Luxury Homes: Increased Investments, Elevating Lifestyle

Over the past couple of years, particularly following the second wave of the Covid-19 pandemic, major metropolitan cities like Delhi, Mumbai, and Bengaluru have witnessed a remarkable surge in the transactions of high-end and esteemed real estate assets. Prominent figures including business magnates, celebrities, and even cricket stars have invested in luxury properties worth millions. Additionally, tech entrepreneurs, CXOs and top corporate executives, benefiting from substantial ESOPs, have also entered the league of luxury property buyers. 

In a groundbreaking residential real estate deal, DMart founder Radhakishan Damani and his brother Gopikishan acquired a bungalow in South Mumbai for an unprecedented Rs 1,001 crore. The Damani family further engaged in several other multi-crore property transactions. Besides the Damani family, the JP Taparia family acquired property at Lodha Malabar on Malabar Hill for an impressive Rs 310 crore. Meanwhile, Jay Mahtani secured the elegant Morena House on Carmichael Road for a substantial Rs 83.4 crore. Actress Alia Bhatt invested Rs 37.8 crore in the splendid Aerial View CHSL in Bandra (West). Additionally, renowned designer Sandeep Khosla made a significant acquisition at Rustomjee Elements in Andheri (West) for a substantial Rs 25.7 crore. 

While the primary motive for purchasing these luxury properties was to elevate their lifestyle according to their aspirations and requirements, a segment of businessmen also ventured into such acquisitions to mitigate capital gains tax by reinvesting in residential properties. However, it is important to note that as of February 1, the government has imposed a cap of Rs 10 crore for deductions on long-term capital gains tax when reinvesting in residential properties under Sections 54 and 54F of the Income Tax Act. This is a new provision aimed at curbing substantial deductions claimed by high net worth individuals after acquiring high-end luxury residences. 

Nevertheless, it appears that this cap on capital gains reinvestment has not deterred businessmen from acquiring multi-crore properties. According to India Sotheby’s International Realty and CRE Matrix report (H1 CY23), Mumbai saw sales of luxury housing properties worth Rs 11,400 crore in H1 of calendar year 2023, up 50 per cent YoY In terms of volumes, luxury housing sales in Mumbai were 533 units during H1 2023 as compared to 419 units in H1 2022.  

The National Capital Region is also not lagging behind when it comes to high-end property transactions. Recently, a remarkable transaction of Rs 100 crore took place involving a spacious 10,000 sq. ft apartment at The Camellias by DLF on Golf Course Road. While Mumbai has grown accustomed to rates of Rs 1 lakh per sq. ft, such a valuation is quite rare in NCR. Notably, India Sotheby’s International Realty recently secured an exclusive sales and marketing mandate for The Residency, by Ceejay in Worli, Mumbai. This development offers 19 bespoke luxury apartments spanning approximately 5,510 sq. ft, starting from Rs 60 crore per unit. However, this breakthrough Rs 1 lakh per sq. ft transaction in Gurugram indicates a growing demand for ultra-luxury apartments, extending beyond the confines of Mumbai upmarket and Lutyens Delhi.  

UHNIs See Resurgence  

One of the primary reasons for the spike in demand for luxury properties is that real estate has reemerged as a significant component of ultra-high net worth individuals' (UHNI) portfolios. With wealth creation surging in India and the number of millionaires on the rise, luxury housing is poised for sustained growth. Our annual survey confirmed this trend, with 61 per cent of HNI respondents expressing a keen interest in real estate acquisitions for the fiscal year 2023-24. These figures highlight the enduring enthusiasm and optimism surrounding luxury real estate investments in India. 

Another factor driving the high demand for luxury properties is the notable outperformance of this segment compared to other categories of residential housing and the same can be attributed to shifting consumer priorities. The pandemic prompted demand for large living spaces, emphasizing comfort, functionality, and features conducive to remote work. Furthermore, a desire for privacy and seclusion has fuelled demand for expansive estates and gated communities. Homes offering a complete lifestyle package, including private cinemas, wine cellars, and resort-style pools, now define luxury for discerning homebuyers. Astute investors recognize that real estate markets operate in cycles, lasting 5-7 years. The current surge in luxury home sales, which commenced post-pandemic, is poised to endure for several more years. This optimism is substantiated by the Reserve Bank of India's projection of India's growth rate at 6.5-7 per cent. Additionally, as the world's most populous country and the fifth-largest economy, India's growing families are driving the need for more homes. 

Challenges & Demand 

While demand for luxury properties continues to strengthen, the supply remains constrained. Although there has been a slight increase in luxury segment launches, particularly in Mumbai and Bangalore, the supply challenges persist, notably in the Delhi luxury market. Prices in the luxury segment have seen an upward shift, attributed to factors such as rising construction costs, inflation, sustained demand, and limited supply. 

About the Author: The author is the CEO of India Sotheby's International Realty, a global luxury real estate brand that specializes in marketing and selling high-end and luxury properties worldwide.