The second wave of Covid-19 may impact luxury housing in the short term as focus shifts to health and safety, but the segment will grow with people increasingly looking for holiday homes within drivable distance, according to Amit Goyal, CEO of global luxury real estate brand India Sotheby’s International Realty (SIR). Speaking to Rishi Ranjan Kala, Goyal said that in the long term, luxury housing will grow further as it is projected that by 2025, 45% of luxury home owners would be millennials. Excerpts:
How would you describe the last 12-14 months in India’s luxury real estate segment?
The pandemic may have dampened most of the sectors, but real estate, especially the luxury homes segment, witnessed unprecedented demand. Keeping aside the pandemic blues, many affluent home buyers moved on to buy luxury residential properties. Covid-19 has made people realise the value of open area, gym, yoga and other recreational facilities within the house for quality living. Also, work from home, the new normal, has raised demand for larger luxury homes that incorporate work spaces. We expect the demand for luxury housing to grow further.
Do you think the second wave could lead to an adverse impact on demand as many would want to wait and watch?
We do not foresee any adverse impact of the second wave of the pandemic in the long term. However, in the short term, there may be some impact as the focus has shifted to health and safety. As and when the pandemic subsides and vaccination programmed is rolled out aggressively, sales of luxury properties will surge on pent-up demand. There has not been any major change in fundamentals like low interest rate on home loans, growing trend of having home ownership instead of renting and requirement for bigger homes. Prices of luxury residential properties remain attractive.
The return on Grade-A commercial real estate (CRE) is more compared to residential. Do you feel such a proposition would encourage individuals or family offices to invest in CRE?
NRIs, HNIs and UHNIs continue to invest in residential properties. Yes, now India has three listed REITs with top quality Grade-A office and commercial portfolio which also makes for a good investment for a steady dividend income. However, residential property in hard asset and investing in commercial REITs are not either/ or investments. Both asset classes find a space in an HNI portfolio.
Generally, luxury real estate is the playground of the rich. But today, India has a growing number of upper middle class families and digital entrepreneurs. Does this development promise to open the segment to a new class of buyers? What about fractional ownership?
There has always been an aspiration for better and luxury lifestyle among the wealthy. It’s no different for digital age entrepreneurs or professionals who’ve created a lot of wealth. What this pandemic has done, it has turned aspiration into necessity. So, we are definitely seeing a new set of customers in luxury residential market. SIR’s Luxury Outlook Report 2021 projects that by 2025, 45% of luxury home buyers will be millennials. Perhaps they are also investing in real estate assets through fractional ownership. We don’t do such transactions, so we won’t be able to comment.
What trends do you think have emerged after the pandemic in the luxury real estate segment?
One thing is very clearly visible — people need and are demanding bigger and better homes. Villas and holiday homes in beautiful destinations at a drivable distance from the gateway cities are quite sought after. We see a trend of outright ownership being the strongest.
How would you describe the price movement across luxury properties in the last 12-14 months?
There is a positive correlation between demand and price. Given that demand for high-end luxury homes increased in most parts of the country, prices have also firmed up in key markets. For instance, if we compare the pre- and post-Covid (first wave) period, property prices of farm houses in Delhi increased by 20-25%.
Are there any destinations in India, which you feel, are gaining or have the potential to emerge as hotspots for luxury properties?
Globally, gateway cities like London, Dubai, Singapore and others are expected to witness an increase in demand. However, in India we believe that people are now open to go beyond the city limits in order to buy bigger homes with better surroundings and atmosphere. So locations like Alibaug, Lonavala near Mumbai are likely to attract more buyers. Similarly, for second homes, buyers may prefer destinations like Goa, Dehradun and so on.