Probably no one subject dominates conversation nowadays more than real estate — or, to put it more specifically, real estate prices. The unprecedented climb in realty prices all over India, including in tier 2 cities, is a matter of great interest — and concern — to everyone. It affects home owners, potential home buyers, and those who have taken home loans, in different ways.

Till now, prices had moved only in one direction — upwards — and looked unstoppable. Now, reports trickling in from the industry suggest that prices are stabilising, if not actually falling. Consequently, the share prices of real estate companies are also taking a hit.

Share prices of real estate companies and real estate prices are two different things. The latter may play a small role in the eventual valuation of the former; other factors, including the overall state of the stock market, also matter.

Barely a few months ago, investors were crazily buying real estate company shares on the presumption that their land holdings had increased phenomenally in value. Many companies made plans to enter the primary market to mop up funds; those that did picked up a lot of cash.

Since then, a bit of realism has set in. Large tracts of land may look attractive, but developing them will be a time-consuming and expensive task. In between, the demand could slow down. The market has now made its own renewed assessment of the profitability of such companies.

As far as real estate prices are concerned, though there is evidence that in some parts of the country they are dipping, they continue to be high overall. In Mumbai, even a 20 percent fall would mean that residential units would continue to be out of reach of the middle-classes.

In addition, the continuous rise in interest rates has meant that borrowing money has become very expensive. The result is that new buyers are hesitating or cannot afford to buy, while those who have borrowed are seeing their Equated Monthly Installments (EMIs) or loan tenures go up.

The real estate business is largely an unregulated one. There is hardly any transparency, either in the computing of prices or the transaction process or indeed the quality standards.

But, with home loans becoming popular and foreign entities planning to enter the real estate sector, the government will have to now put stricter rules in place. That way, we can get a clearer picture of how the market is really behaving.