It is the hottest sector in India today. It is the melting pot of activity impacting several other businesses in the economy. Billions of dollars are pouring into the sector. It is now also the focus of all regulators in the country. Above all, it impacts the common man’s living standards. No marks for getting this one right. It is India’s real estate sector!

In the past three years, property prices have shot up by 150-200 per cent in all metros, crossing even the peak prices of the early 1990s when a property boom enveloped the nation. This time the wave of optimism has also spread to smaller cities where prices are spiralling to previously unimaginable limits.

A recent study by the Associated Chambers of Commerce and Industry of India says that India’s real estate market will expand from $16 billion (Rs 70,400 crore) to $60 billion (Rs 2,64,000) by 2010. With such talk buzzing around boardrooms the world over, excited overseas investors are expected to pump in $25 billion (Rs 1,10,000 crore) into Indian realty by then.

But human memory is short-lived and everyone seems to have forgotten how the property boom in the early 1990s crashed around 1995-1996, fuelling an economic recession that lasted five years. The fact is that today, hype aside, the real estate market is poised as precariously.

Regulators have woken up to this reality and are trying to cool the market. The Securities and Exchange Board of India is tightening listing norms for realty stocks and the Reserve Bank of India (RBI) has instructed banks to set aside more reserves to protect money lent to the realty sector. Retail home loan rates, which determine the demand for homes, have risen 4 per cent to touch 12-13 per cent in the past 12 months and all this has kept prices down in recent months.
However, private equity investors from all over the world are still bringing mega bucks into India’s real estate sector and the money is funding sprawling new townships, swank commercial offices and snazzy retail malls.