Anybody with clout who says home prices must drop is met with a lot of cheer and jeer. And when a voice as respected as the RBI Governor Raghuram Rajan makes a statement to that effect, it becomes virtually gospel truth.

Last week, Mr Rajan said, “I think we need the market to clear. With growing unsold stock, we need to see the ways to do it”. His justification: if prices stay high, demand won’t pick up, even if home loan rates are lowered.

I agree that a lot about the real estate sector and home prices in India is scary today. Look at the housing stock that gets created in the biggest employment hubs of India, its top eight cities – 75% of that stock (apartments, mainly) is priced at Rs. 40 lakh plus.

And now consider the harsh truth – 90% of India’s tax payers earn less than Rs. 5 lakh per annum or Rs. 42,000 per month. So forget lower income groups, even households at this median income cannot afford to buy a two-bedroom home in any of these top eight metro cities including Pune and Hyderabad. After all, if the family pays an EMI of Rs. 34,000 per month (at 9.7% interest per annum interest for a Rs. 40 lakh home loan), what will it eat?

No wonder the real estate sector is witnessing its worst slowdown in a decade.

There’s an absolute demand-supply mismatch of what’s out there and who can really buy it. So prices should come down -after all, it’s plain economics isn’t it?

They should and they have. Everywhere you look, prices are under stress. In heavy investor-driven markets like Gurgaon, Dwarka Expressway to be specific, you can buy from desperate-to-get out investors who made a down payment or signed up for the project two years ago. New project launches which had gone up to a ridiculous price of Rs. 8,000 to 10,000 per square foot in this market have dropped prices by 20-25% over the last two years .

Most developers across India are ready to bear the interest cost till project completion in subvention scheme which give an interest holiday to the buyer on his or her home loan. That’s an inbuilt discount ranging from 10-20%, depending on the contours of the scheme. And it’s happening even in sane and steady markets like Bengaluru. Almost no developer has been able to price apartments higher in any new launches for the past 12 months. Adjusted for inflation, that’s a price cut. It’s also a double-edged sword for the builder because input and labor costs have gone up.

Yet, this is not enough to revive the market. There is simply too much stock of high-priced homes to sell! Propequity data shows at the end of May 2015, there were 7 lakh unsold housing units in the top 6 metro cities and their suburbs.

So something’s got to give and here’s how I see the next 12 months. Realtors have little room left to slash prices with heavy costs of bank financing, delayed project approvals and graft money needed to grease palms at every stage. Their margins have been reduced to that of a manufacturing business. So overleveraged developers in markets which don’t witness a pickup soon will have to start selling part of their stock at a loss to repay their bank loans. That number though, won’t add up to more than 10% of the available stock in any given market.

The downright rogue developer with a dismal track record of delivery will face grim days ahead. Buyers are crying bloody murder and social media won’t let their misdemeanors be forgotten in a hurry.

The rest, who are trying to make an honest business out of real estate, are responding with two simple strategies – to cut down the size of apartments to bring down the ticket price, and and go slow on new project launches, till the excess supply is bought out. Bengaluru seems to be the smartest. New launches in the city are down 67% between January to May 2015, compared to the same months in 2013. In other key markets, they are down by 30-50%.

So should you wait for prices to fall some more? There’s no way to predict the bottoming out of any market, so I’ll put it this way. There’s no cost of waiting for a few more months, especially if you’re an investor looking to buy a second or third property. But if you are buying a home to live and have found one you really like, from a developer with credentials, why wait? With new project launches drastically coming down along with shrinking sizes, you may not get a similar pick anytime soon.

(Data of Property Sales is sourced from Propequity).

Manisha Natarajan is Senior Vice President – Corporate Affairs and Senior Editor – Real Estate at NDTV.