The formation of holographic reflection gratings in polymer dispersed liquid crystals(H-PDLC) was investigated in real time both in reflection and transmission modes. Real time study is useful for obtaining information on the speed of grating formation, phase separation dynamics, host polymer shrinkage, polarization dependence of the reading beam, bleaching of the photointiator dye and scattering of the writing beam during grating formation. The real time studies showed that the formation of the grating is fast and reaches a maximum in a few seconds. The diffraction efficiency (DE) VS time curve shows an initial increase followed by a sharp decrease and a recovery to higher efficiencies. Variation of monomer functionality in the pre-polymer syrup resulted in a decrease of reflection efficiency as the functionality is lowered. Varying the writing power of the laser beam gave higher efficiencies at powers exceeding 10 mW/cm2. Liquid crystal (LC) loadings of >16% are needed to obtain measurable efficiencies. Varying the polarization of the probe beam (S vs P) revealed differences in the temporal evolution of DE. Morphology studies are indicative of the differences in the phase separation due to monomer functionality, LC concentration and also laser power. The growth dynamics of H-PDLC gratings are very different from the well known Du Pont photopolymer films which may be due to the phase separation process accompanying gelation in H-PDLC systems.