The Four Phases of Indian Investing: What Actually Changed Between Gold and AIFs

TL;DR

• India’s investing behaviour has moved through four broad phases: gold-led savings (pre-liberalization), real estate (1990s–2000s), equities (2000s–2010s), and alternative investments (present day).
• Household financial savings as a share of GDP have roughly halved, from about 11% in FY21 to roughly 5.3% in FY24, even as physical assets like real estate still dominate the household balance sheet, per RBI’s Handbook of Statistics.
• Mutual fund AUM has compounded roughly six-fold in a decade, from about ₹15 lakh crore in mid-2016 to over ₹85 lakh crore by mid-2026, per AMFI data.
• India’s AIF industry has scaled from ₹8.5 lakh crore in commitments (mid-2023) to nearly ₹17 lakh crore by March 2026, growing at a CAGR of roughly 30% over five years, per SEBI data.
• The pattern connecting all four phases isn’t a shift toward “riskier” assets; it’s a repeated handoff of custody, from the household itself, to a developer, to a fund manager, to a GP.

Quick Answer

India’s investing evolution didn’t move in a straight line from “safe” to “risky.” It moved in a loop: households held gold directly (self-custody), handed savings to developers via real estate (physical-asset custody), handed savings to asset management companies via mutual funds (liquid, regulated custody), and are now handing savings to fund managers via AIFs (illiquid, but professionally structured custody). Each phase looks like a new asset class. Underneath, it’s the same decision made four times: who gets to hold the capital, and under what rules.

Phase I: Savings Focus Ran on Distrust of Institutions, Not Distrust of Returns

India’s pre-liberalization savings pattern is often read as risk aversion. The data suggests something narrower: a preference for assets that didn’t require trusting an intermediary. Gold’s appeal in this era was structural: it was liquid without a bank, transferable without paperwork, and didn’t depend on a functioning capital market to hold its value.

That structural logic hasn’t fully disappeared. Indian households and temples are estimated to hold somewhere between 25,000 and nearly 35,000 tonnes of gold, a private pool that dwarfs the roughly 880 tonnes on the RBI’s own balance sheet. Gold imports crossed roughly ₹4.89 lakh crore in FY25, nearly double what they were in FY18. The World Gold Council traces this back to a structural cause: India’s gross domestic savings rate climbed from 13% of GDP in 1975 to about 30% by 2021, at a time when banking penetration and awareness of financial products remained limited across much of the country. Gold wasn’t the return-maximizing choice. It was the trust-minimizing one self-custody as a feature, not a limitation.

Phase II: Real Estate Substituted a Developer’s Balance Sheet for the Household’s Own Vault

The 1990s and 2000s real estate cycle changed what households trusted, not whether they trusted. Liberalization, rising incomes, and easier bank lending gave households a new place to park savings, one that, unlike gold, could also be leveraged. RBI data shows household allocation to real estate and gold together absorbed roughly two-thirds of all savings by 2012-13, up from about half in 2006-07, with the financial-to-physical savings ratio falling to its lowest level since the 1960s.

Returns tell the more interesting part of the story. Through the boom years of 2004-2008, average five-year housing returns across India’s top seven cities exceeded 60%. Between 2013 and 2018, that cumulative five year appreciation had fallen to roughly 12% a little over 2% annually, underperforming a bank fixed deposit. The asset class hadn’t changed. The macro conditions that made a developer-intermediated, leveraged, illiquid bet attractive had.

Phase III: Equities Became the First Financial Asset Class India Trusted at Scale

Where gold and real estate were self- or developer-custodied, equities required households to trust a regulator, an exchange, and a fund manager simultaneously and this is the phase where that trust became mainstream rather than niche.

The scale of that shift shows up cleanly in two data sets. Demat accounts, the basic prerequisite for owning equities electronically grew from 2.71 crore at the end of 2016 to roughly 21.6 crore by December 2025, an eightfold increase in under a decade, according to NSDL and CDSL data. Mutual fund AUM tells a similar story: from roughly ₹15.18 lakh crore in July 2016 to ₹85.76 lakh crore by July 2026, per AMFI a six-fold increase, with systematic investment plans alone crossing ₹29,000-32,000 crore in monthly contributions through 2025-26. AMFI’s own data shows the share of mutual funds within household savings rising from 7.6% in FY21 to 8.4% in FY23. This was the first phase where India’s savings pool met a genuinely liquid, professionally managed, regulator-backed vehicle at population scale.

