Some months ago, New York’s most expensive condo—a floor-to-ceiling glass-windowed duplex penthouse spanning 10,923 sq. ft. and commanding a spectacular view— was sold for $100.5 million (Rs 634.86 crore). Yes, that’s a steep tag, but not really surprising, given the global spike in the taste for uber-posh living. The world’s luxury realty market is worth nearly $5.3 trillion, according to international real estate advisor Savills.
Where New York goes, can New Delhi be far behind? The Indian market for luxury housing has been growing. Over 180 luxury projects comprising 25,570 units, valued at $30 billion, were launched between 2008 and 2012. India’s luxe residential market stood at around $40 billion in 2014. Of course, not every high-end development here can be compared with the New York penthouse. In the domestic market, posh pads spanning at least 1,200 sq. ft. and costing more than $170,000 fall under the luxe category.
The flats may be smaller, but the prices are as steep. And there’s only one way the trend is going: up. The number of ultra high net worth individuals in India increased by 9.5% last year compared with the year before, states Singapore-headquartered wealth intelligence firm Wealth-X. The number is expected to triple to 329,000 by 2018, and the country would require 1.5 million luxury homes over the next 15 years, according to a 2014 real estate study by consultancy KPMG in India.
With the rise of the wealthy comes new opportunities. On a cool, windy afternoon in January 2013, Ashwin Chadha, then 38, a banker and wealth management specialist with more than 20 years of experience in MNCs such as Barclays and Citibank, was meeting two close friends to explore these opportunities. Amit Goyal, 34, was a banker at BNP Paribas, while Ankit Tyagi, 33, was a real estate professional and part of the core team that launched the real estate division of BNP Paribas in India.
RealPro Infra, the trio’s maiden venture, was born in March that year, as an elite real estate brokerage firm catering only to the rich and the famous. The co-founders’ collective pool formed a part of the seed money while the rest was raised from an investor they don’t want to name.
RealPro was doing decent business—about $80 million to $100 million in residential property transactions in less than a year. But the big break came in 2014 when it signed an agreement with the U.S.-based Sotheby’s International Realty Affiliates—the luxury residential real estate arm of the famed auction house—to become its exclusive master franchisee for 25 years and operate across northern India. (Sotheby’s started realty operations back in 1976 and now runs its business in 60 countries through 700-plus offices and 16,000 agents.) It also secured the right of first refusal if the parent company wants to tie up with any other firm for operations in any other region within India. The timing was right, too, as Sotheby’s was planning to launch three new offices in the U.A.E., China, and India—the most exciting Asian markets after Thailand, Hong Kong, the Philippines, and Japan.
Nevertheless, getting Sotheby’s approval was a gruelling process. For nearly 15 months the three partners scoured the globe, meeting Sotheby’s officials in London, New York, and Hong Kong, before they got the final nod to open the first India office in Delhi last July. “Their due diligence lasted months,” recalls Tyagi, chief operating officer of North India Sotheby’s International Realty. “It was our professional background, the years of experience with some of the most trusted global brands that gave us the edge,” adds chief executive Goyal. Earlier, as vice president at BNP Paribas Wealth Management, he had helped luxury home buyers and sellers with property selection and financial advice—the kind of nuts-and-bolts work that’s central to Sotheby’s India strategy.
Not too many brokerage firms provide transaction advisory services, but “we are doing what multinational banks do—catering to the wealth management needs of high net worth individuals—but on the real estate side,” says Chadha, now the president of the India business.
Paul Boldy, managing director at Sotheby’s International Realty, says he has been impressed by the founders’ understanding of the high net worth market in North India and their ability to navigate across cultures. “Their countrywide network and ability to utilise it to reach the right audience are key; they totally understand how to offer the ‘white-glove service’ that we offer our clients globally,’’ says Boldy. The trio also managed to convince Amit Burman, vice chairman of Dabur India, to join the board.
