What is it?
Urbanisation—the demographic shift from rural to urban living—is one of the most defining trends of the 21st century. According to UN estimates, more than 68% of the global population is projected to live in urban areas by 2050, up from 56% in 2021. This transition is neither uniform nor linear; its contours are shaped by national policies, local governance, economic cycles, technological disruptions, and, increasingly, climate change. Amid this structural transformation, real estate emerges not only as a responsive asset class but also as an active agent influencing the shape and texture of urban life.
This article unpacks the intricate relationship between urbanisation and real estate. It examines how rapid urban growth alters the landscape of property markets, how real estate dynamics reciprocally shape patterns of urbanisation, and what implications this has for housing affordability, sustainability, infrastructure, and socio-economic equity.
1. Urbanisation: Drivers and Characteristics
Urbanisation is often driven by a combination of push and pull factors: economic opportunity, better access to education and healthcare, mechanisation of agriculture, and the promise of improved living standards. Yet, the process unfolds unevenly across regions.
In emerging economies such as India, Nigeria, and Indonesia, urbanisation is largely demographic—characterised by swelling populations in existing cities and the growth of new peri-urban settlements. In contrast, in developed countries, urbanisation is increasingly morphological, defined by reurbanisation, suburban sprawl, and densification rather than sheer population growth.
This differentiation is crucial because the implications for real estate vary drastically. While in the Global South the challenges lie in absorbing new residents and managing informal housing, the Global North grapples with retrofitting aging infrastructure and reconciling housing demand with environmental constraints.
2. Real Estate as a Mirror and Motor of Urbanisation
Real estate responds to urbanisation by translating demand for space—residential, commercial, industrial—into built form. However, it is not merely reactive. Investment in real estate also drives urban development patterns. Mega projects, gated communities, transit-oriented developments, and business districts often reconfigure city layouts, socio-spatial relations, and land value gradients.
A salient example is the proliferation of Special Economic Zones (SEZs) and urban tech corridors, which tend to catalyse rapid land appreciation, speculative investment, and gentrification. This can lead to the displacement of low-income populations and the fragmentation of urban space, often referred to as “splintering urbanism.”
Moreover, real estate development is capital-intensive, speculative by nature, and typically driven by private actors whose profit motives may not align with urban planning goals. The result is a tension between the commodification of land and housing, and the broader public interest.
3. Housing Markets: Demand-Supply Disequilibrium
One of the most pressing challenges emerging from urbanisation is the mismatch between housing demand and supply. In rapidly urbanising regions, formal housing supply rarely keeps pace with the influx of migrants. In cities like Lagos, Dhaka, or Nairobi, more than half of the urban population lives in informal settlements. These areas lack secure tenure, access to basic services, and resilience to climate risks.
In advanced economies, the housing crisis manifests differently. Here, the issue is less about quantity and more about affordability and inclusiveness. Cities like London, San Francisco, and Sydney are experiencing “affluentisation,” whereby housing becomes an investment vehicle rather than a place to live. Supply is often constrained not by land scarcity per se, but by zoning regulations, NIMBYism, and infrastructure bottlenecks.
The result is a dual housing crisis: one of under-supply in the Global South, and one of affordability and exclusion in the Global North.
4. Infrastructure and Real Estate Development
Urban infrastructure—transport, sanitation, energy, telecommunications—is both a precondition for and a consequence of real estate development. The presence of reliable infrastructure increases land value and catalyses development, creating a virtuous (or at times, vicious) cycle of urban expansion.
Transit-Oriented Development (TOD) is a particularly illustrative model. By aligning property development with transit hubs, TOD fosters compact, walkable, and mixed-use urban environments. However, it also risks triggering displacement if not coupled with affordability safeguards. Empirical studies from cities like Medellín and Seoul suggest that well-planned TOD can foster inclusive growth, but its success depends heavily on governance and cross-sectoral coordination.
5. The Environmental Implications
Urbanisation and real estate, if left unchecked, can have deleterious environmental effects. Urban sprawl contributes to the loss of agricultural land and biodiversity, increased greenhouse gas emissions, and vulnerability to natural disasters. The construction and operation of buildings account for nearly 40% of global energy-related carbon emissions.
Sustainable urban development requires a recalibration of real estate practices: green buildings, energy-efficient materials, passive design strategies, and the reuse of brownfield sites. Green rating systems like LEED, BREEAM, and India’s GRIHA are nudging the industry in that direction, though uptake remains uneven.
Moreover, the growing popularity of ESG (Environmental, Social, and Governance) investing is putting pressure on developers and property owners to demonstrate environmental responsibility. However, there is still a wide gap between rhetoric and practice, particularly in jurisdictions with weak regulatory enforcement.
6. Financialisation and the Global Real Estate Market
Another layer of complexity arises from the increasing financialisation of real estate. Housing is no longer just a social good but a global asset class, subject to the flows of institutional capital, sovereign wealth funds, and private equity. This trend is most visible in global cities—New York, London, Singapore—where high-end developments are often purchased as investment holdings rather than primary residences.
This globalised investment climate decouples housing prices from local incomes and inflates asset bubbles, exacerbating inequality. The 2008 financial crisis revealed the systemic risks of over-leveraged real estate markets. More recently, the COVID-19 pandemic and rising interest rates have highlighted the fragility of over-dependent property economies, such as China’s.
7. Governance, Policy, and the Role of the State
Effective urban and real estate governance is central to mitigating the negative externalities of urbanisation. Land-use planning, property taxation, inclusionary zoning, and rental regulation are among the tools that can be leveraged to steer real estate development towards public interest goals.
However, in many cities, governance is fragmented across multiple jurisdictions and agencies, leading to policy incoherence. There is also a persistent tension between local governments’ fiscal dependence on property-related revenues and their responsibility to ensure equitable urban development.
Public-private partnerships (PPPs), land value capture mechanisms, and community land trusts are gaining traction as potential solutions. Yet their success hinges on transparent implementation, robust regulatory frameworks, and meaningful community participation.
Beyond the Built Environment
Urbanisation and real estate are inextricably linked, engaged in a dynamic interplay of demand, supply, policy, and capital. Urbanisation drives demand for space; real estate responds to and shapes this demand, often in ways that deepen existing inequalities or create new forms of exclusion. At the same time, the built environment offers one of the most powerful levers for driving sustainable, inclusive urban growth—if guided by thoughtful policy and responsible investment.
The challenge for policymakers, urban planners, and developers is to harness the transformative potential of urbanisation without falling into its many traps. That means moving beyond short-term profit motives and embracing long-term urban resilience, affordability, and equity as core principles of real estate development.
As cities continue to grow and evolve, the real estate sector must do more than follow—it must lead, adapt, and innovate in ways that serve not just markets, but the societies they underpin.