BUBBLE IN THE INDIAN REAL ESTATE MARKETS: IDENTIFICATION USING REGIME-SWITCHING METHODOLOGY

India has a growing economy that can support high-income levels and in turn sustain higher real estate prices. The high prices of Indian real estate seem to be in harmony with its fast growing economy. However, there are concerns about speculative bubble behavior in the Indian real estate market. In this paper, we utilize a sophisticated regime-switching speculative bubble model developed by van Norden and Schaller (1993) along with other traditional econometric methods to test for the presence of bubbles in the Indian real estate market. Our results provide evidence that India real estate bubble was not affected by the 2007-2008 global economic slowdown. The Indian Real Estate market grew from the end of 2008 through early 2011.