Evolution Of Real Estate in India
Evolution of Real Estate in India: Shelter to Sustainability
After 75 years of Independence, looking back at the decades of development that contributed to the fabric of India today is a journey worth recalling. The construction and real estate sector has acted as an elemental force that drove the economic growth of a strife-torn nation. Building a country up after centuries of exploitation is a difficult endeavor to undertake, considering the post-independence backdrop. Partition of India left thousands of people homeless and without assets to fall back on. The recovery process took up the better part of the late 20th century, leaving the real estate sector on a slow and gradual rise.
Like any other great story, the rise of the Indian real estate sector must be told impartially and chronologically. Let us hark back to the real estate growth journey and its many prominent ups and downs.
Post-Independence to the 1960s
The pre-partition real estate scenario was very different from what it has evolved to be today. The Zamindari system prevailed in the northern parts of the country till as late as 1950, which marked its abolition. Various land reform acts were formulated and executed by the newly-established regime.
Traditionally, clients purchased land for their own use, made possible by referrals from their relatives or friends and sometimes real estate brokers. The average family during this time constituted of 7 to 8 members, commonly referred to as the ‘Joint Family’. This distinctly Indian concept went through a radical change in the following decades.
The reformation began when Lahore, one of the most populous and diverse cities in the world, was admitted to Pakistan and Punjab was left without a capital city. Thus, the 1950s-1960s came to be known as the period of new capitals for states such as Punjab, Gujarat, and others. Chandigarh is one of the early planned cities that gained major success during the 1970s. The city was built as a symbol of modernity and progress and is highly regarded to date not just in India, but across the globe.
Another notable milestone for the real estate sector during this time was the introduction of the Maharashtra Regional and Town Planning Act of 1966, which first undertook the practice of development plans and town planning.
Housing Development in the 1970s-1980s
Before the 1980s, there wasn’t much happening in the real estate market. People were still quite destabilized after the partition. The need for independent stakeholders and investors was strongly felt in the industry. Shelter being one of the basic necessities, the government directed its attention to the housing sector. To boost the industry, the central government established institutions like the Housing and Urban Development Company in 1970, City & Industrial Development Corporation in 1971 and the National Housing Bank in 1988.
The Urban Land (Ceiling and Regulation) Act, 1976, was enacted to control hikes in land prices and provide low-income housing. However, due to poor management and implementation, it did not yield a positive outcome. It resulted in worsening the situation of availability of land for social housing and social infrastructure in urban areas and eventually had to be repealed in all states but West Bengal and Kerala.
Slum clearance was another major initiative that did not succeed in its attempts. Soon the idea was dropped and the government began focusing on low-cost schemes like Environment Scheme for Urban Slums (1972) and Sites and Service Scheme (1980) to tackle the issues of slum proliferation. India adopted the concept of low-cost affordable housing, which can be witnessed in large housing initiatives such as the Aranya Low-Cost Housing, LIC housing, and many more subsequent projects that came up.
Economic Liberalization and Entrepreneurship of the 90s
One of the most significant phases in the reformation of the real estate sector was brought about by the liberalization of monetary policies in 1990. The background of growing fiscal imbalances combined with demanding monetary policies created a volatile atmosphere that threatened an economic crisis. The reforms became the building blocks of the modernization process, purging the nation of the lasting effects of license raj and extreme restrictions.
The initiative opened up fresh avenues for multinational companies and foreign investors to invest in the Indian market. This created many job opportunities, and gave a big market of consumers, access to many products and services for the first time. The country experienced a spike in the number of commercial buildings, skyscrapers, accelerated urbanization and a better quality of life. The NRIs’ investments coupled with foreign capital in the early 1990s contributed to massive growth in the real estate sector, with cities experiencing exponential population influx. The solution to overcrowding was soon realized through high-rise buildings as they could accommodate more people within limited built-up space.
Demand was reaching untouched heights due to the growing population and migration towards better opportunities. Families transitioned from ‘Joint’ to ‘Nuclear’ and the rate of urbanization rose from 23.34% (1980) to 25.72% (1991).
It is not widely discussed, but in the year 1997, real estate suffered a fall of almost 50% in different parts of the country, especially in Mumbai. Metro cities like Delhi, Bangalore, Pune, Hyderabad, and Chennai were left with unoccupied apartments, unwanted commercial buildings and office spaces, which were previously purchased by investors at high rates.
The Tech Storm and Mall Inception of the 2000s
The arrival of the new millennium was marked by India’s self-discovery as a global force in the field of technology. This new phase welcomed IT companies to set up offices in Hyderabad and Bangalore, and then later spread to other parts of the country such as Kolkata, Gurugram, Noida, Pune, Chennai, etc. More and more foreign companies were setting up their offices in these cities, which boosted the residential real estate market. Today, these cities are considered ‘Tech Giants’ on an international scale and have contributed greatly to the modernization movement.
Just before the turn of the millennium, Indians were introduced to the idea of organized retail through the first mall: Spencer Plaza in Chennai; followed by Crossword in Mumbai and Ansal Plaza in Delhi. From the early 2000s, we have witnessed a surge in mall developments across the nation.
The year 2006 saw the Indian government sanctioning modernization of its brownfield airports, such as Mumbai, New Delhi along with Greenfield airports like Bengaluru via the public-private partnership model (PPP). This led to a lofty increase in the real estate development around the airports.
The Rise of Sustainability and Empowerment in the 2010s
2010 observed a significant rise in the pan-India residential launch activity with the record-launch of about 300,000 units, the highest annual launch of the decade, across the top eight metropolitan cities. This number has been growing consistently ever since.
Although the CII- Godrej building in Hyderabad had become India’s first platinum-rated green building in 2003, the 2010s experienced a rise in the number of green buildings across the country, owing to the parallel increase in awareness and accountability amongst consumers towards the environment.
The Real Estate Investment Trusts (REITs) were originated in 2014 to support investors with a limited budget. Given the expanding interest in Grade-A office properties in Indian cities as well as rising rentals across the market, REITs offer attractive ways for investors to trade in prime commercial real estate. Another pivotal intervention in recent times for the real estate industry came into effect in the year 2017, when the reigning government passed Real Estate (Regulation and Development) Act, widely known as RERA. The act was implemented to ensure that homebuyers are not misguided or cheated by unethical developers. This landmark act would make homebuyers more confident, empowered with information and keep them well-protected while they maneuver through the highly fragmented real estate industry.
The Road Ahead
The Indian Real Estate Industry has come a long way since its conception. While many experts consider that it is still in the stage of infancy, it does have ample room for progress. The sector is a wealth creator, highly impacting our GDP and the consequential growth of the nation. It is also responsible for creating the second largest number of job opportunities right after agriculture. It supports the growth of 270+ allied industries and carries the responsibility of meeting the housing needs of the largest democracy in the world.
For India to achieve its dream of growing into a 5-trillion dollar economy, real estate has to play a major role in this scheme. Eradicating outdated tenancy acts have opened up many paths for the industry to accommodate the dreams of millions of migrating homebuyers. The new-age industry is powered by educated and intellectual human capital who are trained to drive the industry skillfully, towards the dynamic future.
In conclusion, it is safe to say that the industry faces a promising future, defined by its practices and policies. The evolving trends have pushed boundaries that were previously thought unachievable and we are looking towards a self-reliant success story in the years to come.