Millionaires' Property Frenzy
India's luxury real estate sector is back in the spotlight in a big way. High-end property sales have staged a remarkable revival, surging a staggering 130 per cent during the first half of 2023 compared to the same period the previous year. This massive spike is not just a numerical feat; it encapsulates the unwavering confidence and enthusiasm in the Indian real estate market.
According to a recent report by CBRE South Asia, a trusted name in real estate consultancy, an impressive 6,900 luxury residences, each valued at Rs 4 crore and above, were successfully transacted between January and June this year. This represents a significant increase from the 3,000 units sold in 2022, painting a vivid picture of the market's remarkable growth.
The non-resident Indian (NRI) community has played a pivotal role in propelling India's luxury real estate sector to these new heights. Their increased investments in the Indian real estate market have substantially boosted the demand for premium properties. As a result, the premium and luxury real estate segments (Rs 2-4 crore and above) are poised to emerge as highly coveted investment choices, especially among high net-worth individuals (HNIs) and NRIs, who are looking to safeguard their investments amidst the prevailing global macro-economic uncertainties.
Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE, shares his insightful perspective on this momentous achievement, "We estimate a sustained high activity level in these segments, supported by the promising outlook of long-term capital appreciation." This is indeed a cause for celebration as we witness this extraordinary upswing in the luxury real estate sector, reaffirming its promise and potential.
Luxury Home Prices Boom
In the wake of the post-pandemic era, the luxury homes segment across major cities in India is witnessing a significant price appreciation. According to a recent report by ANAROCK, a prominent name in the real estate industry, the price of luxury homes in seven major Indian cities has experienced a remarkable 24 per cent increase. The cost of these luxurious abodes has surged from approximately Rs 12,400 per sq. ft in 2018 to an impressive Rs 15,350 per sq. ft in 2023. This impressive price surge stands in stark contrast to the affordable, mid, and premium home segments, which have seen more modest price increases.
Anuj Puri, Chairman, ANAROCK applauds this trend stating, "Extremely robust sales ably supported by a good supply pipeline have resulted in luxury homes witnessing the most significant price appreciation.” Considering the relative price stagnation in this segment in earlier years, a 24 per cent increase over the last five years is nothing short of remarkable. In the pre-pandemic period in 2019, sales in this segment were anything but stellar, and this reflected in non-existent or negligible price growth.
Hyderabad takes the lead in this spectacular rise, recording the highest increase in the average price of luxury homes over five years. The price has surged by an astounding 42 per cent, from Rs 7,450 per sq. ft in 2018 to Rs 10,580 per sq. ft in the first half of 2023. Bengaluru and Mumbai share the second position with a 27 per cent increase in prices.
Pillar of UHNIs Portfolios
The resurgence of real estate is not just a numerical triumph; it represents a significant component of ultra high net worth individuals' (UHNIs) portfolios. This is a testament to the inherent potential of the luxury real estate sector as an investment option that can be a stronghold for sustained growth.
Ashwin Chadha, CEO, India Sotheby's International Realty acknowledges the upcycle in real estate and its significance. "With wealth creation surging in India and the number of millionaires on the rise, luxury housing is poised for sustained growth." He further adds, "Our annual survey affirmed 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 exemplify the enduring enthusiasm and optimism surrounding luxury real estate investments in India, and we extend our congratulations to the industry for achieving such incredible milestones.”
Abhishek Bhadra, Research Head at Magicbricks observes that the most discerning investors in India are seeking more than just a home; they are in search of exclusivity and exceptional living experiences. This burgeoning demand has ushered in a new era of ultra-luxury properties, encompassing private villas, penthouses, and gated communities in coveted prime locales. “This represents a fundamental shift in the luxury real estate landscape, and we commend the industry for embracing innovation and meeting the evolving preferences of discerning buyers,” says Bhadra.
Demand Drivers
The cost of luxury housing is not uniform across Indian cities. In the Mumbai Metropolitan Region (MMR), prices of luxury properties typically start at an impressive Rs 15,000 per sq. ft, while in Delhi and Bengaluru, they begin from Rs 12,000 per sq. ft. In Hyderabad and Pune, luxury housing starts at Rs 10,000 per sq. ft, which is a testament to the diversity and vibrancy of the Indian luxury real estate market.
As per Magicbricks Research, demand for luxury real estate has increased an impressive 63 per cent year on year (YoY) as of September 2023. Specifically, Gurugram, Delhi, and Mumbai have experienced robust growth in the luxury segment, with demand surging 85 per cent, 90 per cent, and 35 per cent YoY, respectively (in September 2023). Along with Hyderabad, these cities have accounted for 70 per cent of the total luxury housing demand in India. This achievement is worth acknowledging and celebrating, as it showcases the robust growth and unwavering demand for luxury properties.
The remarkable surge in luxury real estate demand can be primarily attributed to two distinct groups of homebuyers. Firstly, an expanding population of affluent individuals and high net worth households, benefiting from increased disposable income, are seeking opulence, health and wellness features, technology integration, flexible living spaces, and premium amenities.
Secondly, NRIs are showing a heightened interest in real estate investments, especially as the Indian rupee experiences depreciation. According to Magicbricks Research, as of September 2023, demand for luxury homes by NRIs has seen substantial growth in Bengaluru (33 per cent), Delhi (30 per cent), and Noida (20 per cent) YoY. This underscores the enduring appeal of the Indian real estate market for NRIs and the role they play in its continued success.
Sudhir Pai, CEO, Magicbricks sums up the current state of the housing market.
"The Indian real estate market is currently in its best shape since 2014, with healthier developer balance sheets and shorter property sale cycles. While caution is advised to prevent excessive price increase, the next couple of months spanning the festive season, show promising signs of increase in residential demand and supply," says Pai.
Emerging Cities Join
Beyond the major metropolitan areas, specific regions in Tier-2 towns are experiencing a surge in demand for luxury homes, characterised by low-rise homes in less-dense areas. These emerging pockets of real estate growth offer property prices that tend to be more stable, with the potential for appreciation and the promise of a higher quality of life. This marks a significant expansion of the luxury real estate market and adds to the richness and diversity of the sector. Factors like lower population density, less congestion, cleaner environments, and a relatively peaceful atmosphere are drawing affluent buyers to these areas.
