Merrill Lynch has invested $2.65bn in the Asian Real Estate market. This is the third Asian property fund of over $2.5bn that has been raised this year, despite the continuing disturbance in the global banking market. It follows a $3bn fund raised by LaSalle Investment Management earlier this month and a $3.9bn fund raised by MGPA in June. Merrill Lynch is likely to invest across all property sectors, as well as in property companies and developers, many of which have found financing increasingly difficult to source. Having completed a first $140m equity raising for the fund in May, it is aiming to increase this to between $200m-$250m by the end of the year.

Sales at Parsvnath Developers' in the festival season of Diwali are down to half from a year ago, but the company does not plan price cuts to boost sales, its chairman said. High interest rates on home loans and central bank rules forcing banks to assign a higher risk weight to real estate loans have dented property demand in India. Analysts say property prices are still high and need some correction before demand picks up. But Parsvnath has no such plans, Mr. Jain said, citing rising input costs. The company would instead focus on reducing costs by reducing salaries and firing 'non-performing staff,' and would speed up projects to improve cash flows, he added.

The global meltdown seems to have hit the Indian realty business severely, especially in Bangalore. Uncertainty in the Indian equity market and speculation over property prices have put the developers in a depressing situation. More than 450 flats in Bangalore’s outskirts are still vacant despite advertisements and other promotion campaigns. Bangalore-based small developers are the worst hit, as their properties have not been sold in the past six months. The situation is pretty much same with many top line builders of the city, though many don’t want to express it in order to maintain their brand equity. The only hope for developers is the possible fall in interest rates on home loans, which has been assured by the Prime Minister and Finance Minister recently after the repo rate cut by the Reserve Bank of India (RBI). United Bank of India and Punjab National Bank have already decided to bring down the interest rates. However, other leading banks are yet to provide the good news to this effect.

Real estate developers have hardly hiked their rates in the last six to eight months and some of them have not hiked them at all. Property analysts say this scenario is different from that witnessed between April and October 2007, when developers hiked rates by as much as 24% to 32%. According to a pan-India survey of local brokers in the residential property market, carried out by global research analysts Edelweiss, around 80% of brokers across India have witnessed a reduction in enquiries over the past month, and about 90% have seen a drop in transactions over the past month. A hundred brokers in 20 micro-markets like Bandra-Borivili, Mulund-Thane, Gurgaon, Noida, Whitefield-Marathalli and Annanagar, in Mumbai, Delhi, Bangalore and Chennai, were polled. Godrej Properties hiked rates for its Riverside project at Kalyan by 24% in 2007, but this year, it has increased them by a mere 7%, from Rs 2,000 per sq ft to Rs 3,000 per sq ft. Rates at Rustomjee's Elanza project in Malad (W) has remained constant, at Rs 9,000 per sq ft, after its hike of 20% at Rs 7,500 per sq ft last year. Similarly, property rates at RNA Builders' Royale Park and HDIL's Dreams project in Bhandup remained at Rs 6,500 per sq ft and Rs 5,750 per sq ft, after jumping 18% and 5% respectively from 2007.

After shoring up the banking system with Rs 1, 45,000 crore funds, the Reserve Bank of India has paved the way for cheaper home, consumer, corporate and personal loan rates by reducing its key-short term lending rate (repo) by 100 basis points. The cut in repo would allow banks to immediately borrow short-term funds from the apex bank at a cheaper eight percent as against nine percent till now. Mr. Ashish Parthasarathy, Deputy Treasurer, HDFC Bank said, "It is a welcome step and clearly shows that the interest rate regime is now on a decent curve." Earlier, the RBI cut the mandatory cash deposits that banks must keep with it (CRR) by 250 points after five years, along with other measures.