The new moon of the lunar month of Kartika marks Diwali, the Indian festival of lights, when Hindus across the country worship the goddess of wealth, Lakshmi. But divinities know full well the laws that govern finance and Lakshmi may not be a little tight-fisted about circulating her riches amid the ongoing global credit crunch.

Indian tradition decrees that it is auspicious to make purchases during the days leading up to Diwali — which falls in October or November. With faith meshing so effortlessly with commerce, the season sees sellers, advertisers and marketers urging the devout to spend money with a religious fervor, hawking everything from chocolates and consumer durables to gold and houses.

Buying a home is considered especially propitious. What better way to welcome the goddess of wealth into one's life than by inviting Lakshmi into one's new abode? So much so that the period from just before Diwali through March is usually a bonanza for the real estate industry: usually 70% of the annual business is conducted at this time.

Not this year. With just about a week to go until Diwali, the mood is decidedly downbeat. The demon of impending economic doom refuses to die, and as tightened liquidity makes people put off larger purchases, the real estate sector is facing the worst attack.

"This time last year, I was selling 10 to 12 properties every day," says Alok Gupta, who runs Advanced Real Estate in the New Delhi suburb of Noida. "This time, I haven't sold a single property all month!"

Considered the barometer of economic growth, the real estate sector in India has grown 30% to 35% during the last five years, reflecting the rapidly-increasing demand for office, commercial and industrial space, as well as bigger homes now considered within the range of India's prospering working classes.

But the economic juggernaut has been slowing since earlier this year due to double-digit inflation, a severe liquidity crunch as a fallout of the U.S. sub-prime crisis, and now, the possibility of economic activity shrinking as part of a global slowdown. The country's growth estimates of 9% at the beginning of the year have been revised to well below 7%, and the effect is directly visible on the realty sector.

"No one's buying any more," says Ashwani Shukla of New Delhi-based Triveni Associates, "Two years ago, 25-year-olds earning fat pay packets from [multinational corporations] were buying high-end apartments. Now, there are no takers for flats selling at 20% markdowns. Estate agents are finding it difficult to even meet daily overheads."

Shukla himself has branched out of real estate and started selling insurance six months back, "to pay the bills." According to various estimates, sales in cities like Mumbai and Chennai are down 30% to 40%. Hoping to induce buyers at Diwali, realtors are advertising cash discounts of 5% to 10% for down payments, and as much as 25% discounts if buyers are willing to wait two to three years before taking possession of the property.

"But there is no liquidity with the end user," says Arvind Nandan, director of consultancy at real-estate consultants Cushman & Wakefield India, "Home-loan rates have hit the roof, and people's investments have lost value at the stock market. No one has the money to buy."

Shukla says if the situation does not improve, there could be distress sales within the next six months. The realty sector was heading for a cyclical slowdown even before the current economic slump. Over the last few years, increasing demand had pushed up prices, with speculators jumping in to further inflate the market. Eventually inventory piled up when buyers refused to pay unrealistically high prices.

"So many transactions were taking place between speculators and investors that no one bothered to find out what the end-user, the family who would eventually live in the house, would be willing and able to pay," Shukla says. And those prospective home owners are the biggest target of India's real estate industry: almost 80% of real estate developed in the country is residential space.

This all comes at the worst possible time. Even as buyers refused to bite, inflation passed into double digits in June this year, raising prices of construction material. Realtors overran their budgets and projects stalled, leaving skeletal structures dotting the landscape across big and small cities all over the country.

Then came the liquidity squeeze as the government sponged away cash from the system to control inflation. Home loan rates went from about 7% to over 12%. People who bought struggled to pay, and potential buyers kept away.

Realtors like Shukla and Gupta may have little reason to light firecrackers this Diwali, but their prayers to Lakshmi, the Goddess of Wealth, will definitely be more fervent, especially as experts predict things will get worse before they get any better. "This was a much-needed correction," says Nandan of Cushman & Wakefield India, "And it isn't complete yet. I expect the market to go down further, and it's hard to say when the recovery will begin."

Yet, no one is entirely pessimistic. Experts and industry insiders believe once the storm blows over, demand is bound to rise back up for the same reasons it did last time — a large, young workforce; gradual but consistent liberalization reforms; and a high rate of consumer and private sector savings.

"The silver lining is that once this phase ends, land and property prices will be corrected to rational levels, speculators will be out, and the sector will have stronger fundamentals," says Shukla. If everyone's prayers go right, the goddess will eventually be propitiated and her blessings will issue forth once more.

Компания "SV Development"