Room for less: Is the luxury housing market shrinking?
BENGALURU/MUMBAI: The market for high-end homes is shrinking in the aftermath of a three-yearlong slowdown and the government’s demonetisation drive. Buyers are deferring purchases, most developers are not in a position to afford new launches, and prices are under pressure.
The premium residential market in the National Capital Region (NCR) has been hit with several investors giving up on real estate, and nervous homebuyers staying away from expensive properties.
In this environment, ‘buildand-sell’ is becoming the preferred model in the luxury segment, as it not only assures prospective buyers, but also helps developers get a better price.
India’s largest developer, DLF Ltd, has just started sales of the third and last phase of Crest, a Gurugram project with 250 luxury residences. The super structure of the towers has been built and DLF expects construction to be completed by December 2018.
The company expects the third phase to fetch a premium, since the apartments that are being sold will be ready to move in.
“Customer confidence has been shaken in the last 2-3 years. We could have sold at a discount, but we didn’t do that. Instead, we decided to complete construction because our target customers —NRIs and professionals — want finished products or homes that they can touch and feel,” said Aakash Ohri, senior executive director, DLF 5.
Developers are looking at different strategies to sell expensive homes, and watching the market before launching new projects.
“In the current scenario, premium projects have to be treated individually, depending on demand and sale,” said Rajeev Piramal, executive vice-chairman and managing director of Mumbai’s Peninsula Land Ltd.
The company launched its luxury project in Byculla around the time demonetisation was announced. While enquiries reflected strong demand for the project, customers are waiting to see if there will be a price correction, Piramal said.
A January report by Liases Foras Real Estate Rating and Research Pvt Ltd, which assessed the impact of demonetisation, said luxury projects are the most impacted, compared to mid-segment and affordable housing.
“The outlook is not positive because we have 18-19 months of inventory; absorption has been slow. Prices may not go up at all. Investors are wary of the luxury market and those who are ready to buy stock are looking at discounted value. NCR and Mumbai luxury projects have been the most affected,” said Pankaj Kapoor, MD of Liases Foras.
“It’s clear that for ultra-luxury projects, you have to stick to what you promise. I don’t see too many people completing their projects on schedule. But there is signifi- cant premium for close-to-completion projects,” said Vinod Rohira, managing director and CEO, commercial real estate and REIT, K Raheja Corp.
The company is currently selling the second phase of its Vivarea project in Mumbai. The first phase and 60% of the second phase have already been sold.
Only a handful of developers have new launches on the cards.
This year, Mumbai’s Lodha Group will deliver its World One project and Lodha Altamount, following World Crest, which was completed in 2015. The firm will also start selling residences in a yet-to-be launched Mumbai project and at 1 Grosvenor Square in Mayfair, London.
“While the general economy has taken a short-term impact due to demonetisation, the medium- and long-term benefits will go a long way . ... We are very confident that our luxury developments will continue to see strong demand,” said Abhishek Lodha, managing director, Lodha Group.
Mumbai-based HBS Realtors is also planning to launch HBS View 360 near Haji Ali by endJanuary, a boutique project of 30 units priced at ₹10-20 crore. “Our philosophy is moving towards build and sell or near-build and sell,” said Sandeep Shah, managing director, HBS Realtors.