Affordable treats driving consumer spending
REAL estate developers are rethinking design and functionalities in order to cater to demands of a ‘larger-thanlife living experience' by luxury home buyers, but there are a few points to remember before you make that investment
The demand for luxurious residences that offer a unique living experience has been growing in the Indian market over the last few years. An increased number of high-networth individuals, rapid urbanisation, and rising incomes are just some of the factors contributing to that growth.
The experience of the pandemic has also left many people feeling a strong sense of home ownership, and a desire to have more square footage for work and education requirements.
“Because the mid and premium segment consumers have other resources to tap into, they are still able to go ahead with their desire for home ownership by tapping into other resources that they have access to,” says Vivek Rathi, director-research, Knight Frank India, a property consultancy.
If the numbers are anything to go by, India's luxury residential market is booming. Post-pandemic, the segment performed remarkably well, with overall sales share rising steeply across the top seven cities.
Out of the total 3,65 lakh units sold across the top seven cities in 2022, about 18 percent (approximately 65 680 units) were in the luxury category, reveals research conducted by real estate consultancy firm Anarock Group. Contrastingly, of the total 2,61 lakh units sold in 2019, just seven percent (approximately 17 740 units) were in the luxury category.
“After a stupendous performance in 2022, the bull run in luxury sales continued in Q1 2023 as well despite property price rise,” says Anuj Puri, chairman, Anarock Group.
“And most recently, out of the total 1,14 lakh units sold across top seven cities in Q1 2023, at least 25 percent were in the high-ticket segment priced Rs1,5 crore.”
Puri adds that the demand for luxury real estate is expected to persist, “with over 60 percent of ultra-high-net-worth individuals (UHNIs) and HNIs surveyed intending to purchase a property”.
The government's announcement in the Union Budget to cap capital gains at Rs10 crore, which came into effect from the current financial year in April, could be another reason for high sales in this segment.
“To save tax on capital gains, the HNIs across top cities rushed in to close luxury housing deals before the financial year ended in March,” says Puri, who is still waiting to see if this will have a major impact on this segment.
Regardless, Amit Goyal, CEO, India Sotheby's International Realty believes the post-pandemic revival in luxury home sales could last for a few more years if India continues to have economic growth of about 6,5-7 percent as forecast by the Reserve Bank of India (RBI).
“According to our survey, 34 percent of HNIs and UHNIs have indeed bought luxury real estate between April 2021 and December 2022,” says Goyal.
“As many as 61 percent of the respondents said they were looking to buy right-priced real estate in 2023 -24. For the India Sotheby's Luxury Outlook Report 2023, they reached out to their one lakh-plus clients. About 500 UHNIs and HNIs participated in the survey and shared their feedback.
Deal sizes in the luxury real estate segment depend on the square footage of the home and the number of bedrooms.
“Generally, average unit costs of luxury ranges from Rs35 crore at Lodha Ciel to Rs 125 crore at Lodha Malabar," says Prashant Bindal, chief sales officer, Lodha, Mumbai.
“So, an average deal value may vary from
Rs35 crore to Rs350 crore depending on the number of units purchased.”
While S Raheja Realty's typical deal size is generally between Rs7-8 crore, India Sotheby's International Realty has found the price range of Rs4-10 crore has attracted the highest interest among home buyers for their property investments.
“Also, as many as 33 percent of HNIs and UHNIs are willing to spend more than Rs10 crore to acquire the ideal luxury property,” reveals Goyal. According to Business Standard, high-net-worth individuals (HNIs) are investors who own liquid assets valued between Rs5 lakh and Rs5 crore, while ultra-high-net-worth individuals (UHNWIs) are investors who own more than Rs25 crore in liquid assets.
While it is an exciting time to be in this space, there are some things to be aware of before you make that bid. — BBC