As the country completes seven decades of independence, it is worthwhile to remember the milestones that have had a lasting impact on India’s real estate industry
Often, how a particular industry
shapes up, depends on the government’s initiatives and interventions –
largely done through new, sector-specific policies, as well as tweaking
older ones. While the government’s role is important, it is the market
conditions, geopolitical events, socio-economic changes in population
and the element of time itself that are fundamental in the evolution of
industrial sectors. Given that real estate is a major industry across
the world, there has been a constant focus in many countries, to have
more transparency in the sector through regulations and technology.
India too, has seen many policies in recent years but certain milestones
are spread over decades.
- The new capital cities of Chandigarh and Gandhinagar were formed in 1952 and 1960, respectively. These were the first and rare occasions of planning entirely new cities in the country.
- The Maharashtra Regional and Town Planning Act, 1966, first incorporated the practice of development plans and town planning. The Planning Commission also issued its first guidelines for district planning in 1969, which led to many states to formulate district plans. However, except for a few examples, these initiatives didn’t yield positive results.
- The Urban Land (Ceiling and Regulation) Act was enacted in 1976, to curb speculative hikes in land prices in urban areas and to provide low-income housing. However, because of poor implementation, it ended up worsening the situation of availability of land for social housing and social infrastructure in urban areas and was eventually repealed in all states except West Bengal and Kerala.
- The government started setting up institutions, such as the Housing and Urban Development Company in 1970, City and Industrial Development Corporation in 1971, the Mumbai Metropolitan Region Development Authority in 1975, National Housing Bank in 1988 and the Housing Development Finance Corporation in 1994, to strengthen the residential real estate industry.
- In the backdrop of a looming fiscal deficit crisis, the economy was liberalised in 1991 through reforms, which set in motion its modernisation process. This created newer job opportunities and gave a big market of consumers, access to many products and services for the first time. This led to the entry of multi-national corporations into India in a big way and brought a new type of demand – contemporary, world-class office space.
- The phase of 1994-99 marked the completion of India’s first property cycle as the market, which was opened up, saw property prices go up for the first time, thanks to NRIs and foreign capital. However, the realty market tapered off after 1995, due to inherent inefficiencies. With the advent of the Asian Financial Crisis in 1997-98, foreign capital was wiped out and growth in capital values came to a halt altogether.
- The idea of commercialisation of the space above transit routes, was first introduced at Vashi station in Navi Mumbai, in 1992. Other stations, such as Sanpada, Juinagar, Nerul and CBD Belapur on the same railway line followed in Vashi’s footsteps but met with lesser degrees of success. However, the latest transformation of Seawoods-Darave railway station has met with phenomenal success.
- India received global recognition as a force in the software world, thanks to the Y2K bug, which also proved to be another turning point for the real estate industry. More foreign companies started setting up offices in cities like Hyderabad and Bengaluru, which led to growth in these cities’ commercial and residential real estate.
- Foreign direct investment (FDI) in real estate was first allowed in the year 2005, which opened up newer ways of funding and led to a maturing of the industry, in terms of business practices and product offerings. The FDI regime has been further liberalised in recent years, leading to record private equity inflows and entry of foreign developers.
- Just before the turn of the millennium, Indians were introduced to the concept of organised retail through the first mall: Spencer Plaza in Chennai, followed by Crossword in Mumbai and Ansal Plaza in Delhi. From the early 2000s, there has been a spurt of mall developments across the country.
- The government approved the restructuring and modernisation of brownfield airports, such as Mumbai and Delhi, as well as greenfield airports at Bengaluru and Hyderabad, through the public-private partnership model in 2006. This led to the introduction of the concept of airport cities and airport precinct real estate.
- The collapse of Lehman Brothers in 2008 triggered a panic, along with the sub-prime crisis, leading investors to scout for rationality in investments across asset classes. The ensuing economic slowdown and risk of job losses, made it difficult for investors to exit from their stakes in Indian real estate. The global financial crisis, however, had a big impact on commercial realty in India and a limited impact on residential realty in the country. The price fall led to quick sales and India’s residential market bounced back sooner than most expected.
- The Real Estate (Regulation and Development) Act (RERA), aimed at protecting home buyers, came into effect from May 1, 2017. This landmark Act will make home buyers confident, empowered with information and well-protected and make the non-serious players disappear from the highly-fragmented residential real estate market.
- Real Estate Investment Trusts (REITs) were first opened up in 2014 and the first REIT is due for launch soon. This will allow small-ticket investments in commercial real estate of the country. Given the expanding universe of Grade-A office properties in Indian cities, as well as rising rentals across their micro-markets, REITs offer an attractive way for investors to trade in prime commercial real estate.
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