China’s $60 trillion housing boom turned into a crisis. Could India be next?

China’s housing market is now facing one of the deepest and longest property downturns in modern economic history, with inflation-adjusted home prices effectively falling back to levels last seen around 2005. The correction has erased much of the wealth created during the country’s two-decade real estate boom and is reshaping the world’s second-largest economy. 

China’s property boom has reversed 

For nearly two decades, real estate was the backbone of China’s economic rise. Apartments became the preferred investment for millions of households, while developers expanded aggressively across hundreds of cities. 

But recent data from the Bank for International Settlements (BIS) shows China’s inflation-adjusted residential property price index has fallen sharply from its 2021 peak. Analysts say the decline has effectively wiped out most real gains accumulated since the mid-2000s. 

In nominal terms, home prices in many major cities are still far higher than in 2005. However, after adjusting for inflation, the market has undergone a dramatic reset. 

What triggered the collapse 

The slowdown accelerated after Beijing introduced the “three red lines” policy in 2020 to curb excessive borrowing by property developers. 

That move exposed severe debt problems across the sector. Developers such as Evergrande and Country Garden struggled to repay obligations, construction projects stalled and buyer confidence weakened rapidly. 

At the same time, China began facing broader structural pressures: 

• Slowing population growth 
• Falling birth rates 
• Oversupply in smaller cities 
• Weak consumer confidence 
• Heavy dependence on property for local government revenues 

Housing starts have plunged since 2021, while unsold inventory remains elevated across many lower-tier cities. Analysts increasingly describe the downturn as a “slow-motion property crisis” rather than a sudden crash. 

Why the crisis matters so much 

Real estate once contributed roughly a quarter of China’s economic activity when related industries are included. Property was also deeply tied to household wealth, banking exposure and local government finances. 

As prices fall, consumers feel poorer and become more cautious about spending. Local governments are also under pressure because land sales — once a major revenue source — have slowed sharply. 

The property downturn is now one of the biggest drags on China’s post-pandemic recovery. 

The pain is uneven across China 

Not every Chinese city has suffered equally. Top-tier cities such as Beijing and Shanghai have held up relatively better due to stronger incomes, tighter supply and continued demand from wealthier buyers. 

The sharpest corrections are being seen in smaller cities where developers built massive housing inventories during the boom years. In several regions, falling populations and weak job growth have worsened the oversupply problem. 

Could India face a similar housing crash? 

At the moment, most economists believe India’s housing market remains structurally different from China’s. 

India still benefits from: 

1. A younger population 
2. Faster urbanisation 
3. Rising middle-class demand 
4. Lower housing penetration 
5. Relatively tighter supply in major cities 

Unlike China, India has not seen the same scale of speculative overbuilding across hundreds of smaller cities. India’s property sector is also less dominant in the economy compared with China’s peak dependence on real estate. However, analysts say some warning signs are still worth monitoring. 

Areas of concern for India 

• Rising property prices in major cities: Home prices in cities such as Mumbai, Bengaluru, Hyderabad and Delhi-NCR have risen sharply over the last few years, driven by strong premium housing demand. 
• Increasing investor participation: A growing share of purchases in certain urban markets is coming from investors rather than end users, especially in luxury projects. 
• Household affordability pressure: High property prices combined with elevated interest rates could eventually weaken affordability if incomes fail to keep pace. 
• Dependence on premium housing: A significant portion of recent growth has been concentrated in luxury and premium segments rather than mass affordable housing. 

Still, India’s situation remains fundamentally different because demand is still being supported by demographics and urban migration. China’s downturn, by contrast, emerged after years of oversupply, slowing population growth and extremely high leverage among developers.