Tracing India's Real Estate Journey:

Indian Real Estate History (1947–1988)

From 1947 until 1988, people typically bought real estate through their savings and gratuity payments. Loans were not commonly used to purchase homes. Housing at that time was seen as a sense of security, a necessity, and a status symbol for the common people. Buying a house was one of the major life goals for most individuals, and they saved diligently to achieve it.

Economic Liberalization (1990–1994)

At the start of the 1990s, the Indian economy was struggling, and foreign investments were drying up. The country was on the brink of default, but thanks to the prudent economic policies of then Finance Minister Dr. Manmohan Singh, the Indian markets were liberalized. This led to increased foreign investments, boosting job creation. With rising incomes, the demand for real estate soared. NRIs saw the Indian market as a lucrative investment destination, especially in real estate.

In 1992, the stock market crashed as the Harshad Mehta scam unfolded, leading to a loss of investor confidence. Many turned to real estate as a safe haven, which pushed property prices higher.

The Worsening Condition of the Real Estate Industry (1995–2000)

Between 1994 and 2000, demand for real estate dropped by nearly 40%. The key reason for this was a demand-supply mismatch. While demand remained high, developers couldn’t deliver ready-to-move-in homes on time. The inflated real estate prices from the earlier boom also made it difficult for new buyers to enter the market, further slowing demand.

The IT Industry Revolution (2000–2010)

In the early 2000s, IT and tech companies began investing heavily in India, driven by the country’s demographic dividend — a young, skilled, English-speaking workforce that was inexpensive to train. India became the IT outsourcing hub of the world, driving demand for both commercial and residential real estate. The urban migration from rural areas added to this demand as new job opportunities arose.

Between 2002 and 2008, the SENSEX surged from 2,900 to 21,000 points, a growth of approximately 731%. In 2005, the government increased the FDI limit to 100% in real estate, leading to more investments. Banks offered home loans at lower interest rates, making real estate more affordable for common people. As a result, real estate prices increased by 56%, with the micro real estate space growing at a 13% CAGR. Developers offered lucrative schemes to entice consumers into the market, and the arrival of television into Indian homes exposed people to global trends, boosting awareness about the importance of owning property.

The US Real Estate Crisis of 2008

Although the global financial crisis of 2008 slowed FDI inflows and domestic investor demand, India wasn’t as severely affected as many other countries. Since 65% of India’s economy was driven by domestic consumption and it had limited exposure to global exports, real estate prices stabilized as lower-cost housing schemes helped boost buyer confidence.

The Startup Boom (2011–2014)

During this period, India’s startup ecosystem thrived, with real GDP growth averaging around 8%. Increased investment in startups created a demand for commercial real estate, while residential real estate saw growth in tier 2 and tier 3 cities. However, rising real estate prices in metro areas drove many buyers to seek homes in the city outskirts.

The Infamous Scandals (2010–2011)

Several major real estate scandals surfaced during this time:

Adarsh Housing Scam: A scandal involving the construction of a 31-story building intended for war widows and veterans. Politicians, bureaucrats, and army personnel were implicated in acquiring flats for themselves, flouting environmental and land-use rules.

2010 Fake Housing Loan Scam: A fake housing loan scam worth thousands of crores was uncovered by the CBI. Top banking officials, including LIC Housing Finance CEO Ramachandran Nair, were arrested.

2010 Commonwealth Games Scam: This scandal involved monetary misappropriations of Rs. 70,000 crores in contracts and infrastructure developments related to the games.

Oversupply Issues (2014–2015)

Many individuals ventured into real estate development, leading to an oversupply of units. As a result, real estate prices stabilized after years of rapid growth. Developers paused new construction as unsold inventory began to pile up.

Regulatory Interventions (2015–2016)

During this period, significant regulatory changes reshaped the real estate industry. The enactment of RERA (Real Estate Regulatory Authority) curbed illegal constructions and malpractices. This led to reduced investments in the sector and further declines in property prices. The demonetization of November 8, 2016, had a similar impact, as the government cracked down on black money, much of which was parked in real estate by wealthy individuals trying to avoid taxes.

The Muted Demand Phase (2015–2020)

From 2015 to 2020, the real estate sector experienced muted demand due to waning investor sentiment and past negative events. It delivered a negative CAGR of -1% and became one of the worst-performing sectors during this period.

The Turnaround and COVID-19 (2021-Present)

The COVID-19 pandemic played a significant role in the revival of the real estate sector. With lockdowns in place, people began working from home, and the need for larger living spaces became apparent. Buyers sought homes with more rooms to accommodate workspaces and quarantine areas for family members.

As a result, demand for real estate surged. Developers introduced attractive schemes, and banks offered favorable credit access, leading to increased sales. Real estate valuations in many cities rose despite inflation and high interest rates. From 2021 onward, NIFTY Realty grew at a CAGR of 47%. The recovery was driven by strong regulatory oversight, easy credit access, the introduction of REITs (Real Estate Investment Trusts), and optimistic economic prospects.

Conclusion:

Real Estate goes through various cycles based upon many factors. As discussed above, it can get influence by factors like regulatory policies, demographic shift, economic cycle, industry disruptions and unexpected events. As a consumer & investor, we should consider these diverse factors before making our decisions regarding buying, selling or investing. I hope now you are well aware of the topic in details & be able to make prudent judgements.