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A Brief Analysis of Luxury Real Estate in India

Luxury real estate has finally come off age in India, with more individuals than ever seem interested in having a share of this pie. This article does an insightful analysis of the premium housing segment in India.

India is one of the few countries in the world blessed with a growing real estate market despite all the odds lined against it. Flagging economic growth rate, increasing urbanization and global economy slowdown are some of the pertinent issues that have been plaguing the overall Indian demographics. However, Indian real estate sector has managed to remain unscathed from all these afflictive factors, largely due to the IT industry, which has gone from strength to strength and also owing to the Indian government’s surprising predilection towards the realty sector, visible in a slew of measures announced recently. Under such circumstances, luxury housing has emerged as a knight in the shining armor for Indian real estate. One of the most vibrant and dynamic segments of Indian realty, it has become a cynosure of domestic developers and is also attracting a fair amount of attention from foreign investors.

Evolution of Luxury market & how it took the center stage

The concept of luxury housing was never foreign to Indian developers. Be it the lavish palaces of Nizam’s of Hyderabad or the expansive Havelis of Rajasthani traders, Indians knew how to spend our money. Fast forwarding to the current scenario, globalization put the Indian economy on the track of double digit growth in the mid-90s, IT and ITeS companies became the mainstay of Indian service sector and employment in these sectors saw a major boost in early 2000s. With increased opportunity and higher income at disposal, average Indian became more enterprising in terms of spending his money. Branded clothes, high-end accessories and fast moving cars were the first objects of desire on the wish list of these individuals. Those who were a frequent to foreign shores came back with a wealth of new ideas and trends and implemented them on indigenous products.

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Luxury housing was a result of a similar blurring of boundaries and fusion of foreign elements with Indian style of architecture, resulting in larger spaces, rich specifications, premium finishing and a better overall theme of development. Earlier limited to a niche audience, the concept of luxury real estate has now extended to a wider set of population, spurred by lifestyle aspirations and matching earning capacities of salaried as well as business class. No wonder, the most expensive home of the world belongs to an Indian industrialist. Located in the suburbs of the financial capital of India, Antilla is recognized world over as the most expensive residence and belongs to Mukesh Ambani of Reliance Ambani Group. Built at a cost of over $1 Billion, the home consists of all the possible luxuries that a mortal can think of. While not all luxury houses belong to the same bracket, it is just a matter of time before more and more Indians embrace this exotic style of living.

The current scenario of luxury segment in India

Although the market for middle income and affordable housing hasn’t really impressed, with its stagnant growth rate becoming a cause of concern amongst some circles of real estate, the luxury housing segment does not have any such problem. Factors that have afflicted the growth rate of low-end and affordable housing are the ones which are taking the growth chart of luxury housing to the next level. A rapid pace of urbanization, higher income at disposal, and enhanced interest of NRIs for investment in India have helped the cause of luxury real estate greatly. Real estate consultants and veterans conclude that the growth is sustainable and is only going to expand in the future.

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Putting some statistics to perspective, the Indian luxury market is growing by 20 % YoY basis, mostly fuelled by the 1.5 million High Net Worth individuals in the country. These HNI devote 40 % of their investment plans to real estate. Some reports have suggested that Indian luxury market will grow at a CAGR of 26% over the coming decade. Sales of super-luxurious units having more than 5,000 square feet area and in the range of INR 5 to 50 crores are also expected to grow YoY basis. Although luxury segment accounts for only 5% of the total real estate sector in India, it is the fastest growing of all the other segments. As per the estimates of a risk consultancy firm, KPMG, the premium housing segment will grow by a CAGR of 80% during 2012- 2014 period and around 9,000 uber-luxury units will be launched during the same time.

What exactly makes realtors so optimistic about this segment when all other segments and the overall scenario of Indian real estate largely are grim? It is the immunity that the HNI have from the economic imbalance happening inside or outside the country. There wealth shields them from the distressing effects of global economic slowdown and makes them capable of keeping the sales figures of luxury goods, including housing units on a growing trajectory. Besides, the number of superrich keeps on increasing in the country, evident from the increased number of Indian billionaires in the annual Forbes list of the world’s richest.

The leading centers of Luxury Real Estate in India

Talking about the biggest hubs of premium housing in the country, Delhi/NCR and Gurgaon tops the list confortably. This region has been the de facto choice of most

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real estate investors and end buyers, including the NRIs for investing in high-end properties owing to some very obvious reasons. The vicinity of the national capital and the growing number of IT clusters across Noida, Gurgaon and Greater Noida are the two biggest factors contributing to this upward trend. Therefore, the real estate market of Delhi/NCR is replete with a large number of projects in this segment by leading realty developers like Godrej, DLF, Omaxe and Supertech. Closely following are the realty markets of Bangalore and Mumbai which together have the biggest percentage of high net worth individuals of the country. While in Bangalore, these HNIs belong to salaried class employed in the city’s vibrant IT/ITeS sector; in Mumbai most of the HNIs attribute their wealth to a range of business, stocks and the entertainment industry. Further, Tier-II cities like Ahmedabad, Pune and Lucknow are also registering their presence in this segment, although it is still too early to predict anything about the future of premium housing in these cities.

The future is brighter

Branded residence is the latest fad in luxury realty. Another concept borrowed from the foreign counterparts, these units have exclusively designed fitting, furnishings, concierge services amongst others. Developers are tying-up with internationally acclaimed design houses and brands who lend their expertise to make for a truly fivestar experience delivered within the confines of four walls of the home. World One Tower by Lodha Group is Mumbai is one such example where the interiors are done by the design house of Giorgio Armani. Each apartment in this twoer is priced upwards of INR 20 crores, making sure that only a few selected are able to have the privilege of calling it their home. Noida-based Supertech has also launched a project named Armani Tower which is supposed to have 100 residential units, each exquisitely designed by Armani.

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A Brief Analysis of Luxury Real Estate in India