The Brief: New Appetite For Luxury Homes

K.P. SINGH-LED DLF recently sold a 10,000-plus sq. ft. apartment at The Camellias on Gurgaon’s Golf Course Road for ₹100 crore! If such numbers are anything to go by, India’s luxury residential market is in a boom cycle with overall sales rising steeply across top seven cities.

According to a recent report by ANAROCK Research, luxury homes (₹1.5 crore and above) made up for 24% of overall home sales in the top seven metros in the first three quarters of CY2023, a 100% increase YoY, from 14% in the corresponding period in 2022. Hyderabad saw the maximum rise (260%) followed by Pune (191%), Chennai (143%) and Bengaluru (142%).

Among real estate firms, DLF, Lodha Developers, Brigade and others have seen a healthy demand for super-luxury homes in Q2FY24.

“Prices of homes in the luxury segment are going up due to demand for better, bigger homes,” says Aakash Ohri, chief business officer and joint MD, DLF Homes. Millennials and Gen-Zs have been on a home-buying spree, especially first-time buyers willing to spend that kind of money. “There are enough people out there who want to better their experiences,” says Ohri.

Agrees Abhishek Lodha, MD & CEO, Lodha developers, a major player in the Mumbai Metropolitan Region (MMR). Lodha has seen increase and improvement in conversion rates in the last one year. “There is a clear preference for buying branded, high-quality homes where lifestyle comes first and price second,” Lodha says during the Q2 earnings call. Sunteck CMD Kamal Khetan also says in the past quarter (Q2), the company increased prices of its luxury offerings, Sky Park and ODC, in Mumbai.

While interest rate increase may be weighing on the minds of buyers in other segments, it doesn’t act as a hindrance for the luxury category. “This customer base prefers homes with large spaces and luxury amenities. The impact of higher interest rates is minimal within this segment, given that a portion of these customers opt for self-funded acquisitions,” says Viswa Prathap Desu, COO, residential, Brigade Enterprises, adding, there is a sharp increase in demand for luxury homes in the price range of ₹3-5 crore and beyond. The company is looking at two new projects in Bengaluru and Chennai to tap into the demand.

Swapnil Anil, executive director & head, advisory services, Colliers India, attributes a major part of the demand to factors, including growth of population with increased income, rising number of HNIs & UHNIs and government-supported urbanisation schemes along with the increase in migration from smaller cities to metros. “With US dollar getting stronger against the rupee, NRIs are buying as well,” says Anil.

Another reason is the shift in preferences of HNIs towards acquiring homes in vibrant and sought-after city neighbourhoods, which is driving the luxury housing segment. “There is a trend among HNIs to upgrade to superior residences, with a surge in demand for second homes in picturesque locations such as Goa, Alibaug and Shimla. Given the limited supply and inventory, prices have moved up. While average annual increases have been 10-15% since 2021, there are some markets where prices have even moved up 40-50% in the last two years,” says Ashwin Chadha, CEO, India Sotheby’s International Realty.

If one goes by the latest (Q3CY2023) Knight Frank-NAREDCO’s real estate sentiment index, the party will continue in the residential segment. Around 60% of survey respondents expect residential sales to increase in six months.

Going forward, the focus will be on eco-friendly green housing with sustainable features, and properties that offer exclusive living, even owning luxurious second homes that offer buyers potential of capital appreciation and rental income combined.