Banks in India are urging property developers to stop increasing real estate prices as it could stall a recovery in the market.

There is considerable disquiet that the developers have been taking advantage of a pick up in sales to increase prices on middle range properties and fears that it could put off would be buyers.

Some go as far as to claim that the developers are merely intent on lining their own pockets and not working together to help the property market in the country recover.

It also raises doubts on recent pledges by developers to concentrate on more affordable projects.

‘Certain top-rung developers have already started increasing prices, especially in mid-income projects, following the recent pick up in sales. Besides, with liquidity no longer a constraint, certain developers are seeking once again to increase their margins,’ said Deepak Parekh, Chairman of HDFC.

He added that the real estate market had just begun correcting itself and it would be ‘extremely unfortunate if the developers were to increase property prices at this juncture’.

S. Sridhar, Chairman and Managing Director of the Central Bank of India described the move as short sighted and that the developers are naïve if they think that by raising prices they would stimulate demand.

‘It is difficult to generalise but as a whole there is some more scope for downward adjustment in prices, or in certain places it should plateau. That will stimulate the demand,’ he said.

‘If the real estate players revise the prices upwards, it will stall the recovery process. Demand for housing loans has picked up among the banks but the situation is still fragile,’ he added.

But Anand Gupta, general secretary of the Builders Association of India said that when developers reduced prices they did not see a sudden surge in demand.

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