India’s growth as one of the biggest consumers worldwide for almost everything under the sun has been well documented and is certainly something to be proud of. Real estate has been no exception, particularly when you talk of luxury. When the richest man in the country builds himself a mammoth 27-floor private tower with almost everything that one could want, it’s a mega-sized benchmark indeed! Indians were clearly lapping up luxury real estate for several years, leading to the growth of this segment and it was not just the businessmen or well-heeled entrepreneurs from yesteryear.
A new buying class of affluent, high-salaried professionals and corporates came into the picture along with newly minted successful start-up founders, sportspersons and also entertainment industry stars to name a few segments along with the upper middle classes. Luxury real estate seemingly knew no bounds with everything from penthouses in the sky and bungalows with pools to triplexes and entire floors devoted to single apartments in a country where space scarcity is as common as backyards are to suburban Americans. However, the bubble came crashing down after demonetization and the subsequent slump in the realty market. There was limited demand and lacklustre sales figures and the paucity of cash hugely affected biggies in this segment (both developers and buyers).
This led to a downturn for the luxury real estate segment which has not quite seen the revival witnessed in other categories like mid-income and affordable housing. Naturally one doesn’t expect desperate measures taken for the luxury realty segment since that would be tantamount to hedonism on part of the authorities (just kidding!). What does the scenario look like for luxury real estate now in India?
Indian real estate seems to be in revival mode
According to various market experts and reports, luxury real estate may actually be reviving steadily in India. The real estate sector has seen an overall recovery in 2018 thanks in part to Government sops and also increased transparency on part of developers. Some of the key factors that infused new life into the sector include the following:
- PMAY (Pradhan Mantri Awas Yojana) under Housing for All by 2022 that offers first-time buyers incentives and subsidies.
- The increased thrust on affordable housing which has also received infrastructure status.
- Lower rates of interest overall offered by banks.
- Stable or reduced prices of property in India’s top cities.
- RERA has ushered in greater transparency into the sector, scaling up overall accountability of real estate developers and cleaning up the sector.
- GST rates have been cut to 5% from 12% on properties under construction while affordable housing units now come with 1% in GST as compared to 8% earlier.
- The 2019 Union Budget has proposed zero taxation on personal income up to Rs. 5 lakhs.
- The Budget has also proposed no taxes on notional assumption of rental income from a second home which is self-occupied. This should give a major push to second home demand in the country.
- The TDS limit for rental income has been increased to Rs. 2.4 lakhs as compared to Rs. 1.8 lakhs previously. This should be another incentive for purchasing a second home.
- There will be capital gains exemption proposed in the Budget for two homes up to Rs. 2 crore once in a lifetime for a taxpayer. This is another beneficial move for the Indian real estate sector.
As you can see, the Government has clearly done its bit and developers have also responded with more transparency, consolidation and faster delivery of projects.
How does the luxury real estate market match up?
The luxury realty segment has always had a loyal customer base in spite of the slump as opined by experts. It did not see a drastic slowdown as compared to mid-range housing units over the last 3-4 years since sales figures are anyway lower in this category. Demand should go up in the luxury segment as well owing to the reduction in GST rates as opined by real estate developers and industry watchers.
Of course, no matter how high you go, we Indians always love a better deal and the lowered GST rates should bring in fresh investments in luxury property. Key aspects for buyers when it comes to luxury real estate include the amenities and features on offer, the location in question, the overall niche/segment being catered to and so on. Prices do not really prove to be a major stumbling block in this category as per reports.
Vital market trends worth knowing
- Unsold inventory is not as big a problem in the luxury realty space in comparison to mid-range housing units.
- Limited construction quantities are also seen in the upper segments of the industry.
- Demand should revive after the reduction in GST rates and developers opine that prospective luxury homebuyers are now interested again.
- The affluent were not purchasing homes only for a limited time period as per several experts since they were looking at getting more information about RERA, GST and other aspects. With these being addressed and absorbed by the market, demand has naturally increased once again.
- Demand may already be going up in key metro cities due to the entry of several MNCs into these cities over the last few years, the growing number of new high-net worth individuals in India and economic growth.
- Several buyers in the luxury real estate segment are investors looking to park surplus funds in property with a view towards selling the same at a profit later on.
- Luxury real estate has incremental value which is comparatively higher than mid-income housing units as opined by some experts. Price increases in this segment are more over a sustained period of time.
- NRIs continue to remain loyal investors in luxury real estate in India and 35% of investments in this category come from them as per reports.
Luxury real estate has always been a favoured investment avenue for businessmen, entrepreneurs, celebrities and even politicians among other sections of the upwardly mobile society as per experts. Additionally, more Indian investors are now better travelled and have a clear understanding of their needs. They automatically gravitate towards luxury real estate which offers them elevated lifestyles and amenities to match. Mumbai continues to be the top luxury real estate market in the country followed by New Delhi. Prices in the category can range anywhere between Rs. 20-100 crore in these mega cities.
Even Pune and Bangalore are witnessing demand for luxury real estate priced anywhere around Rs. 10-15 crore or upwards. The NCR (National Capital Region) also has its fair share of luxury real estate across prime locations in Noida and Gurgaon. With appetite reviving again amongst Indian investors for luxury real estate, we should definitely see some mega realty deals soon, if not another Antilla (you never know if there’s another billionaire lurking in the wings!).
