High lending rates may lead to slump in realty market: DLF

"The earlier they do it, the better," he added.

Anshuman Magazine, managing director of CB Richard Ellis Group Inc., a New Delhi-based real-estate adviser, agrees.

"The rise in interest rates is definitely one of the major factors that is deterring home buyers," Magazine said, noting how prices have dropped in the NCR (National Capital Region) by 25 percent earlier this year ever since the RBI raised interest rates six times in the past 18 months.

India's central bank has been raising interest rates to curb inflation and prevent the economy from overheating. It has raised the repurchase rate, or the rate at which it injects funds into the banking system, to 7.75 percent.

The central bank has since December increased the cash reserve ratio by 2 percentage points to 7 percent to slow down loans growth. The Reserve Bank is scheduled to make its next monetary policy announcement at the end of next month.

According to a report published by the Indan business lobby group, the Associated Chambers of Commerce and Industry of India (ASSOCHAM), the increase in home loan rates to 12 percent this year from 7 percent in 2003 has raised borrowers' monthly liability by about $82 (Rs. 3,250).