A lethal cocktail of high prices, drying up of bank lending and government efforts to reduce black money may combine to produce what many have anticipated -- in vain -- for long: a crash in realty prices in the country's metropolitan cities.

That is the takeaway from a research report put out by brokerage firm Ambit Capital, which says that a sharp correction in property is in the offing.

"Whilst the RBI’s Housing Price Index suggests that prices have moderated on a pan-India basis, data from property websites suggests a deeper slowdown inIndia’s large cities, with prices falling by 7-18% YoY," the report, authored by Ambit's Saurabh Mujherjea and Sumit Shekhar, says.

Alongside this, a significant drop in transaction volumes has also been witnessed.

"Our visits to five property registration offices in Mumbai suggest a sharp drop in the registration of new residential properties and data from property valuers in Maharashtra and Tamil Nadu suggest that transaction volumes have fallen by 10-15 percent per annum for three consecutive years now. Also, new launch volumes are down 40-80 percent on a pan-India level," it adds.

The report concludes that in cities like Mumbai, prices "could halve" from current levels in order to arrive at a sustainable level.

According to the report's authors, the demand and supply factors that have together tightened their stranglehold on the already-stressed real estate sector in recent times include:

- RBI data suggests that the banking system seems to have turned the tap off for property developers over the past year.

- The NDA has cut subsidies sharply (down 9 percent in FY16) and is shifting subsidies to Direct Benefit Transfer. As a result, the ability of the politician-and-builder to pilfer subsidies to fund real estate construction has been checked.

- The knowledge that there is many years’ worth of unsold real estate inventory in most of India’s tier-1 and tier-2 cities is causing investors to hold back further purchases.

- The draconian Black Money Bill went live on July 1 and has made high-net-worth families reluctant to invest in real estate.

- The 8 percentage point gap between gross rental yield and bank base rate highlights the unattractiveness of real estate for investors.

- Key state governments (such as Maharashtra, West Bengal, Delhi) have hiked “ready reckoner” rates sharply this year and thus prevented prices from dropping to a market clearing level.

Property prices could reduce by 25%: Orbit

Agreeing with the view that property prices are slated to come down, Orbit Corporation MD Pujit Aggarwal said that though there was little room to cut prices due to high costs, builders were now willing to reduce prices and sell units even at a loss.

"They will sell in order to meet cash flow requirements such as interest payments, overhead costs or further construction," he told CNBC-TV18 in an interview.

According to Aggarwal, prices in some pockets of Mumbai could fall about 20-25 percent.

"Till now, builders had been reducing prices through indirect means such as the 80:20 schemes and interest free EMIs, but a direct price reduction is absolutely on the table now," he said "We will witness that in the months and quarters to come."