Due to a rise in sales and consumer demand in the luxury real estate market, last year was lucrative for the sector. The luxury market became the industry’s growth engine in 2022, and this pattern is anticipated to continue in 2023. Over the past few years, luxury real estate has become a popular choice among NRIs and HNIs. In spite of a number of factors, nine out of ten Indians with ultra-high net worth increased their fortune in 2022, according to a new analysis from the real estate consulting company Knight Frank.
In the next two years, more HNIs plan to purchase luxury real estate or second residences. NRIs are also seeing this as a fantastic opportunity to develop larger and better assets back home, made possible by a significantly stronger purchasing power and steep decline in the rupee.
While the performance of other investment channels and the stock market, as well as the sentiment of luxury purchasers, are all tightly correlated, the correlation between home loan interest rates is lower. This is mostly due to the fact that the majority of homebuyers in this segment rely less on home loans than they do on other forms of investment to cover their purchases of homes. Additionally, the Budget 2023’s measures will have an influence on luxury housing just as they will have an influence on homebuying decisions across all market sectors.
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Change in preference of investment
Due to increasing investment complexity, greater regulatory and taxation burdens, and increased asset class volatility, high net worth individuals’ (HNIs) investing behaviors have shifted drastically. HNIs have always preferred conventional real estate investments over other types, but the current economic climate has forced the luxury segment in the forefront of the sector.
Global headwinds make real estate a more suitable choice
Real estate is still the finest investment amidst local and international challenges in today’s unsettling environment. The stock market is excessively erratic and pessimistic right now. The interest rates on FDs remain low. The housing market is more or less steady and significantly more positive than the stock market, which is more volatile. Residential real estate investing gives return on investment in addition to long-term appreciation. It also acts as a hedge against potential financial uncertainty because it is a tangible asset. It continues to be the best option for investors.
Change in home preferences/ experiences
High net worth individuals, non-resident Indians, and corporate professionals are the main drivers of the demand for second houses or holiday properties. People who have reliable income and savings yet work remotely also like to invest their money in opulent holiday homes surrounded by lush flora. Penthouses, condos, or villas in gated communities that offer open spaces, picturesque views, good broadband access, security, and cutting-edge amenities like a swimming pool, gym, spa, and health centre are in high demand. Given that the pandemic had kept everyone in isolation for a considerable amount of time, have changed their desire to treasure community living.
Post-pandemic perspective shift
After going through the pandemic and lockdowns, there has been a paradigm shift in the perspective of investors. Tangible assets like gold and real estate have taken precedence. People are willing to put their money where their mouth is. Therefore, the rising demand from affluent buyers is driving up the luxury home launches.
(By Ram Raheja, MD, S Raheja Realty)