70 years of in­de­pen­dent In­dia: De­cod­ing real es­tate mile­stones

A look at the ma­jor mile­stones that have had a big im­pact on In­dia’s real es­tate in­dus­try

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Ashutosh Li­maye feed­back@hin­dus­tan­times.com n Ashutosh Li­maye is na­tional di­rec­tor, re­search, JLL In­dia.

Of­ten, how a par­tic­u­lar in­dus­try shapes up de­pends on the gov­ern­ment’s ini­tia­tives and in­ter­ven­tion s–largely done through new sec­tor-spe­cific poli­cies as well as tweak­ing older ones to bet­ter suit the chang­ing busi­ness en­vi­ron­ment. 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 evo­lu­tion of in­dus­trial sec­tors, es­pe­cially so, in the case of de­vel­op­ing economies like In­dia.

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. As the coun­try will soon com­plete seven decades of in­de­pen­dence, it’s worth­while to re­mem­ber the mile­stones that have had along last­ing im­pact on In­dia’s real es­tate in­dus­try:

•The new cap­i­tal cities of Chandigarh and Gandhi na gar 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 for­mula te district plans. How­ever, ex­cept a few ex­cel­lent ex­am­ples, these ini­tia­tives didn’t yield pos­i­tive re­sults.

•The Ur­ban Land( Ceil­ing and Reg­u­la­tion) Act was en­acted in 1976 to curb spec­u­la­tive hike sin 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 got re­pealed in all states but 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 mod­ern is at ion 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 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- 99marked the com­ple­tion of In­dia’s first prop­erty cy­cle as the mar­ket, which was opened up in post lib­era lisa ti on re­forms saw prop­erty prices go up for the first time, thanks to NRIs and for­eign cap­i­tal. How­ever, the realty mar­ket ta­pered off post-1995 due to in­her­ent in­ef­fi­cien­cies. With the ad­vent of the Asian Fi­nan­cial Cri­sisin1997- 98, for­eign cap­i­tal got wiped out and growth in cap­i­tal val­ues came to a halt al­to­gether.

•The idea of com­mer­cial­isa- tion of airspace above tran­sit routes was first in­tro­duced at Vashi sta­tion in 1992. Other sta­tions such as San pad a, Ju in agar, Nerul and CBD Be­la­pur – on the same rail­way line – fol­lowed in Vashi’s foot­steps but met with lesser de­grees of suc­cess. How­ever, the­lat­est trans­for­ma­tion of Sea woods-Dar ave in 2017 rail­way sta­tion has met with phe­nom­e­nal suc­cess.

•In­dia’s self-dis­cov­ery as a global force in the soft­ware world got global recog­ni­tion thanks to the Y2K bug that was an­other turn­ing point for real es­tate in­dus­try as well. More for­eign com­pa­nies started set­ting up of­fices in cities like Hy­der­abad and Ben­galuru in the post-Y2K era, 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 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 got in­tro­duced to the con­cept of or­gan­ised re­tail through the first mall: Spencer Plaza in Chen­nai; fol­lowed by Crossword in Mum­bai and An sal 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 air­port sat Ban­ga­lore and Hy­der­abad through the pub­lic-pri­vate part­ner­ship model in 2006. This led to the in­tro­duc­tion 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. Lim­ited in the sense that 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, com­monly called RERA, has come into ef­fect from May 1, 2017, to en­sure that home buy­ers are not taken for a ride by un­scrupu­lous de­vel­op­ers. This land­mark Act will make home buy­ers con­fi­dent, em pow­ered with in­for­ma­tion and well-pro­tected and make then on-se­ri­ous play­ers dis­ap­pear from the highly-frag­mented res­i­den­tial real es­tate in­dus­try.

•The Real Es­tate In­vest­ment Trusts( RE I Ts) were first opened up in 2014 and the first REIT is due for launch soon and would 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 mi­cro­mar­kets, REITs of­fer an at­trac­tive way to in­vestors to trade in prime com­mer­cial real es­tate.

MINT/FILE

In­dia has seen a num­ber of poli­cies re­lated to real es­tate in re­cent years

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