Phase IV: Alternative Investments Are Rebuilding Illiquidity With a Manager Attached

The “alternative investment era” looks, at first glance, like a reversal of a move back toward the illiquidity of Phase I and II. It is, but with one structural difference: the illiquidity is now intermediated by a regulated, professional capital allocator rather than a jeweller or a developer.

SEBI data shows AIF commitments rising from ₹8.45 lakh crore in mid-2023 to ₹16.94 lakh crore by March 2026 doubling in under three years, at a roughly 30% CAGR over five years. Registered AIFs have grown from 732 in March 2021 to 1,849 by March 2026, a 135% increase in fund count alone. Category II funds private equity, private credit, and real estate strategies account for the bulk of this, at ₹12.74 lakh crore in commitments as of March 2026, though Category III (hedge and long-short strategies) is growing fastest. SEBI’s own chairman has pointed to accredited investor numbers rising from 649 in May 2025 to 2,181 by February 2026, alongside industry projections of ₹50-65 lakh crore in AIF commitments by 2030. This is not retail India’s next asset class; it is HNI and institutional India’s answer to a question retail already settled in Phase III: who do you trust to hold your capital, and what do you get in exchange for giving up daily liquidity.

The Custodial Handoff: What Actually Moved Between Phases

Line up the four phases and a different story emerges than “India got more sophisticated.” Each transition substituted a new custodian for the previous one, and each new custodian came with more regulatory scaffolding and less immediacy of control than the one before it.

What makes this more than a stylistic observation: liquidity and trust don’t move together across the four phases; they trade off in opposite directions twice. Phase I to Phase II sacrificed liquidity for leverage. Phase II to Phase III recovered liquidity by handing custody to a regulator instead of a counterparty. Phase III to Phase IV sacrifices liquidity again but this time in exchange for structured governance (LPAs, drawdown schedules, fiduciary duty) rather than a title deed and a builder’s promise. India’s investing maturity curve isn’t really a curve toward “more equities” or “less gold.” It’s a repeated willingness to give up direct control of capital in exchange for a more accountable custodian and Phase IV is the first time that custodian has come with a contract instead of just a key or a certificate.

Chief Brand & Investor Relations Officer

Sneha Dadrwal

Frequently Asked Questions

Q: Is India's shift toward alternative investments a retail trend?

A: No AIF participation remains concentrated among HNIs, family offices, and institutions, with a ₹1 crore minimum investment threshold for most schemes. Retail India's structural shift toward professionally managed capital happened earlier, in the mutual fund phase.

Q: Has gold actually lost relevance in Indian household savings?

A: Not in absolute terms. Gold and silver ETF inflows have grown sharply within the mutual fund industry itself gold ETF AUM rose roughly 148% in 2025 alone, per AMFI suggesting gold's role is being repackaged into regulated wrappers rather than disappearing.

Q: Why did real estate returns fall so sharply after the 2004-2008 boom?

A: A convergence of factors: demonetisation, GST implementation, a construction ban in parts of Mumbai, the NBFC liquidity crisis, and RERA-driven inventory corrections compressed five-year residential returns from over 60% (2004-2008) to roughly 12% (2013-2018), per industry return data.

Q: What is driving the current AIF growth phase specifically?

A: SEBI's own data points to regulatory simplification (the proposed GARUDA framework for faster scheme launches), a rapidly growing accredited investor base, and rising domestic HNI and family office allocation alongside a structural shift of private credit from roughly 6% to 15% of AIF commitments over five years.

Sources

RBI Handbook of Statistics on the Indian Economy; AMFI Monthly Notes and Annual Reports; SEBI AIF industry data; NSDL/CDSL depository statistics; World Gold Council India Gold Market Series; Knight Frank Global House Price Index; industry press coverage of RBI, SEBI, and AMFI releases.