Over seven decades, India’s real estate sector has evolved in a challenging economic landscape. From restructuring land ownership to promoting low-cost housing in urban areas in the seventies, to managing demand for offices in the IT boom of the 1990s to social inclusion, governments have had their hands full.
Two industry experts list the key milestones in Indian realty.
The Bombay Rent Act 1947, which applies only to private premises, provides that rent in excess of the standard is illegal except in certain cases. But over the years the act deprived property owners of returns in line with inflation. As a result, landlords avoided repairs, and municipal bodies struggled with stagnant tax income. Various amendments have since made rental/leasing more equitable.
Gulam Zia, Executive Director, Advisory Retail and Hospitality, Knight Frank India, says rewriting the Rent Control Act in 2009 was a huge relief. “The regulation brought a much-needed reprieve. Especially [when] the commercial sector, which was practically driven by the ownership model, shifted to the rental model. Today more than 90 per cent of office properties are on rent.”
CITY SPACE FREED
The 1976 Urban Land (Ceiling and Regulation) Act originally sought to curb rising land prices and promote low-income housing through a ceiling on the ownership of vacant land in urban areas, allowing the state to acquire excess land for new homes.
“The act was repealed from 1999 onwards by various states as it had become a hindrance to private investment in housing,” explains Siddhart Goel, Senior Director — Research Services, Cushman & Wakefield. It now applies only in West Bengal and Kerala.
The IT boom of the 1990s brought sweeping socioeconomic changes. Singapore’s Ascendas-Singbridge was one of the first foreign players to launch IT-related projects in 1994. “Wealth created through this new wave of jobs laid the genesis of an organised retail culture. Even two decades on, it accounts for nearly half the occupied office space in India,” says Zia.
Legislation such as the 1991 Software Technology Parks of India scheme and Special Economic Zones Act in 2006 helped things along. “Both policies transformed the landscape,” says Goel. “Also, real estate growth beyond the major cities has been possible.”
The years 2000-2003 saw a massive meltdown in mortgage rates. From 14-15 per cent on average, interest rates tumbled to 6.75 per cent (ABN Amro had the lowest rate). Rising interest from young professionals changed demand patterns — until then senior citizens had driven the residential market.
As foreign direct investment came into India in 2005, “Global players such as developers and banks for the first time looked at India as a potential market,” says Zia. “It also fuelled the ambitions of domestic developers, which translated into a changing skyline over the next decade.”
Prime Minister Narendra Modi’s Housing for All by 2022 scheme, launched in June 2015, aims to provide concrete homes for those with annual incomes under Rs750,000 (about Dh43,227). It provides homes with basic amenities and interest subsidies in the range of 3-6.5 per cent for home loans under Rs1.2 million.
“The scheme assumes significance as it targets to address the housing shortage of 20 million houses in urban areas by 2022,” says Goel.