The usual IANAE(I am not an economist) and random weekend ramblings.
Currently the Home Loan interest rates in US fixed interest for 15-30 years are between 6 to 6.5%. The Home Loan floating rate in India is between 10.5 to 11% and I am told only 5 year fixed interest rate at 12% is available%. USD is slowly sliding against currencies of the world including the INR. The incentives for moving money from US to India are far greater than from US to China (what with their overheated stock market and realty). The interest rate on personal loans and credit card debt are similarly plagued with un-productive and un-sustainable interest rates. On the other hand the interest earned by small investors on debt instruments remains relatively low, reflecting an in-efficient or non-competing oligopolistic market.
Capital flows, discounting for relatively un-safe business environment and weak property rights would be naturally in the direction of high interest rate bearing economies with an appreciating currency. Currency appreciation is further accentuated due capital flows themselves. Indian corporates and Indian peoples are subject to a high interest rate regime thanks to the capital controls not allowing them access to cheap capital wherever in the world it is available from. All this while the borrowings from World Bank continue un-abated. Sovereign debt India needs to repay stood at 114B USD as of 2005 (source: from deep inside worldbank.org).

This paper describes what went wrong with the sub-prime mortgage market. This whitepaper describes how the current structured financial products for mortgage financing work with as many as six different types of players including large investors, home owners, credit originators( the thrifts), investment bankers, credit rating agencies and brokers. Book Liar's poker also explains the world of investment banking and origins of application of securitization and structured financial instruments to create marketplace for mortgage bonds.
Washington Post explanation in layman terms.

Under-regulation of norms however is not our problem in India. The housing loan market in India is a mostly un-healthy nexus of builders,bankers, municipal/state actors with in-accessible land-records, property title deed information, urban zone information and traditionally weak property rights laws.

Typically a new upcoming leases aircraft and runs operations (hopefully profitably)
What did some indian private airliners do ? They booked aircraft in bulk from large manufacturers with deliveries spread over years. Based on their assessment of increasing air traffic throughout the world. For aircraft's booked as far back in time as 3 years they got deliveries now at a price which is lower than if someone were to book an aircraft to be delivered after 3 years. So since there is no money to buy aircraft anyway the airlines sold these aircrafts for a cool profit and leased back the same or different aircraft to run their operations which they were doing anyway. Says something about indian business acumen does it.
Warning: Story based on hearsay

Q. Is the bubble going to burst ?
A. On the contrary many believe that what we are seeing today is merely a tip of the iceberg. We are hardly looking at the innovation potential created by concentration of bright minds in relatively small areas like Noida/Bangalore. Remember this is what Silicon Valley is all about high concentration of bright minds working to create knowledge based products and services. ( Yes the 50 billion USD a year VC funded investment chasing software startups in the Silicon Valley helps a bit | source: random silicon valley newspaper)

Q. What about infrastructure ?
Looking at a city from an air-conditioned car after coming out from an air-conditioned hotel/house powered with big generators, they all look the same and Delhi sure comes out really well here.
Sure infrastructure is cracking up in Bangalore but hardly so in Delhi-Gurgaon-Noida, although people new to Bangalore would hardly complain so endearing do they find its weather. And there is no dearth of so called B-Grade towns with decent educational infrastructure and increasingly ubiquitous telecom infrastructure. From what I saw at Bangalore its already happening in cities around it.

Q. But software companies don't pay taxes ?
A. I would hardly fault the software companies on that. Lets take an example of what happens to each Rs 1000 paid to a software engineer who likes the good things of life. Some Rs 330/- goes to the government (the most in-efficient user of money) which produces only 15% economic output from its actual potential(Source: random speeches of Late Rajiv Gandhi's on Doordarshan). Surely you and I deserve more than 15% efficiency from our government.

And look at what our much derided beer guzzling, club hopping, flashy car owners working in a software companies and call centers are able to do to our economy by buying housing, cars and consuming. For money spent on a house doesn't merely go into a property developer's pockets alone(discounting a few percentage points of profit) it trickles down all the way to factory workers in cement, steel companies and directly to construction workers. The ETC television's funky advertisement about the "nakli note" that did so much for so many people before being detected is a case in point.

Manufacturing drives our big industrial base which is smaller than China but still employs millions of people. The rising purchasing power of the middle class creates a huge market for garments/clothes and much of the garment industry that was sick for a long time and has now found its feet by modernizing and becoming IT enabled. (Investment advice: watch out for penny stocks of garment manufacturers ).

The modern capitalist economy works on sentiment, and the sentiment that drives the spending from software engineers and call center workers has cascading effect on the whole economy. I firmly believe that companies in US that are able to successfully partner in India creating development centers here(virtual or otherwise) have come out stronger and used Indian talent here to create more jobs for the American economy too.

What about real innovation?
It is great time to innovate and succeed in the great Indian market. When the bulk of IT industry looks for US jobs for survival , the US companies like IBM, Microsoft and SAP are making big inroads into Indian market. However all of them are big companies that take their time to think and act. There is enough space for nimble and efficient startups to create real rupee businesses in India. In fact startups that are based on importing something from US or something that has its sales price pegged to USD will benefit in medium term. Americans are sure hardworking innovative people and their economy will bounce back in longer term. With the bulk of talented competition employed by outsourcing companies it should be a home run for entrepreneurs in New Delhi. Do I need to repeat my advice to the bureaucrats in corridors of the old British era buildings to not to show any interest in the Internet and software ventures and especially avoid drafting laws to regulate it.