Mapping The Evolution of Indian Real Estate: A Glimpse into the 75-Year Journey

As India celebrates 75 years of Independence, it is worthwhile to commemorate the milestones of the Indian real estate industry that have not only characterized modern India but have made an ever-lasting impact on the country's economy. The real estate sector of the world's largest democracy, the second-most populous nation, and one of the fastest emerging economies has been the key driver of socio-economic change. The industry has come a long way since its infancy and has been a largely unorganized state since Independence. Migration, increased demand for commercial and housing space, and expanding industries and city limits triggered the real estate sector expansion post-independence. Further, government policy and interventions were critical in shaping the industry over the years—mainly by forming sector-specific policies and amending older ones.

As we enter the 75th year of Independence, the real estate sector continues to evolve and is expected to contribute 13% to the country's GDP by 2025 (IBEF). The sector's growth is fuelled by rapid urbanization, a rise in disposable income, and a liberal credit policy. Consequently, India remains one of the most preferred investment destinations in the real estate sector, and construction is the third largest sector in terms of FDI inflow.

Post-Independence: A New Era for the Indian RE Industry

Soon after the independence, it was a beginning of a new era for the Indian real estate industry—while we inherited the rich architectural heritage amidst the prevailing socio-political situation, the subsequent period between 1950-60 prompted defining new state capitals, giving rise to new capital cities like Chandigarh. Following the development of Chandigarh, other states opted for town planning and development strategies like the Maharashtra Regional and Town Planning Act 1966. Moreover, the period led to governments formalizing institutions, such as Housing and Urban Development Company in 1970, City and Industrial Development Corporation in 1971, and the Mumbai Metropolitan Region Development Authority in 1975 & more, to strengthen residential real estate.

While the development of cities and industrialization under the government was in full swing, 1990s economic liberalization gained the spotlight as gates opened for multinational corporations to establish operations in the Indian markets. This made the country a preferred avenue for foreign investors and stakeholders—and catalyzed the development of commercial real estate, and we entered the era of the skyscraper along with rapid urbanization. In the process, the construction activity had a multiplier effect on economic growth, given its linkages to various allied industries like cement, steel, paint, etc.

The Current Landscape

The real estate sector in India is recording sturdy growth across the asset class. Government policies & initiatives have been significant enablers in shaping the RE landscape. The last three decades have been noteworthy considering the sector's economic significance as the government continued its reformative stance over the past couple of years and has lent support to the industry. Policy reforms ranging from NBFC, PMAY, and REIT, expanding the scope of PLI scheme, setting up the bad bank along with focusing on facilitating infrastructure development by setting up new industrial parks, national monetization pipeline, and ramping up logistical infrastructure are proving to be an enabler for the economy and paving the way for development and industrial growth. These policies have played a constructive role in improving investor sentiments and accelerating overall economic growth.

The asset class across commercial real estate has been strengthening, and office, retail, I&L, and data centers have shown resilience despite key events like the Lehman crisis of 2008 and the recent pandemic outbreak. Initiatives by the government to realize the Make in India vision and establish India as the next big manufacturing hub globally are yielding good results. The retail sector, in particular, has undergone a drastic transformation with the adoption of e-commerce and experiential retail with all global brands in India. The Indian retailers are Resizing, Relocating & Rightsizing to ensure long-term growth and broaden their customer base. As the market progresses, alternative investment avenues like the Data Center are emerging amidst rising digitization and strong policy push.

The road ahead: ESG & Technology to Pave the way

Decarbonization and technology will be the two most substantial shifts over the next decade that will rewrite the fundamentals of the real estate sector. ESG and the green initiatives are no more just moral imperatives but fiduciary responsibilities as well that organizations can’t ignore. Organizations have realized and are taking steps to promote development in an environmentally conscious way, undertaking green initiatives in every possible way, including adopting green real estate. Embedding ESG into commercial real estate and construction can help organizations reduce their emissions and achieve sustainability goals. The sector is now leveraging advanced technologies to function in an environment driven by digitization—technology in real estate, aka. Proptech is graduating from an initial stage to become an integral part of the organization. The industry is exploring the untapped potential that lies with IoT and Big Data for reporting, assessment, predictive analysis, and more, to improve processes and generate better results.

The dynamics of the real estate sector are undergoing a sea change. Technology and ESG will stand out as key enablers for the industry in the future. These elements will play a critical role in helping stakeholders transform the delivery of property services and amenities in the years ahead, not just across the commercial but the housing sector as well.

With many more milestones to achieve, I wish you all a happy Independence Day. Jai Hind.