India’s real estate sector has rarely been short of ambition. The larger challenge, for much of its modern history, has been getting the structural plumbing right. Fragmented regulation across states, limited transparency in transactions, and a near-absence of enforceable investor protection meant that serious institutional capital came in cautiously, selectively, and often with a significant risk premium baked in. You cannot build a trillion-dollar sector on sentiment alone. At some point, governance has to do the heavy lifting. The importance of that policy stability becomes even more pronounced in an environment where rising food prices and affordability pressures continue to influence household spending and consumer sentiment.
The shift is well underway. The reforms of the past decade, RERA, GST, SEBI’s REIT framework, and now SMREITs, have not arrived together as a single grand plan. They have layered on top of each other, each one addressing a specific friction, and collectively they have changed the investment calculus for Indian real estate in ways that are only now becoming fully visible in the data.
RERA: the foundation that changed everything
Ask any serious real estate investor what single reform mattered most, and the answer is almost always RERA. The Real Estate (Regulation and Development) Act fundamentally altered the power dynamic between developers and buyers. Project registration became mandatory. Delivery timelines became enforceable. Fund diversion, once common, became a compliance risk rather than an accepted practice.
The results are measurable. India’s Economic Survey 2024-25 notes that following RERA’s implementation, India ranked 31st out of 89 countries in the Global Real Estate Transparency Index 2024. As of January 2025, over 1.38 lakh projects and nearly 96,000 agents had been registered under the framework, with more than 1.38 lakh complaints resolved. These are not abstract statistics. They represent a shift in buyer confidence that eventually becomes transaction volume, which in turn becomes investor appetite.
For institutional investors evaluating India, transparency indices matter. They signal governance quality, reduce due diligence risk, and inform pricing. A market that moves from opaque to regulated does not just attract more capital; it attracts better capital, the kind that brings longer holding horizons and more disciplined underwriting.
GST and the simplification dividend
GST’s role in real estate is less dramatic but equally important. Before its introduction, a property transaction carried layers of indirect taxes that varied by state, made cost structures unpredictable, and created scope for structural arbitrage that benefited neither buyers nor the market as a whole. GST replaced that complexity with a unified framework.
For under-construction residential properties, the current rates of 1 per cent for affordable housing and 5 per cent for other categories have made the cost of acquisition more predictable. For commercial real estate, the 12 per cent rate with input tax credit has introduced efficiencies that were simply unavailable before. In September 2025, the government went further, reducing GST on cement from 28 per cent to 18 per cent, a move that directly lowers construction costs and, over time, should support supply-side expansion.
The direction is clear: a government that is actively calibrating the tax architecture to support real estate development, not just regulate it. The broader objective is visible in the government’s continued effort to balance regulatory oversight with measures aimed at supporting affordability and economic stability.
REITs and SMREITs: opening the capital stack
Perhaps the most consequential reform for the investment community has been SEBI’s progressive opening of the REIT framework. Real estate investment trusts, once the preserve of large institutional players in developed markets, are now a legitimate and growing asset class in India. SEBI’s recent reclassification of REITs as equity and their potential inclusion in benchmark indices represents a significant step toward deeper liquidity and broader market participation.
The introduction of Small and Medium REITs takes this logic further. By lowering the minimum ticket size and creating more flexible structures, SMREITs bring income-yielding commercial assets within reach of retail investors and smaller HNIs for the first time. A pre-leased office asset in Pune or a warehousing facility in Chennai can now form part of a structured, regulated investment product. For a country where the financialisation of household savings is still maturing, this democratisation could prove to be one of the more enduring legacies of the current reform cycle.
Capital is following policy
The investment community has taken note. According to IBEF, Indian real estate attracted $4.3 billion in institutional investments in the first nine months of 2025, led by a 52 per cent surge in domestic capital contribution and sustained inflows into office and residential segments. That domestic capital surge is particularly telling. It reflects not just foreign institutional confidence, which has ebbed and flowed with global cycles, but a maturing domestic investor base that is increasingly willing to allocate to real estate through structured, regulated vehicles.
Emerging asset classes such as warehousing, data centres, and mixed-use developments are also drawing heightened investor interest, supported by India’s expanding digital economy, infrastructure push, and improving policy environment. As institutional capital becomes more sector-specific in its allocation strategy, these segments are increasingly being viewed as long-term growth plays rather than niche alternatives.
Private equity flows into real estate have also remained resilient. The H1 2025 figures from Savills showed PE inflows of US$ 2.4 billion, up 38% year-on-year, with marquee names such as Blackstone and Brookfield continuing to deploy capital into Indian assets. These are not passive observers of the regulatory environment. They are active beneficiaries of it.
What still needs to change
For all the progress the sector has made, a few old frictions still persist. State-level RERA implementation is still uneven, and that unevenness creates pockets of risk that unsuspecting investors discover too late. Single-window clearance for project approvals is national policy on paper but inconsistently delivered on the ground. Land title clarity, particularly outside the large metros, remains one of the more stubborn friction points for institutional transactions. And the SMREIT market, however well-designed, is still in the early innings of building a credible track record.
Beyond sector-specific reforms, the broader inflation environment will also shape the pace of investment activity going forward. Elevated food prices, in particular, continue to affect household savings and discretionary spending capacity, especially among aspiring homebuyers already adjusting to higher financing costs. For policy momentum in real estate to translate into sustained demand on the ground, inflation management and broader consumer-side economic stability will remain important areas of focus.
The long arc of reform
India’s real estate sector is mid-reform, not post-reform, and that distinction matters more than most commentators acknowledge. The structural work of the past decade has been genuine and largely well-directed. What comes next, deeper REIT liquidity, wider SMEREIT adoption, faster approvals, and more consistent enforcement across states, will determine whether the sector fulfills its $5 to 10 trillion potential by 2047 or settles for something smaller.
Governance and returns are not competing priorities in real estate. Across investment cycles, the assets and markets that hold up best are almost always the ones built on a foundation of regulatory credibility and transparency. The policy push of recent years has given Indian real estate exactly that foundation. The work now is to build on it without losing patience or discipline along the way.
The article is authored by: Binitha Dalal, Founder and Managing Director, Mt. K Kapital
