CRISIL Research expects divergent price trends during the year in Mumbai and NCR (NationalCapital Region), the two largest residential real estate markets in India. In 2011, prices of houses are likely to decline in Mumbai, whereas prices will rise marginally in NCR. Further, the extent of price decline will vary widely across areas in Mumbai, whereas prices will inch up uniformly across areas inNCR. CRISIL Research studied the price trend in three major supply pockets in Mumbai and NCR – westernsuburbs (Goregaon, Malad, Kandivali and Borivali), Thane (Ghodbunder Road), and central suburbs (Dombivli and Kalyan) in Mumbai; and Noida and the outskirts of Ghaziabad and Faridabad in NCR. Accounting for more than 50 per cent of total planned supply in each city, these major supply pocketswould represent the trend in housing prices in the whole city. Mumbai and NCR would together account for more than half the 1.5 billion sq ft housing supply planned in India’s 10 leading cities up to2013. In Mumbai, falling demand, owing to diminished affordability, and rising interest rates will trigger a decline in prices in 2011. Prices of houses soared by 43 per cent in 2010, in the city’s three majorsupply pockets. Prices thus surpassed their peak values, attained in the first half of 2008, by 26 per cent, adversely affecting housing affordability. CRISIL Research therefore expects prices in Mumbai to decline by 8-10 per cent in 2011.In NCR, prices will move up marginally because of relatively better affordability. Prices went up onlyby 6 per cent in 2010 in the capital region’s three major supply pockets. Prices in these areas currentlyare 15-20 per cent less than their peak values in the second half of 2007, making affordabilityrelatively better in NCR than in Mumbai. CRISIL Research therefore expects average prices in theregion to move up marginally by 3-4 per cent in 2011. “Reduced affordability and a likely increase in interest rates by the Reserve Bank of India willsubdue demand and depress housing prices in Mumbai in 2011. In NCR, relatively betteraffordability will prop prices despite any increase in interest rates,” explains NagarajanNarasimhan, Director – CRISIL Research. In Mumbai, the extent of the price decline would vary widely by area. Prices in premium locations like South Mumbai and Central Mumbai, which have an excess supply of houses priced at more than Rs 50million, would decline sharply by 15-20 per cent over the next 12 months. Prices will decline moremoderately, by about 6 per cent, in areas like Vasai and Virar, where affordability would be relativelybetter. In NCR, with prices increasing marginally across all areas, the trend, again, will be divergent.