Why is luxury housing witnessing high demand in India?

The shift to healthy lifestyle, need for world-class amenities and desire for a luxurious lifestyle along with future security have increased the value of luxury housing.

The growing interest of HNIs and NRIs has been the biggest demand drivers in India’s luxury housing market.

India’s luxury real estate sector has climbed up the ladder to emerge as an investor’s favourite. The products in this niche segment are not just limited to the ambit of providing security and high returns to the well-off customers but they are successfully delivering to the promise of luxury, comfort, wellness, and opulence.

The precipitates of the pandemic have left positive imprints and the outlook towards the market has changed. Today’s discerning customers aren’t hesitating to invest more in a luxurious lifestyle that secures them a coveted address in the toniest neighbourhoods. The segment is registering a phenomenal growth not just because of the necessary policy interventions in the volatile times but majorly due to the rising aspirations of the affluent Indian buyers.

The high traction in the luxury housing market has put the segment on an uphill climb and this is well-reflected in industry reports. Going by the numbers of Anarock, this segment accounted for 12% of overall sales in Q1 2022, up from 7% in Q1 2019.

The UHNIs, HNIs including the business leaders, startup founders, industry stalwarts, corporate honchos, working professionals and the NRIs have actively purchased upscale properties to avail benefits of market cushions such as low interest rates, high disposable incomes, stamp duty cuts, favourable policy support, among others.
The sentiments are soaring high, and they are confident like never before. A survey by Sotheby’s International Realty said a large number of HNIs are proposing to buy luxury property in the next two years which indicates that the luxury housing market is set to become more resilient in the following quarters which is promising.

Policy support, transparency, credibility, trust and transformation into buyers-first market

In recent years, India’s realty sector has strengthened its image to emerge as a customer-centric or buyers-first market. This has been largely made possible due to much-needed policy support and steps like RERA that have made the market more transparent, credible, and profitable.

Wealthy customers in the niche luxury housing segment engage in high-value transactions, and with transparency coming to fore, investors and even the fence-sitters are accelerating their decision-making processes. 

Similarly, the residential real estate sector was quick to transform adversaries into opportunities in the pandemic. The timely support of the government with stamp duty cuts, low interest rates and favourable tax policies acted as catalysts that supported the sector despite headwinds. 

The Central Bank’s decision to not increase the repo rate was perfectly timed and made the sector more resilient against pandemic shocks. Recently, the Reserve Bank of India has hiked the Repo Rate to tackle inflation, however, it is set to have a minimal impact on the sentiments of homebuyers in the luxury segment. 

Rising interest of HNIs and pandemic-driven trends

The growing interest of HNIs and NRIs has been the biggest demand drivers in India’s luxury housing market. These affluent buyers who aspire for a residence amongst like-minded individuals in posh settings are ready to walk an extra mile to invest in their dream properties that match their opulent lifestyles. This group of influential buyers is well-exposed to global benchmarks and wants similar amenities in their residential spaces. The upmarket residential spaces loaded with chic interiors, contemporary designs and superior amenities perfectly suit their demands and which is why as much as 67% of HNIs said they were willing to invest in a residential space in 2022, as per a Sotheby survey.

Moreover, the pandemic has made the NRIs realise the value of investing in their homeland. Here, the growing economic stature of India globally coupled with transparency and growth in the real estate market have turned the tide in favour of luxury housing. The NRIs are largely investing and are opting for luxury housing for good returns or even as their retirement settlement plans.

Since the pandemic, prospective homebuyers are carefully examining factors related to sustainability and their well-being before making a purchase.  Technology has been another growth enabler and has accelerated high-value transactions in this segment.  The work from home culture and learning from home models have made the buyers realise the importance of spacious homes.

They are staying indoors for extended hours and looking for homes equipped with dedicated workspaces, study rooms, gymnasiums, entertainment zones, private gardens, decks or balconies and other ultra-modern amenities for hassle-free living.  

Great opportunity lies ahead for established developers

The current market conditions and sentiments have ushered in an opportune time for credible, branded developers with a proven track record. Today, they are in a better position and have gained a larger market share. They are perfectly capturing the demands and delivering the high level of quality and trust to the customers.

With pandemic fear withering away, they have bettered their sales resulting in sound balance sheets. The luxury housing market has become resilient owing to their contributions in making the segment more customer centric.

These developers are well-placed in terms of liquidity, having raised funds through both, equity and monetisation of land and commercial assets. In coming days, their improved position will keep the market profitable, attract more investments and funds for growth.

Going forward, the luxury housing market will register huge growth as demand from buyers will reach stratospheric heights. The increase in sales and supply already are promising and encouraging and will boost the morale of leading market players to dole out new offerings to cater to this high-end market.  

The shift to healthy lifestyle, need for world-class amenities and desire for a luxurious lifestyle along with future security have increased the value of this segment and promising results will be witnessed in 2022.

(By Amar Sarin, CEO & MD, TARC Ltd)

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