India house prices will rise at half the rate of consumer price inflation next year, hit by dwindling credit supply, according to a Reuters poll of housing market experts who said Delhi will be hit hardest.

House prices have risen at almost double-digit rates for over a decade in Asia’s third-largest economy which is also grappling with a liquidity crunch after a large lending firm, Infrastructure Leasing and Financial Services (IL&FS), defaulted on a short-term debt payment in June.

Rising bad debts and non-performing assets have made major banks and other large financial institutions cautious on lending, leading to a slowdown in the property market, which relies heavily on borrowing for both home building and buying.

“The liquidity crunch is likely to continue in 2019 and push (house) price growth to an all-time low. It will also lead to a scarcity in funds, pushing home loan interest rates higher,” said Anuj Puri, chairman of ANAROCK property consultants.

“And thus, NBFCs (non-banking financial companies) and other commercial banks will be alert over further loan disbursements until normalcy returns to the market. This has created a deep-rooted problem. Only the fittest can survive,” he said.

House prices rose at an average annual rate of 8.5 percent last year, according to Reuters calculations based on the RBI’s NHB Residex (National Housing Bank Residential index) measure.

The Reuters poll of 14 property market experts, conducted Oct. 29-Nov. 14, showed they expected national house prices to rise 2.8 percent this year and 2.0 percent next, around half the rate of the current and expected rate of consumer price inflation.

While the consensus is based on different measures, a majority in the poll provided their forecasts based on NHB Residex. The common theme across forecasts irrespective of the methodology clearly shows a sluggish pace of house price growth over the next year.

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