Less than a year ago India’s property market was one of the most exciting in the world, there was a buzz, speculators were making lots of money and economists predicted unprecedented growth would continue.

Even a couple of months ago confidence was still high. What credit crunch? Whatever was happening in the US and Europe, property in India seemed immune. A few analysts warned, however, that it was only a matter of time before reality would bite.

The warning signs were clear – soaring inflation, easy home finance, rising interest rates, surging oil prices and increasing construction costs.

The first tremours appeared in June and July. A report from HSBC predicted house price falls of between 25 and 30% in most Indian cities.

India’s best know developer DLF, which  floated on the stock exchange last summer which was at the time India’s biggest ever public offering, announced in July it would buy back part of its equity. It also shelved plans to list its real estate investment trust on the Singapore stock exchange.

Then on Monday the US’s oldest investment bank Lehman Brothers crashed. On Tuesday Lehman’s India operation was shut down. Then AIG, which provides significant re-insurance capacity in India, had to be rescued by the US government. Turmoil was unleashed on stock markets throughout the world, not least in India.

So it is not surprising that the question on every one’s lips right is what now for the property markets in India. One analyst questioned by Property Wire replied simply; ‘I don’t know. Events are moving too quickly right now for us to be able to take a view’.

However those analysts who have been examining the situation in India over the last few months have formed a view – a sharp downturn will mean it takes some time for confidence to return to the Indian markets. But there is optimism. Return it will, not least because India has a growing middle class population who need homes.

Also developers have seen the future and they are turning away from luxury gated developments to building affordable housing so that when the market bottoms out then it is ordinary investors who will help it to recover.

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