Luxury At Scale

Luxury is no longer the prerogative of just the rich and famous in the big cities. It is getting more and more broad-based, with a growing population of the well-to-do in smaller cities and towns eager to splurge on the premium things of life, whether it’s high-end homes, wonder wheels, custom-made clothes, or the other accessories of premium lifestyle. 

This trend has underpinned the growing demand for premium properties, which of late has led developers to focus on luxury housing units not only in metros but also in adjoining cities and towns, driven by the promise of greater returns and better margins. In fact, properties worth Rs 1 crore and above, which once marked the luxury threshold in major cities, are now fairly common. While the rising costs of land, inputs, and construction have a role in pushing up prices, it is also true that homebuyers are now seeking residences equipped with modern amenities and spacious layouts. 

This shift towards larger, amenity-rich homes is contributing to the uptrend in property prices. Although there are fluctuations in various price segments, the overarching trend signals promising opportunities for investors. It's evident that the market is moving towards a positive trajectory, driven by the evolving preferences of discerning buyers.

Demand for Premium
The housing data of recent months indicate a significant trend in buyer behaviour, with a shift towards high-value acquisitions. There has been a consistent increase in the sale of properties in higher price brackets, including those valued between Rs 75 lakh and Rs 1 crore and above. This trend suggests a growing inclination towards upscale real estate offerings, potentially driven by factors such as increased disposable income and changing lifestyle preferences. 

Tier-2 cities in states like Uttar Pradesh are set for a real estate surge with projects exceeding Rs 50,000 crore, which are expected to generate significant employment opportunities for the state’s youth, according to government sources. Key developments in Moradabad, Noida, and Ayodhya are drawing interest from leading domestic and international real estate firms. 

Cushman and Wakefield's report identifies Bhubaneswar, Coimbatore, Indore, Jaipur, Kochi, Lucknow, Nagpur, Surat, Thiruvananthapuram, and Visakhapatnam as emerging hubs for real estate growth. ANAROCK’s Consumer Sentiment Survey highlights a growing preference, with 26 per cent of property investors now eyeing Tier-2 and Tier-3 cities for investments, reflecting shifting trends in real estate markets.

Demand from Tier-2
Meanwhile, rising demand for quality residential housing in Tier-2 cities in India is drawing the attention of big developers. This is because there is a rising demand for quality housing that is being driven by urbanisation, improved infrastructure, remote work trends, and lower living costs, attracting both families and professionals seeking better lifestyles and investment opportunities outside major metropolitan areas. 

Agrees Kalyan Chakrabarti, CEO, Emaar India. He says he is excited about the potential of the Tier-2 and Tier-3 markets. “We recognise the growing demand in Tier-2 cities, where uptick in urbanisation has made them attractive for real estate development. These cities have a rising consumer base with increasing disposable income and a desire for a better quality of life compared to bigger and crowded cities. Also, the Tier-2 markets are magnets for local Tier-3 markets as owning real estate in these cities has an aspirational value for consumers of smaller Tier-3 cities.”

Price Surge in Big Cities
According to the Developer Sentiment Survey by CREDAI and Colliers (April-May 2024), about half of the developers surveyed are confident of buoyant residential demand this year. Amid strong demand, around 52 per cent of developers across India expect housing prices to rise. In 2023, average housing prices in the eight major cities increased 9 per cent year-over-year, with a further 10 per cent rise in Q1 2024. Notably, more than 80 per cent of developers anticipate a surge in NRI demand for residential properties.
"The strong streak is expected to continue in 2024, driven by stable interest rates, a continued inclination for homeownership, and positive market sentiment," said Badal Yagnik, CEO of Colliers India. He noted that while unsold inventory has grown due to significant new launches over the past two years, launches are expected to moderate as developers become more strategic.

Over the past two years, housing prices in India's top eight cities surged about 20 per cent. Bengaluru, Delhi NCR, and Kolkata saw the highest increases, with average prices rising around 30 per cent since 2021. This growth is attributed to a notable uptick in demand, particularly in the mid and luxury segments. Developers have managed to pass on rising construction costs, maintaining healthy sales.

Anuj Puri, Chairman, ANAROCK Group, highlights that NCR saw a 49 per cent increase in average residential prices from H1 2019 to H1 2024, while MMR experienced a 48 per cent rise. Prices in these regions had remained stable from late 2016 until 2019, with the pandemic initially halting their recovery. Bengaluru, often referred to as India’s ‘Silicon Valley,’ witnessed a remarkable 57 per cent rise in average residential prices over the last five years. Prashant Thakur, Regional Director & Head of Research at ANAROCK Group, noted a 32 per cent year-on-year jump from Rs 5,900 per sqft at the end of H1 2023 to Rs 7,800 per sqft by H1 2024-end. Increased new launches in the premium and luxury segments contributed to this surge.

