Residential property prices in India have increased in 12 cities in the second quarter of 2011 with Bhopal posting the highest gains, a survey by the National Housing Bank has found.

Demand for property in major cities across the country had dipped after the Reserve Bank of India raised interest rates 11 times in the last year to keep inflation under control but buyers are now coming back into the market.

Increased borrowing costs had hit the sales market but the NHB Residex, which tracks housing prices in 15 cities, shows activity is increasing again.

Bhopal has seen price increases of 34.13% followed by Faridabad at 33.33% compared with the first three months of the year.

Housing prices in Kochi have risen 24.42%, Surat 16.41%, Delhi 16.67%, Chennai 13.76%, Hyderabad 9.6%, and Bengaluru 4.5%.

Some cities have seen lower increases, most notably the financial capital Mumbai, up 3.4% followed by Ahmedabad 2.4%, Lucknow 1.9% and Pune 1.35%.

The NHB Residex showed that only two cities have seen a decline in prices over the previous quarter.

These include Kolkata where prices dipped 8.05% and Jaipur which was down 4.47%. The capital of Bihar, Patna did not show any change over the previous quarter.

The index helps the consumers and property buyers and borrowers in their decision making by enabling comparisons over time and across cities and localities and the emerging trends in the property market.

The NHB Residex takes into account the price trends for residential properties in different locations and zones in each city, according to the classification devised for evaluation.

The classification has been designed to give a representative index for each city based on the transactions in the market and data collected from various sources. The trends seek to bring greater transparency in the property market.

The Residex for the first three months of the year had shown that property prices rose only in six of the 15 cities covered by the residential price index, a situation similar to what was witnessed at the peak of the global financial crisis.

But there is some doubt that these prices will be sustained unless borrowing costs come down and interest rates remain high. ‘Demand for housing may remain depressed in some areas.

The price increase may not be uniform across the country,' said D K Joshi, chief economist at ratings agency Crisil.

This article hs been republished from Propertywire