Listing luxury homes in sync with Sotheby’s reputation is no easy task. As pricing can’t be the sole benchmark in a volatile market, the promoters look at other key parameters—location, design, style and architecture, notable provenance, and amenities. However, branded residences, a relatively new concept in India, are in the forefront, according to Tyagi.
A perfect example is Grand Hyatt Residences in Gurgaon, an apartment complex being developed by Ireo (a U.S.-based private equity fund that invests in luxury residential properties) and managed by Grand Hyatt. Foster + Partners, the company run by the award-winning British architect Sir Norman Foster, is designing the exterior, while the interior-design mandate has been awarded to New York’s Tony Chi Associates. Each apartment will cost upwards of $2 million.
To grow clientele (the promoters are targeting the top 140 dollar-billionaires of the country), the company is marketing a number of avant-garde homes in some of the most sought-after localities in Delhi, Mumbai, Goa, and other parts of the country. Independent houses and bungalows in tony South Delhi locations, and luxury condos from Rustomjee Builders, and DLF make the cut as well. But the biggest catch till date is, perhaps, the exclusive mandate they have from Tata Housing to sell two super-luxury signature villas being built on New Delhi’s Hailey Road, the swankiest address in the leafy Lutyens’ Bungalow Zone. “We are sure our partnership would deliver positive results,” Mrinmoy Mukherjee, senior vice president (marketing and sales) at Tata Housing, tells Fortune India.
Currently the company showcases more than 60 properties on its website, worth some $300 million, and the founders plan to take the portfolio value to $1 billion by the end of this fiscal. They would not disclose revenue, but their fee is generally 1% to 3% of the deal value.
If the global brand evokes enough trust to attract big names, Sotheby’s huge network opens up new markets and endless opportunities. As an affiliate of the U.S. firm, the India franchisee taps into 26 million wealthy NRIs (45% of the NRI population) living in 60 of the most developed countries who are extremely active in their respective property markets. Plus, the company can do roadshows in the U.S., Britain, and the U.A.E. to showcase developments in India.
Sotheby’s digital infrastructure is another key asset. The parent website, which gets almost a million hits a month, allows Indian developers to showcase their properties to a global audience. Moreover, properties advertised on the parent website automatically cascade into 135 affiliate sites, which significantly increase the catchment area.
Michelle van Vuuren, managing director (residential development and investment) at Sotheby’s International Realty in Britain, mentions a new trend while talking to Fortune India. She calls it “the return of the collector’’, referring to the penchant among high net worth buyers for something “different, special, or unique’’. The global rich, including NRIs in Britain, are looking at homes or villas with a distinct local flavour, she says. So property developers, after considering their distinct aesthetics and history, are turning them into stately homes. In India though, the uber rich do not seem too keen on colonial façades.
It’s still early to say whether Sotheby’s can script a long-term growth story in India. According to media reports, property prices in posh South Delhi neighbourhoods have plummeted 25% to 30% over the past one year, due to inventory pile-up and a major cash crunch faced by investors and developers. However, Tyagi argues that the market for super-luxury housing is extremely niche (not more than 5% of the total residential market) and works on completely different dynamics. In the short term, no price appreciation is expected. But high net worth buyers, including the NRIs, have a long-term view and they’re ready to wait even seven to eight years to get good returns on their investments. Moreover, many of these boutique homes are bought for their snob value and luxury offerings.
That probably explains why the luxe segment is doing quite well, even though overall residential sales slumped to a three-year low in the second half of 2014, across key markets (Mumbai, Delhi-NCR, Bengaluru, Pune, Chennai, and Hyderabad). New launches were down by 28%, compared with the previous year, but the more established high-end players bucked the trend. According to real estate consultancy Frank Knight, the Lodha Group (although not listed) saw a 17% rise in sales during this period. Godrej Properties and Prestige Estate also grew by 40% and 18%, respectively. Clearly, the larger-than-life story of luxury consumerism is not likely to be put out by a few spells of recession. And that’s good news for Sotheby’s flagbearers in India.
