How tech valuations are changing luxury property prices

While large traditional developers ruled the roost in real estate sales in the past, quite a few design-oriented, technocrat-led developers are now making projects that are perfectly suited to new-age billionaire entrepreneurs.

With a growing population of new-age billionaires, the average age of luxury property buyers is coming down.

Did you know that India has 72 tech companies today that are valued at USD 1 billion or higher – a segment more popularly known as the Unicorn club? What is more interesting to know is that 35 of these 72 companies entered the Unicorn club in the first 10 months of last year, making 2021 the bumper year for Indian startups. In addition to the unprecedented funding spree, quite a few of these startups who were at more advanced stages of growth have taken the IPO route to take advantage of the buoyant capital markets.

The liquidity created by a large number of firms going public has led to an exponential growth in the number of Ultra High Net Worth individuals (UHNIs). A number of promoters and shareholders of these unicorns have capitalized on the positive sentiment around the equity markets by selling their stakes at high valuations, creating a rapid increase in the number of multimillionaires in the country.

Bangalore, the Silicon Valley of India, has more than 40% of these unicorns based in the city. Naturally, the sheer number of new generation UHNIs in Bangalore is growing exponentially. These newly wealthy people are interested in acquiring all the trappings of wealth, including ultra-luxury homes. While homes here are not yet rivaling the ones seen in Beverly Hills or Bel Air, the trend in luxury properties is clear – higher prices, more international standards and designs, and larger properties.

During the onset of the pandemic, there was speculation that predicted the end of real estate as the preferred investment asset class globally. Interestingly, the events that panned out in the following months not only strengthened the position of real estate as the preferred asset class but also increased the demand for larger and better-designed homes, with a wide range of sports and recreational amenities. This trend is expected to be seen more prominently in cities such as Bangalore, which have a greater proportion of jobs in the knowledge-based sectors such as technology, research and development, and engineering. The founders and share-holding employees of these firms, having reaped the windfall from stake sales and IPOs, are now looking to buy the home of their dreams – one that will be an apt reward for the years of hard work.

This sudden increase in demand was unanticipated by the real estate industry, with the consequence that demand now outstrips supply for many luxury projects, especially high end villa projects, which seem to be the preferred home type for the moneyed tech crowd. These successful entrepreneurs are well-traveled, well-read, and expect nothing short of international standards in real estate design and development. A key trait that most successful entrepreneurs also have is an eye for detail. So, properties with beautiful designs go a long way in attracting the attention of this segment of homebuyers. These designs need to factor both indoor and outdoor spaces and also be functional in their usage. Most of these UHNIs also need a wide range of outdoor and sports amenities, and a clubhouse within the community of their home so that they do not waste time commuting elsewhere to use these facilities.

In a city like Bangalore, high-end villa communities closer to some of the hottest tech hubs which have all the above features and with future-proof designs are bound to be in high demand in the future, if not already. While large traditional developers ruled the roost in real estate sales in the past, quite a few design-oriented, technocrat-led developers are now making projects that are perfectly suited to these new-age billionaire entrepreneurs. One example that represents this trend is Prime One Corp’s upcoming integrated township with ultra-luxury villas in East Bangalore, which seems to have gathered a lot of interest from billionaire entrepreneurs seeking their next abode.

With a growing population of new-age billionaires, the average age of luxury property buyers is coming down. In recent research by a leading international luxury realty brand, 45% of luxury homebuyers in the next 5 years are expected to be in the millennial age group – a segment of the population that had been written off from the category of potential home buyers a couple of years ago. This age group is also in the stage of wealth creation currently and a large number of wealthy millennials are bound to purchase their dream home soon. Those of you keen on capitalizing on the upcoming trend in real estate investments will do well to focus on luxury properties developed by the growing tribe of niche design-oriented developers, as there are a lot more unicorns in the making in India.

(By Vikram Chari, CEO, SmartOwner)

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