By its nature, a bubble is a japan property agency short-term phenomenon while Indian property market has shown continuous growth, apart from periodic adjustments, in the last few years. One should not forget that there are more than 400 million Indians waiting to hit the middle class group which will require more than 75 lacs housing units by 2013. Whether bubble burst or see a bit trouble in short-term, growth story will remain intact for Indian real estate industry. However affordability is the most important factor when it japan property agency comes to housing prices and middle class housing is much levels of affordability in most of the major cities in India. People, who compare India with developed European cities, forget the huge difference in affordability in both areas. Of course there is a huge demand for housing but they can only buy what they can afford. Major reasons for default risk on commercial real estate loans is a bubble economy. An often-quoted definition of “bubble” is japan property agency the one given by Stiglitz as follows: ” If the reason for the price is high today is only because investors believe that the selling price will be higher tomorrow – when “fundamental” factors do not seem to justify such a price – then a bubble exists”.The basic reason for the connection between a bubble and banking problems is over-expansion of bank credit fuelled by the build-up of real estate prices and increasing credit risks. The acceleration of economic growth and increased demand for real estate triggers “euphoria” as households and companies anticipate these further properties’ prices rise and increase their willingness to engage in debt-financed investment.There is a special thing about real estate lending: as price increases create “an extra” collateral that can be used for additional borrowing. Increases in the japan property agency price of real estate property held by companies mean a rise in the value of this asset on their balance sheet. Such capital gains lead to easier access to bank loans, which may be used for new productive investments or more speculative real estate investments. For various reasons lenders may incorrectly rely on trend-based analyses, which assumes that current market conditions continue in the future.Thus, increased real estate prices, when japan property agency related to fundamental improvements in the economic outlook or declines in real interest rates, can lead to increased borrowing. Therefore bank lending may also be a source for upward pressure on real estate prices; especially, if banks relax lending policies. Thus, lenders may undertake extremely tolerant lending policies at the peak of the cycle and extremely conservative lending policies at the trough of the cycle.At the peak of the cycle banks may have borrowers that are highly exposed to a sharp price decline. These borrowers are known as the latest entrants in the real estate markets and they are especially vulnerable, since they japan property agency have borrowed when prices were close to the peak and possibly expected that the price rally and trend would continue. These borrowers would experience the largest capital losses and the largest risk of default. Once these borrowers stand face to face with the possibility of default, they are also likely to take increasing risk .