People who purchased a house in the capital in the beginning of the year should be happy.They would support opinion from expert stracking these gmentand data from estate dealers, this raise has been, in certain places up to 40%.

The price for an apartment finding no takers at Rs.32 lakh in early 2004 is over Rs45 lakh now.The prices are also higher insuburbs. It's not just Delhi but most metros are enjoying price appreciation. Others,asinDelhi,areaccelerating a tarapidpace; InMumbai,prices are rising optimistically; while in Bangalore and Chennai, modestriseisseen. The million dollarquestion people ask if it is a bubble,which can be defined as follows:

Price of a property-financial assets like stocks or bonds or real assets like gold coins or real estate -increases steeply. This rise is momentary and is much higher than what the property delivers in the middle - or long - term.The rise occurs without any change in basic factors in fluencing the asset.

This rise invites speculators. So far they have been observing from outside,letting the 'believers' invest where their view pointis. These investors are usually a small tribe of business persons(as we saw in the dot-comera) and households(as investors or home buyers). As prices near a fuzzy take-offpoint that resides in the collective consciousness of risk -takers-speculators enter the field. As a tribe, they do not move first.They have little capital. If they do,they do not risk it.They play with other people's money costing them only interest.

Speculators bring an important element called liquidity into the market. Regrettably,for home buyers,this brings a price rise because speculators work on the principle of the 'greaterfool' syndrome(An economics term), It may be stupid to buy an house for Rs10 million but so far, as there is an other stupid who may buy from me at a elevated price, it's fine.It is bubble at it's best,and its weakest point. Many individuals enter this 'easy-money' market here. After rising for some time, it could vary between a few weeks or so for a specific stock to a few months for a specific segment(Ref:tech boom of 1990s), prices start to decline.

Since their stakes are very high(they are paid to stay invested) and due to poor 'staying power'(each day the price of the asset does not increase means mounting expense due interest),speculators start getting restless and begin to exit from the market.This drives prices lower.Along with speculators, out goes liquidity as well and individual households are left holding assets purchased at steep prices,with no buyers the deal fizzlesout.

According to a corporate honcho:Indian market has not been through cycles. Real estate was a continuously appreciating asset. The price did not seem to go down. The fall, up to 40% in some cases, was required, he says:For once prices reflected a demand - supply scenario.The rise in 1997 was surely a bubble, not the present. The head , India Property Research agrees: This is not so. There are strong basics supporting the price rise. The market crashed arounds even years back, this completes the cycle.

In this cycle, three fundamental factors differentiate it from the previous one.One, the purchasing power of households has increased in the past five years. Two, prosperity is followed by affordability, interest rates on home loans have crashed to 7.5-8%, giving access to many prospective home buyers, offering them the choice to move from tenancy to ownership. Lastly, the supply of housing has increased substantially, with colonisers offering a huge variety of apartments.

It is true that speculators have entered the market and influencing, if not raising the prices. During the 1994 property boom, speculators closed deals, paid tokenmoney (with a month to pay the balance) and if the property prices did not increase during that period or if could not sell it off, they simply dropped the deal,a small gamble that didn't pay off. May be not as yet but time will come so on. But the decision to buy or whether it's a bubble depends upon who's asking. If it's an investor,he needs to be sure that there is scope for appreciation in excess of alternative returns from other assets having the same risk profile. Easy finance availability has made housing affordable as well as mobilized the market,such an investor, by leveraging just 10% of themoney, can get good returns, provided the call is right.If the investment turns out to be inflated, it's a total loss.

Forafirst - time home buyer, the matter of appreciation is secondary; moving out of a rented place into a house of your own is vital.For such buyers, the issue turns into balancing the rent - EMI equation, plusthenon-monetary satis faction of owning a house.If the bubblebursts, only the paper value falls.