What is luxury real estate, and why is it booming in India? Here’s Everything you should know about the investment!

India’s real estate market is undergoing a seismic shift, with the luxury housing segment experiencing unprecedented demand growth. Rising incomes, growing aspirations for upscale living, and a preference for modern amenities have fueled this transformation, increasing luxury home sales nationwide. 

In a recent development that exemplifies this trend, DLF, India’s largest developer, sold out 795 apartments worth Rs 5,590 crore three days after launching its latest luxury housing project in Gurugram. This builds on the success of previous projects, including ‘The Arbour,’ which saw pre-launch sales of Rs 8,000 crore in a similar timeframe. 

Non-resident Indians (NRIs) have played a significant role in driving the luxury housing market. NRIs have emerged as key contributors, accounting for nearly 25% of total residential sales at major developers. The allure of luxury properties, combined with the promise of exclusivity and modern amenities, has captivated both domestic and international buyers. 

According to property consultant Anarock Group, the share of luxury homes sold in India has tripled over the last five years, with luxury properties accounting for 21% of all residential units sold across the top seven Indian cities in the first quarter of 2024, up from 7% in 2019. 

Ashish Kukreja, Founder and CEO of Homesfy.in emphasized the underlying reasons for the underlying reasons for the rise in luxury home sales. Luxury real estate investments are attractive in India due to economic growth and the projected doubling of affluent individuals within three years. 

Kukreja stressed that investing in luxury real estate provides not only luxurious living spaces, but also long-term value and profit potential. The concentration of wealth among high-net-worth individuals has boosted demand for exclusive properties, particularly in prime locations such as  Delhi-NCR, Mumbai, Pune, Hyderabad, and Bangalore. 

Furthermore, luxury properties have historically shown lower volatility and served as a hedge against inflation, making them an appealing asset class for sophisticated investors seeking prestige and profit. 

Kukreja stated, “Industry analysis bodes well for the future of luxury real estate in India, projecting an 8-10% increase in property prices across key cities over the next two years, solidifying its long-term investment potential.” This projection is consistent with the prevailing sentiment among affluent investors, as evidenced by a recent survey in which 56% of high-net-worth individuals (HNIs) and ultra-high-net-worth individuals (UHNIs) expect the Reserve Bank of  India to lower interest rates in 2024. This optimism is fueled by anticipated rate decreases and other factors such as  limited inventory and the fear of missing out (FOMO), which collectively influence purchasing  behaviors, reinforcing the appeal of luxury real estate as a compelling investment avenue for discerning investors.” 

The current trend of premiumization is a significant contributor to this surge. With India experiencing rapid wealth creation and pent-up demand from the COVID-19 pandemic, consumers are increasingly drawn to luxury products and experiences. This trend has spread to the real estate market, where wealthy individuals build their portfolios by investing in luxury properties. 

According to India Sotheby’s International Realty’s annual Luxury Outlook Survey 2023, ultra-high-net-worth individuals are bullish on real estate, with 75% expecting the sector to thrive in the coming years. Notably, 61% think about costly homes, indicating a growing demand for high-end residential properties. Key cities such as Delhi-NCR, Mumbai, Goa, and Bengaluru are becoming popular locations for luxury real estate investments. 

Another factor driving the luxury housing boom is a scarcity of high-end apartments in desirable locations. Due to a shortage of luxury housing options in cities like Gurgaon, wealthy buyers are in search of exclusive properties with modern amenities and sophisticated designs. The shift from traditional bungalows to posh apartments reflects changing preferences among high-net-worth individuals, who prioritize security, convenience, and exclusivity. 

The influx of NRI investments is driving up demand for luxury housing in India. NRIs now account for nearly a quarter of total residential sales at major developers, up significantly from pre-pandemic levels. 

Meanwhile, the increase in luxury home sales has changed the trends in the property market, with the affordable housing segment losing market share. Affordable housing, which once dominated the market with a 37% share, has now dropped to around 18%, highlighting homebuyers’ changing preferences in the current climate. 

Among the top seven Indian cities driving demand for luxury homes, the National Capital Region (NCR) and the Mumbai Metropolitan Region (MMR) are key hubs. In the National Capital Region, luxury homes accounted for 39% of all residential units sold in the first quarter of 2024, a significant shift from the affordable segment’s dominance in 2019. Similarly, the MMR has emerged as a luxury housing hotspot, attracting buyers looking for high-end properties with world-class amenities. 

Other cities, including Hyderabad, Bangalore, Pune, Chennai, and Kolkata, have distinct market dynamics, with strong demand for mid to high-end properties. Bengaluru, Chennai, Pune, and Hyderabad saw the highest sales in the mid-range and premium housing segments in the first quarter of 2024, reflecting homebuyers’ diverse preferences across regions. 

Leave a Reply

Your email address will not be published. Required fields are marked *