Rise in demand for luxury properties in India. Who is buying?

Emerging from a slumber of almost half a decade, the luxury property segment in India is poised for a comeback with real estate experts pointing to an upsurge in demand for high-end properties in select parts of Mumbai, Delhi, Gurgaon, and Goa -- the key destinations of luxury and uber-luxury properties in India.  

The ‘phenomenon’ is being termed as an offshoot of the pandemic by realtors who said that people experienced a ‘psychological shift’ and discovered the importance of a ‘good living space’ and thus upgraded to their ‘next level of living comfort.’   

The explanation for the significant rise in interest for high-end properties, according to ISIR, is the rise in HNIs (high net-worth individuals) in India.   

“The pandemic accelerated digitisation and hence also the start-up ecosystem – we now have 100 unicorns in the country and counting; an emerging segment of UHNI (ultra-high-net-worth individuals) category is also driving the luxury property segment. As these promoters sell their stake, they make capital gains that can be deployed in real estate. Which explains the significant rise in luxury real estate demand over recent times,” Amit Goyal, CEO of India Sotheby's International Realty (ISIR) told Business Today. 

As per ISIR data based on sales in the Mumbai micro-market, 306 luxury housing units worth Rs 4,877 crore have been sold during the January-March quarter of the 2022 calendar year.   

Luxury property in India has a divergent price range – while in Mumbai or Goa, a property would only be considered in the luxury category when marked at Rs 45,000 per square foot; in Delhi or Gurgaon, properties get tagged as ‘luxury’ at Rs 15,000 per square foot onwards. ISIR defines any single property transaction above Rs 10 crore as a luxury property in the top seven locations in India. 

A luxury property offers inclusive spaces with qualitative points of a home office, study rooms, gym, entertainment, green open spaces, and more. 

However, the rise in demand notwithstanding, experts say that the Indian real estate market is not mature yet to deal with the crypto ecosystem which could lead to crypto investors converting their gains to property. 

“For digital assets to be converted to real estate purchases we need clearer rules and guidelines and we are nowhere close to ready either for crypto transactions in real estate as land records, registrations, or agreements to sell documents have to be in a 100 per cent accessible in digital format. The Indian luxury property market is not mature like international markets yet,” Goyal said. 

Nevertheless, investors continue to be bullish about the real estate segment, claims Goyal. “In a luxury outlook survey, we have found that 67 per cent of HNIs in India wanted to buy a luxury property in 2022, and 46 per cent wanted to buy a property over and above their existing luxury property, the reason being: lifestyle upgrade. Also, people who have made sharp gains in the capital market want to convert their gains to real estate,” Goyal added.  

According to Goyal, India's luxury property market size is still small when compared to the US, China, and Australia but competitive with key luxury markets like New York, London, and Dubai. 

The emerging interest in luxury real estate also indicates a change in the urban Indian lifestyle and how home space is likely to be defined as Indians aspire to live ‘big’. 

“We have seen people who were living in two BHKs going for a 3BHK or 4BHK – lifestyles also shifted with work-from-home and hybrid workstyles, and many moved into bigger houses to integrate home office. In several cases, people are buying twin properties to accommodate large families where parents and children want to live next to each other or siblings buying flats next to each other or large families choosing to upgrade their lifestyle and buying two properties for proximity,” Ram Raheja, director of S Raheja Realty, said.

“It is a good time for luxury property in India. The segment has been under pressure for over five years, even before the pandemic hit, and is now witnessing growth because of how life and workstyles have changed over the last two years. There is promise in this segment now and for the coming two quarters. The segment is also unlikely to be unaffected by the change in loan rates among other factors,” Gulam Zia, executive director of Knight Frank, told Business Today.  

Also Read: Experts explain how to manage your finances amid rising inflation - BusinessToday

Also Read: PPF vs Mutual Fund: Which is a better savings instrument for you? - BusinessToday