While there is an unprecedented focus on affordable and mid-income segment housing units, the demand for luxury houses is no less. As a matter of fact, there are several factors which have been driving the demand for luxury housing in India. Though affordable housing tops the buyers’ preference, experts opine that the reduction in the GST rates will help the high-end segment to proliferate further.
The transparency induced by the Real Estate (Regulation and Development) Act, 2016 (RERA) and Goods and Services Tax (GST) has not only benefitted the homebuyers in affordable and the middle-income segment, but has also bolstered demand in the high-end segment. As per the realty experts, the demand will further gain momentum from here on.
While price is a significant factor for the buyers of affordable or mid-income segment housing units, this is not the case with the luxury segment. The major factors for a buyer of luxury apartments, as per the realty experts, are the location, niche provided, and amenities rather than the price of the residential unit. This is the reason why luxury real estate, having a fan base of its own, did not witness a significant slowdown in the last few years, unlike the other two segments. While the industry at present is witnessing immense surplus of unsold inventory, the limited quantity of construction in the high-end segment has kept the apartments less prone to being unoccupied.
Increase in NRI investments
Keeping in mind the fact that luxury property creates higher incremental value as compared to property in a mid-segment, the market has eventually become a preferred choice of investment by affluent, including the NRIs. As per the reports, nearly one-fourth of the luxury real estate was dominated by NRI investors in the financial year 2018. While only 20 percent of the properties in the luxury segment were bought by NRI investors until 2013, the number immensely increased in 2018. NRI investment for properties priced above Rs 5 crore was recorded to be 27 percent in NCR, followed by 24 percent in Bangalore and 18 percent in Hyderabad during 2018.
Citing the case of Bangalore, B S Nesara, Executive Director, Concorde Group, states, "Bangalore’s luxury real estate is witnessing a gradual, but steady uptick. Factors such as rising incomes and aspirations, brain gain from the West, recognition of the city as a global corporate centre and more importantly, increasing transparency and customer-friendly regulations are stoking the demand for opulent properties in Bangalore.”
Increase in demand
Lack of information, delay in project delivery, and tedious recourse for the buyers were some of the major concerns for the homebuyers, especially the Non-Resident Indians (NRIs), which have earlier restricted investments in the sector. However, the introduction of RERA has complemented the market to a large extent. Given the present market conditions, there have been continued investments in luxury residential properties not only due to factors such as capital appreciation and high rental yields but also because of enhanced transparency and standardised due diligence system. And, though there was a slowdown in the overall market during the last few months, the reduction in GST rates is expected to boost demand in this segment.
Briefing the facts, Deepak Kapoor, Director, Gulshan Homz avers, "The luxury real estate segment is picking up rapid pace despite it catering to a niche clientele. In fact, luxury has remained subdued since 2013 and has now picked up the pace. One of the reasons in last one year is the interest shown by rich NRIs in Indian real estate market post the introduction of buyer-friendly reforms such as RERA. Another reason is the increase in the number of millionaires in India, which was 3,30,000 in 2017, and is expected to reach up to 9,50,000 by the end of 2027. After a decline in the segment in 2017, luxury housing picked up the pace in 2018 as the year saw an increased supply of around 29 percent across the top seven cities as compared to 2017.”
As per reports, the demand for luxury real estate is steadily rising due to the escalation of multinational companies and businesses over the past few years. This has led to sustained demand from the well-off in society. According to Sagar Saxena, Project Head, Spectrum Metro, "Major cities in India witnessed a supply of around 12,090 units in the luxury segment during 2018, with maximum supply being in Mumbai Metropolitan Region (MMR). This was 6,310 units in MMR followed by NCR with 2,650 units. The figure in itself shows a marked difference from 2017 when the supply in major cities saw a decline of around 49 percent for houses priced over Rs 1.5 crore. Demand can also be gauged from the fact that out of the total unsold inventory in the third quarter of 2018, only 12 percent was in the luxury segment."
Taking into consideration the current market scenario and the innumerable benefits that come with luxury apartments, it would be interesting to see whether the predictions of the realty experts actualise or not.