A similar view was expressed at a recent one-day seminar held in the city on behalf of a trade mission from FIABCI, the International Real Estate Federation.

The Knight Frank report said: 'There is a new balance between demand and supply factors.

'The big boom in property prices between 1992 and 1995 was fuelled by indiscriminate speculation.

'When this speculative bubble burst, the worst hit were the upper-end commercial areas in south Bombay and distant suburbs like Kandivli, Mira Road, Bhayandar and Virar.' The other reason for the slump was the increased supply of property from projects initiated during the boom.

Supply may further increase due to the state government's slum rehabilitation programme, availability of surplus mill and Port Trust lands, industrial relocation from the central suburbs and the development of New Bombay.

All these factors, along with the probable relaxation of the Urban Land Ceiling Act and reforms in rent control, should mean that property in Bombay might become more easily available and therefore even less expensive.

But Knight Frank believes that several long-term factors could start tilting the balance.

These include more international buyers once the rupee becomes convertible, the growth of retailing groups, including food store chains, multinational investment in city infrastructure and support services, plus corporate buying of homes for senior executives.

With the pace of foreign investment undiminished last year, international companies continue to demand office space in Bombay and New Delhi.

The paucity of shopping space continues in both cities.

But Asia Pacific Trends said the depressed property market was expected to push down prime shopping values by 12.5 per cent at the top end of the Bombay market and by 12.9 per cent across the board in New Delhi.

At the low end of Bombay's prime shopping properties market, however, prices are expected to rise by 14 per cent.

Prime shop rents in Bombay's Fort area are in the range of 33,000 rupees to 45,000 rupees (about HK$9,600) per square metre a year and about 21,000 rupees in Bandra's Linking Road.

The report takes note of the decline in manufacturing in Bombay and the relocation of industrial units to Nagpur, Pune, Nasik and Aurangabad.

The industrial estates in the western suburbs and along the western express highway are poised to be converted to business and commercial centres under the liberal interpretation of zoning laws.

Even in New Delhi, the main industrial districts likely to see continued growth are Faridabad and the New Okhla Industrial Development Centre.

The Knight Frank report made a series of predictions about the real estate market in India's big cities, particularly Bombay.

The quality of projects will improve, their added value will increase and it is unlikely that projects will be sold 'off the plan'.

There will be a gradual shift in demand from leased office space to outright purchases.

Demand from users as opposed to investors will begin to surface.

Organised, reputable foreign brokers will begin to dominate the market in view of the high yields on rentals (between 8 per cent and 12 per cent, among the highest in the world) and high returns on investment ranging between 30 per cent and 35 per cent.

In comparison, the rental yield per annum in Paris is 6.75 per cent, 5.5 per cent in Frankfurt, 6.5 per cent in Hong Kong, 4 per cent in Tokyo, 4.2 per cent in Singapore, 5.5 per cent in London and 5 per cent in New York.

The report says Bombay and New Delhi should prove profitable markets for those who invest in property and then rent it out - provided, of course, rent control laws are changed in favour of the landlord.