A real estate price correction could lead to more NPAs and this could lead to a self fulfilling cycle of a deep rooted correction in the economy.
Japan, the US, Spain and Ireland are examples of high-profile countries whose economies were destabilised by a real estate bubble burst. How and why does real estate cause economic catastrophe? Can it happen to India as well? The single common factor for real estate bubble burst across economies is the exposure of the banking sector to inflated asset prices. Economic collapse in all these countries has been led by the banking system.