Are luxury housing sales sustainable in the long run?
“Buying our dream home is a one-time event, so we’re willing to loosen our purse strings to ensure it reflects our taste and personalities,” said a lawyer-techie couple who’ve recently booked a 3 BHK unit in a North Bengaluru project. While the property is priced at ₹1.5 crore, the duo have set aside a sizable amount for the home interiors as well.
“The luxury residential market in India has experienced substantial growth over the past three years, driven by several key factors such as rapid urbanisation, increasing disposable incomes, and changing lifestyle aspirations,” summarised Pavan Kumar, founder and CEO of Bengaluru-headquartered White Lotus Group.
However, home sales driven by the luxury segment, a phenomenon evidently on the rise since the Covid-19 pandemic, is not a sustainable development from a long-term perspective, property consultancy Knight Frank India said on October 3.
“The complete dependency on the upper end of the market is not appropriate,” said Gulam Zia, Senior Executive Director – Research, Advisory, Infrastructure, and Valuation, Knight Frank India.
Others agreed. “Focusing solely on the luxury segment for sustained growth could pose risks, as it caters to a limited audience. A diversified portfolio, including affordable and mid-segment housing, will be essential to cater to the broader population and ensure long-term market stability,” said Ashok Chhajer, CMD, Arihant Superstructures.
According to Knight Frank’s report on real estate activity in the third quarter of the ongoing calendar year, 46% of the total home sales across the top eight cities in India were concentrated in the luxury housing category.
Luxury housing comprises home units priced at ₹1 crore and above, albeit real estate stakeholders across the country have argued time and again in favour of an amendment to this definition in light of the changing economic dynamics, especially in Tier-1 cities.
Statistically speaking, the average luxury deal value may vary from ₹8 crore to ₹18 crore in case of Noida (on account of the cost of land, builders have to pay 90% of the land price upfront from 2022), ₹15 crore to more than ₹100 crore for Mumbai and ₹5 crore-plus for Bengaluru.
In fact, in a land-starved city such as Mumbai, property builders have taken to redevelopment to get their hands on prime real estate in the financial capital. In general, all redevelopment projects are super luxury in nature with most offering sea views. This trend is expected to continue, experts say.
Over the past few years, real estate developers in the country have also roped in globally-acclaimed architects and designers to keep up with the growing aesthetic demands of buyers in the luxury homes segment.
As per data shared by Knight Frank India, barring a minor dip in the January-March quarter of 2024, the luxury housing segment has recorded a sustained rise in its market share (sales) starting Q3 2022.
“Luxury housing boomed post-Covid as lockdowns and remote work made people crave bigger, more comfortable homes with top-tier amenities,” said Ashwin Chadha, CEO, India Sotheby’s International Realty. He added that the consultancy’s annual survey showed lifestyle upgrades were the key driver of luxury home demand from 2021-2023.
However, the 2024 Luxury Outlook survey highlighted a shift indicating that investors are back, with 44% citing capital appreciation as their primary motivator, signaling a return of real estate in HNI portfolios.
Recent examples of sales boom
Earlier this month, Birla Estates sold 95% of the inventory in its Bengaluru project within 24 hours of launch, roping in an approximate booking value of ₹600 crore.
In another example, DLF’s luxury project, DLF Privana South in Sectors 76–77, Gurugram, saw an overwhelming response from customers, resulting in a complete sell-out even before its official launch. This success garnered new sales bookings worth ₹7,200 crore.
Similarly, Signature Global sold premium apartments worth over ₹2,700 crore in its Gurugram project named Titanium SPR. The company said it received an overwhelming response with expressions of interest in more than twice the number of apartments to be sold.
Going forward, sectoral stakeholders remain bullish on the segment, however also anticipating recovery in the affordable housing in the near to medium term.
“The luxury market will continue to thrive, particularly in metro cities, as demand for exclusive, high-end properties with advanced amenities remains strong,” Chhajer said, adding that as urbanisation accelerates, developers will focus more on affordable projects to meet the housing needs of a growing population.
Founder and CEO of Bengaluru-based MAIA Estates Mayank Ruia believes that as a market matures, buyers increasingly prioritise quality and move away from substandard developments. “As this trend continues, premium housing is poised to command even higher pricing,” he said.
“With PMAY 2.0 back on the table and a potential interest rate cut by the RBI—following the US Federal Reserve’s recent 50 basis point reduction—we may see a resurgence in both supply and demand in the affordable housing sector,” Chadha said.
Contribution of non-resident Indians
Following the Covid-19 pandemic, non-resident Indians are increasingly investing in the Indian real estate market, driven by emotional ties and fiscal prudence, experts said.
They added that many from this cohort are upgrading their real estate portfolios by moving to newer amenity-rich and higher priced homes. Popular cities which see a significant share of NRI investments include Mumbai, Bengaluru and Hyderabad, among others.
“One of the primary reasons for the growth in India’s luxury residential market is the rise of high-net-worth individuals (HNIs) and non-resident Indians (NRIs) who are investing in premium properties,” Kumar said.
The sustained depreciation in the value of rupee versus the dollar, from around ₹74 in January 2022 to about ₹84 presently, has further helped the case for these non-resident Indians.
According to industry reports, NRIs are expected to comprise a 20% share in the country’s total real estate investments by 2025.
Where are prices headed?
Real estate stakeholders across the spectrum foresee a sustained rise in real estate prices, including in the luxury segment, going forward.
“Real estate prices are on an upward trajectory, and I believe this trend will continue, particularly in prime locations,” Ruia said, adding that he anticipates continued appreciation in land prices as well, driven by limited supply and growing demand in prime areas.
“While we won’t see the sharp 40-50% jumps that we witnessed between FY 2021- FY 2024, we expect steady growth in prices. Higher construction costs, scarce urban land, and the demand for premium living spaces will drive this moderate yet sustained price appreciation,” Chadha added.
Experts also highlighted that the demand for high-end properties remains relatively stable, ensuring better resale value. However, factors like market conditions, property upkeep, and evolving lifestyle trends play a pertinent role.
“In the luxury segment, properties tend to hold and even appreciate in value due to limited supply, prime locations, and unique features. The resale value of luxury units is generally higher than standard properties, as they appeal to a niche market that values exclusivity and premium amenities,” Chhajer elaborated.
“Luxury homes are generally located in prime areas, which naturally drives up demand and, in turn, property values,” explained White Lotus Group’s Pavan Kumar.
If you are planning to invest in a luxury housing project, the neighbourhood plays a huge part in the experience, so understand the neighbourhood first. Be clued into the investment, financing and taxation related issues.
