“If they drop prices, investors will panic and it will be a self-fulfilling prophecy,” causing further declines in prices, said Siddharth Yog, a co-founder and managing partner of the Xander Group, a large international real estate investment firm started in 2005. That was the year India began allowing foreign institutional investors into its real estate market.

But with sellers refusing to cut prices, many potential buyers are losing interest. Devkinandan Agarwal, a Mumbai broker with three-quarters of his business in residential real estate and the rest in commercial real estate, said that until the last few months, he had at least three or four separate meetings each day with genuine, interested buyers; now he has only one a day.

“There are now only actual users in the market, there is hardly anyone buying real estate as an investment,” he said.

One longstanding complaint about business practices in India is that the country’s banks lend heavily to a wealthy elite who often put very little of their own money into deals. These developers rely on minority investors and bank loans for most of the financing. India’s debt tribunals, for companies unable to repay what they have borrowed, have tended to move slowly. They are reluctant to force founders of companies to incur large losses even in corporate reorganizations in which creditors and minority investors lose heavily.

Raghuram Rajan, the new governor of the Reserve Bank of India, said at his inaugural news conference last Wednesday that he would try to change this. “Promoters do not have a divine right to stay in charge regardless of how badly they mismanage an enterprise, nor do they have the right to use the banking system to recapitalize their failed ventures,” he said.

Bimal Jalan, a former chief economic adviser to the Indian government who was also the governor of the central bank from 1997 to 2003, said in a telephone interview from New Delhi that the broader Indian economy could escape serious harm even if real estate prices did decline. India has low rates of homeownership, so families are less likely to be worried about falling home prices and cut household spending.