Buying a property is a significant choice, particularly luxury or mid-range housing. The growing demand for upscale real estate in cities like Mumbai and Pune indicates that modern homebuyers have aversions to comfort and luxury all under one roof. However, how is Pune’s and MMR’s real estate market holding up to the growing demand for opulent homes?
The luxury real estate market has had a spectacular recovery in the last few years following the pandemic. The trend of working from home has led to an increase in investments in luxury homes with large floor plans, first-rate amenities, and improved quality of life. The trend has centered in desirable areas like Pune and the Mumbai Metropolitan Region (MMR), which saw growth of 42% and 8%, respectively, in Q3 (July-September) of 2023. Propertywala investigates the reasons behind the rise of mid-range and luxury real estate in Pune and MMR, along with the expected shifts in the market in 2024.
What drove the demand for luxury and mid-range homes in Pune and MMR?
The Union Budget of 2023, in which the Government set a cap of Rs 10 crore for tax deductions on long-term capital gains, is responsible for the spike in the sale of high-end homes in Mumbai. Real estate gains currently carry a 20 percent post-indexation tax if not taxable within two years. The income-exemption limit under Sections 54 and 54F of the Income Tax Act will increase by Rs 10 crore under the new caping, which will take effect on April 1, 2024. According to experts, the desire to upgrade to better, more spacious homes and the rush to save taxes on gains are the causes of the increase in demand for luxury housing in most cities, especially Pune and Mumbai.
In what ways have the costs of luxury and mid-range housing in Pune and MMR changed?
Mumbai’s property values have always been higher than its neighbors in Delhi, Bangalore, and Hyderabad, but the COVID-19 pandemic has caused the rates to rise even more. The increased cost of building materials, rising mortgage rates, and the preference for large homes are the reasons given by developers. Moreover, one of the causes of the high demand for luxury homes in cities like Mumbai and Pune is the abundance of NRI investment opportunities pouring in from the Gulf countries.
The unexpected pay increases in the years after the pandemic are another reason driving up the price of luxury homes. According to ET HR World, salaries in Mumbai rose by 18% despite the pandemic. This hike is higher than the remaining metro areas’ average hike of 11%. It is a further factor that helps explain why Knight Frank’s 2023 Affordability Index report ranks Mumbai as the most expensive city in India. The EMI-to-income ratio of 55% indicates that Mumbai residents repay their home loans with more than half of their wages.
Residential sales in the MMR region recorded sales of 1,53,870 units in 2023 as opposed to 1,09,730 units in 2022, demonstrating the resilience of residential sales in the face of rising costs. Pune sold 86,680 units after close, compared to 57,145 units in 2022.
The MMR region’s trend of luxury home ownership and the money made
With the assistance of the Maharashtra State government’s revenue collection from real estate transactions, let us examine the newly emerging luxury housing sector. The Maharashtra state government registered 72,700 properties between January and July 2023, netting Rs 6,500 crore.
The average property value, reported at Rs 1.9 crore, represented another paradigm shift. The average value of properties registered in February 2022 was Rs 1.18 crore, so it’s 65 percent more than this amount.
It is not a one-time event. Last year, the state received Rs 10,850 crore in revenue from stamp duty, an increase of 22 percent. The president of CREDAI National, Boman Irani, states that “post-COVID, homebuyers’ shifting sentiment played a crucial role in both economic and sectoral growth. “Property registrations for units valued at Rs 1 crore and above have sharply increased from 52% in 2020 to 57% in 2023 due to the demand for larger homes.”
Furthermore, Sotheby’s International Realty and CRE Matrix found that the growing demand for better amenities, larger homes, and affordable home loan rates has resulted in a twofold increase in sales of luxury houses.
Popular sizes and configurations in Pune and MMR
The MMR area and Kolkata are the only two cities where average flat sizes have decreased by 2% and 5%, while other major cities like Hyderabad and Delhi NCR have seen the construction of larger homes. There have always been space issues in the MMR region, and the rise in residential demand has resulted in smaller, more compact homes than in the past. According to industry reports, 2-BHK apartments continue to be the most popular kind of housing in the area.
In Mumbai, the average sought-after home size is currently 749 square feet, a decrease from 840 square feet in 2022. On the other hand, the MMR region has seen an increase in average sizes of one percent between 2019 and 2023 if we take into account the overall appreciation over the previous five years. In contrast, Pune’s average apartment size grew to 1,086 square feet in 2023 from 980 square feet the prior year.
The annual Luxury Outlook Survey 2024 indicates that while the demand for luxury homes increased in 2023, this trend is here to stay. The poll shows that although real estate prices have increased by 40% in the past 24 months, 71 percent of respondents said they plan to purchase a luxury home in the upcoming year. Of these, almost 56% of wealthy Indians believe that the Reserve Bank of India (RBI) will lower interest rates in the coming Budget announcements for 2024.
In summary, modern luxury residences are not just about grandeur; they also reflect a refined style distinguished by one-of-a-kind encounters, high-end conveniences, and first-rate services. It is especially true for people moving to urban areas in India in search of a better, more lavish way of life. Therefore, in the upcoming quarters, there will probably be an increase in demand for luxury and mid-income housing in MMR and Pune.