Gauging the effects of expanded subprime lending on house prices is complicated by two-way causality – more lending can drive up house prices but expected house price increases can also induce more lending. Undoubtedly, causality did  7  For example, the International Monetary Fund (2008) found evidence that house prices have become more sensitive to monetary policy in countries with more mortgage deregulation.
The real risk free interest rate they experience is 2.5%, a little higher than elsewhere in the world, but not the most significant factor standing in the way of investment. Far more useful in lowering borrowing rates is to improve lending institutions and borrower behavior to bring down the credit risk premium, than to try and push the RBI to lower rates unduly.