HDFC chairman Deepak Parekh exuded optimism that the slowdown, driven by lower consumption, is "temporary" in nature as there is adequate demand for assets across the country.
There has been a distinct slowdown in the economy which was reflected in the lower GDP growth of 6.8 per cent in FY19, he said.
"While there has been an across-the-board slowdown in consumption, given the inherent demand and low penetration levels, I believe this is temporary in nature," he told the shareholders at the 42nd AGM here Friday.
There remains adequate demand for affordable housing across the country, which is supported by the government flagship credit-linked subsidy scheme and incentives provided to developers to increase the supply of affordable homes.
The demand for commercial real estate has been buoyant, especially across the top eight cities, he added.
"One is seeing increased demand for commercial real estate, particularly from the IT sector, e-commerce and professional and services sector," Parekh said, adding even the demand for retail space has picked up in certain pockets.
In recent times, several investors such as pension funds, sovereign funds and private equity players with deep pockets have evinced interest in the country's commercial real estate sector, he said.
He said the challenge in the housing sector has been with the upper middle segment and high end luxury housing.
"It is this segment where unsold inventory levels are high. This is where the price of the apartments are typically upwards of Rs 2 crore," he said, adding "I would like to reiterate that the demand for smaller sized homes at affordable price points is still strong".
Parekh said the problem got compounded with the tight liquidity situation that prevailed since last September. This particularly impacted the non-banking finance companies and housing financiers and blamed it on banks' risk averseness.
"Banks are reluctant to lend and there has been a flight to safety where a select, few, high rated NBFCs and HFCs have access to funding, while for several others, access to credit has been chocked," he said.
Due to this a number of NBFCs and HFCs have curtailed disbursements. This in turn has had spillover effects into a number of other sectors.
"One is hopeful that normalcy will be restored soon and by the time the festive season sets in, some of the risk averseness should taper off. To my mind, what is critical is re-instilling confidence in lenders to support growth in the economy," he added.