Soaring construction costs and rising investor and buyer demand are pushing prices up, especially post-Covid-19. With demand on the rise and construction costs escalating, developers are hiking prices. In Bengaluru, nearly 75 per cent of the new supply of approximately 32,500 units in H1 2024 was in the premium and luxury segments, according to Thakur.

Percy Chowdhry, Executive Director at Mumbai-based Rustomjee Group echoes the sentiment when it comes to the Mumbai Metropolitan Region (MMR). “The Mumbai real estate market is poised for substantial growth in FY25, driven by a surge in demand for premium and luxury housing. Property registration numbers are growing at 22 per cent annually, with a preference for spacious 2-3 BHKs and properties facing the sea,” he says.

Chowdhry says FY24 was marked by strategic growth for Rustomjee Group, with revenue surpassing targets, a 41 per cent increase in pre-sales. Rustomjee Group now plans to expand into data centres and plotted development projects, with a focus on redevelopment, he adds. In recent past, the company has launched Rustomjee Panorama at Pali Hill. Upcoming projects include Rustomjee 180 Bayview at Matunga and Rustomjee Ocean Vista, a beachfront property at Versova. “We plan to launch two projects per quarter,” Chowdhry adds.

Slow Offtake
Housing sales in India’s eight prime residential markets declined 6 per cent during the April-June period of 2024 (Q2CY2024) even as new supply tapered off, according to a quarterly analysis by digital real estate brokerage firm PropTiger.com. In its report titled ‘Real Insight Residential – April-June 2024,’ the Gurugram-based firm revealed that a total of 113,768 units were sold in Q2 of calendar year (CY) 2024, compared to 120,642 units in the previous quarter (Q1 CY2024). The quarterly decline in sales was observed across most cities, with the exceptions of Bengaluru, which saw a 30 per cent increase, and Delhi-NCR, which experienced a 10 per cent rise.

Homebuyers adopted a wait-and-watch strategy ahead of the election results, deferring plans to invest in real estate during a quarter that coincided with national elections in the world’s largest democracy, the report noted.

“Demand for homes moderated during the April-June period due to the general elections, even though consumer sentiment remains extremely positive about real estate investments, buoyed by strong fundamentals,” says Vikas Wadhawan, Group CFO, REA India, and Business Head, PropTiger.com. “Amid expectations of a pro-investment Union Budget following the formation of a new government, we believe sales numbers will strengthen in the coming quarters, particularly during the festive months.”

Wadhawan further adds, “Anticipating policy changes in the upcoming Union Budget, which could propel India to become the world’s third-largest economy by 2027-28, the developer community exercised caution. This was evidenced by a decline in new launches in half of the cities analysed in our report.”

Rescue Affordable Housing
Dhruv Agarwala, Group CEO, Housing.com, PropTiger.com notes that over the past three years, demand and supply for affordable homes have fluctuated across major Tier-1 and Tier-2 cities. “The upcoming budget must prioritise revitalising both demand and supply for homes priced between Rs 15 and Rs 75 lakh per unit. Introducing interest subsidy programmes could effectively incentivise potential homebuyers,” he says. 

Agarwala suggests that in order to enhance supply, the government could strategically leverage its extensive land banks in partnership with private developers, providing land and capital at concessional rates. Implementing tax incentives for developers engaged in these affordable projects could further stimulate the sector. According to Agarwala, significant demand persists within the Rs 15-75 lakh price bracket, necessitating focused governmental action in the upcoming budget. “This approach would not only catalyse growth in the real estate sector but also stimulate approximately 200 ancillary industries, significantly boosting job creation across these sectors,” he adds. 
Experts say the state governments should be encouraged to reduce stamp duty on affordable housing to enhance accessibility. Additionally, longstanding sector demands, such as granting industry or infrastructure status and increasing tax exemption limits on home loan repayments should be considered to sustain long-term growth in the housing sector. For the sake of middle-class, salaried workforce, it is imperative that the policies are tweaked across India, so as to encourage developers to re-focus on the affordable housing segments and not just on the luxury segment. Whether the finance minister will yield to some of the key industry demands remains to be seen.