Do home prices really never fall? Ramalingam Kalirajan begs to differ.
Have you ever heard someone confidently say, 'Home prices never fall'?
Chances are, you have -- because it's the most common sales pitch in the real estate market.
The phrase is thrown around so casually, as if it's a law of nature.
But here's the reality: Home prices do fall, just like the prices of stocks, bonds, gold, or even onions at the vegetable market.
Think about it -- have you ever seen gold prices drop? Or stock markets crash? Of course, you have.
Real estate is no different. Believing otherwise could turn into one of the costliest financial mistakes you ever make.
1. Why the 'Prices Never Fall' Belief Exists
So, why does this myth exist in the first place? Quite simply, because it benefits the real estate industry.
Every broker, builder, and even many homeowners want you to believe in only two scenarios:
Why? Because if buyers believed that prices could fall, they would delay their purchase, slowing down the entire real estate machine.
And remember, real estate is not just about buying homes. It's about keeping money flowing -- into construction, into loans, and into the hands of developers.
The 'never fall' narrative acts like fuel for the engine. Without it, many buyers would simply wait and watch.
2. How Real Estate Differs from Other Industries
Think about it this way: Maruti Suzuki invests its own money to build a car first, and then sells it to the buyer. The risk lies with the company, not the customer.
But in real estate, the model is flipped: Builders sell homes before they are constructed. Over 60% of most projects are actually funded by homebuyers themselves.
If you don't buy early, the builder may not even have the funds to complete construction.
So what happens? Builders have a strong incentive to keep you convinced that prices never fall.
Because the moment buyers hesitate, the cash flow dries up. And if that happens, the entire project could get stuck.
That's why the 'never fall' story isn't just marketing -- it is survival for many developers.
3. The Power of Narrative in Driving Home Sales
Have you noticed how builders offer discounts disguised as fancy offers?
Instead of admitting to a price cut, they'll say things like:
At the end of the day, these are indirect ways of reducing the price without admitting that the myth has cracked.
Because once the narrative breaks, so does the sales cycle.
Imagine if a builder openly said, 'Yes, we're cutting prices by 10%.' What would happen?
Every prospective buyer would wait for another 10%.
That's why they carefully mask it as a perk, bonus, or festive offer.
The price cut is real -- but the story is carefully hidden.
4. What Really Happens When Prices Don't Match Reality
Narratives may be powerful, but reality always has the final say.
If a product isn't selling at a given price, there's only one logical outcome -- the price has to be cut. It's basic economics.
But in housing, this truth gets camouflaged behind layers of creative marketing.
Instead of admitting to a price correction, builders invent 'offers': Free parking, waived stamp duty, or a so-called festive discount.
The buyer feels like they are getting a deal, but in reality, the builder is quietly lowering the cost without calling it a price drop.
Why? Because the moment the industry openly acknowledges falling prices, confidence shatters.
And in real estate, confidence is everything.
5. Why Homeowners Perpetuate the Myth
Here's another twist -- this myth isn't just kept alive by brokers and builders.
Even homeowners play their part. Why? It's simple human psychology.
People love to share stories of profit, but hate admitting to loss.
At weddings, family functions, or office gatherings, everyone proudly boasts about how their property value 'doubled' in five years.
But when prices dip, silence takes over.
Nobody wants to be the person admitting they bought at the peak and are now sitting on a (notional) loss.
This selective storytelling creates a biased illusion: It looks like property prices only go one way -- up. The reality, of course, is very different.
6. The Silent Truth: Real Examples of Price Declines
Let's cut through the noise and look at actual numbers.
According to real estate research firm Liases Foras, property prices in South Mumbai -- India's most premium market -- have fallen by 10% since 2013.
Think about that. If the country's most elite market can decline, why wouldn't others?
Yet, you rarely hear such stories in casual conversations.
The silence keeps the myth alive, while the real data quietly tells a very different story.
7. Market, Location, and Product-Specific Trends
Here's the catch: Home prices don't move in one straight line.
They behave differently depending on the market, location, and product.
So the blanket belief that 'prices never fall' is misleading. The truth lies in the details -- and those details vary widely.
8. How Buyers Can Protect Themselves from Costly Mistakes
So, what should you do as a buyer?
Here's a simple rule of thumb: If a broker confidently says 'home prices never fall,' treat it as a red flag.
Why? Because either they don't fully understand the market, or they're deliberately misleading you.
In both cases, it's not advice you should bet your life savings on.
Buying a home is likely the biggest financial decision of your life.
Shouldn't it be guided by facts, data, and long-term financial planning -- rather than myths and marketing narratives?
9. Why Equity Often Outperforms Real Estate in Returns
While real estate has emotional value, when it comes to pure wealth creation, equity has historically delivered far superior returns.
For instance, the Sensex has grown at an average of 13% to 15% CAGR over the last four decades, while real estate in most Indian cities has offered around 8% to 10% CAGR at best.
What does this mean in real terms?
Rs 10 lakh invested in equity 20 years ago could be worth over Rs 1.3 crores today.
The same amount in real estate may have grown to around Rs 60 lakh to Rs 70 lakh, depending on location.
Unlike real estate, equity also offers liquidity, diversification, and lower transaction costs, making it a more efficient wealth-building tool for long-term investors.
Ramalingam K, an MBA in Finance, is a Certified Financial Planner. He is the Director and Chief Financial Planner at holisticinvestment, a leading financial planning and wealth management company.
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
