Location and luxury
The market dynamics for the residential luxury segment are a far cry from other asset classes, primarily due to the target end-user segment and their aspirations from such assets. Owning a prime piece of residential real estate, whether a bungalow in Delhi’s diplomatic enclave or a high-end apartment near the queen’s necklace in South Mumbai or a colossal mansion in Bengaluru’s Sadashivnagar, is a matter of pride for the owners as ‘pin code’ matters in social circles. For top industrialists, bureaucrats, politicians, doctors, lawyers, civil servants and film makers, these locations exude an unmatched vibe which is synonymous with their affluent lifestyles.
Many locations near the centre of power, whether political, economic or cultural, have a significant influence on residential property prices. According to a research conducted by Knight Frank, the following locations at present command the highest price across the top cities in India.
Apart from the above locations, the below micro-markets also have a huge inventory of luxury residential real estate but due to low vacancy, hardly any properties are available. Even if they do become available, such transactions are often closed privately through word of mouth or references due to which it is difficult to arrive at their ‘actual’ prices in the secondary market. For such locations, the sky is the limit as far as
l New Delhi - Prithviraj Road, Chanakyapuri, Golf Links Road
l Mumbai - Malabar Hill, Tardeo, Bandra (West)
l Bengaluru - Langford Gardens, Sadashivnagar, Indiranagar
l Kolkata - Alipore, Ballygunge
l Chennai - Boat Club, Poes Garden
No dearth of wealth but times are changing
As per the findings of Knight Frank’s the Wealth Report 2018, the ultra-wealthy population (individuals worth $50 million) increased by 16% between 2016 and 2017 in Asia. As of 2017, India constituted 8% of the total ultra-wealthy population of Asia. Over the next five years, strong growth of 71% in the ultra-wealthy population is projected for India which bodes well for the consumption of luxury residential products. However, according to a Credit Suisse report, the top 36 Indian families own more than 25% of the country’s GDP but the last one decade has seen a significant increase in domestic family structures. The traditional family structures headed by a patriarch and multiple generations living under the same roof are paving the way for nuclear families with Ivy league educated younger generations keen to chalk out their own paths.
Exposure to cosmopolitan cities globally through education, travel and work has been instrumental in shaping the housing preferences of these end-users who seek modern environs, community living and vast amenities at their fingertips, yet maintaining exclusivity and privacy of their residences. Such evolving tastes for home ownership caught the frenzy of real estate developers as early as 2010 to come up with diverse residential formats. During the period between 2010 and 2013, a wave of new residential products took the realty scene by storm with a lot of branded residences and themed developments. Villas with Spanish architecture, Disney themed apartment complexes, Swarovski or Sharapova associated residential projects were marketed extensively to lure crème de la crème of society.
In India, however monetary and policy interventions proved to be challenging for residential markets. Demonetisation, the Goods and Services Act and the Real Estate (Regulation and Development) Act all left their mark in the last couple of years, with luxury prices rising by just 0.6% in Mumbai. But market confidence is now improving. The wealthy younger generations want a taste of opulence that is draped in contemporary ‘luxury’ amenities. Today, location is not the sole predefining factor of luxury real estate.
Western concepts of penthouses, condominiums and contem-porary residences are fast catching on in India’s luxury residential realty scene. Homes crafted with high component of automation and technology integration for home management such as mobile-app enabled switching on and off of household appliances, drapes and security is now increasingly becoming synonymous with luxury. Equally popular are exclusively designed residences from international designers. It is not uncommon to find apartments with branded gymnasiums, spas, salons and concierge services in Mumbai or Delhi which are a class apart from other high-end products in the vicinity. For the corporate head honchos and social climbers, living in a luxury apartment complex comes with additional perks as they get a chance to expand their social circle and network with people from similar strata of the society.
As the Indian residential market comes of age, we have noticed some interesting trends unfolding which will not redefine, but certainly enhance the definition of luxury residential real estate in India. These trends will act as a precursor to increase the supply of such assets in the primary market and engulf new formats.
l Buyers in the luxury segment are not cash strapped but changing lifestyle habits and global outlook will bring luxurious apartments managed by hospitality chains back in vogue. The design elements of these products coupled with branding will be preferred due to their service, amenities, security and investment yield potential. For developers venturing into the supply of such residences, market differentiation and branding will be key drivers to undertake such projects.
l Tier II regions with a healthy tourism market such as Goa will see an inflow of such projects as developers try to position such markets as a second home destination for the uber rich. Owning a piece of luxury real estate in the lap of nature - be it the mountains or by the beach - is the new thing.
l Homes crafted by international architects, interior designers and joint venture with leading developers from other countries will remain popular with buyers. In cities with low proliferation of new products in the luxury space, such as Kolkata, the upcoming Trump Tower and Forum Atmosphere have struck the right chord among the target segment.
l Affordable luxury is emerging as a key theme in light of changing market dynamics post the policy reforms. The growing popularity of affordable luxury in the middle-income groups will keep the suburban markets with good connectivity and social infrastructure on the radar of developers as homes with luxury amenities will help people meet their lifestyle aspirations. For cities such as Bengaluru, Gurugram, Noida and Navi Mumbai, affordable luxury will be the new mantra in the long term.
l Technological innovations play a huge role in our life and home ownership is no different. Homes with sophisticated home automation systems and advanced features to reduce energy consumption, waste management, safety and security of families will attract the new age buyers.
l With the stark depreciation in the rupee value, reduced prices post demonetisation and an enhanced transparency in Indian real estate transactions post policy reforms, the Non-Resident Indians (NRI) have started finding the Indian real estate market attractive again. With high disposable incomes and preference to head back home after making the big bucks abroad, NRIs will dominate the Indian luxury realty sales.
The rise of the demi-millionaire club in India, coupled with India’s own growing stature, augurs well for this product category. In times to come, we foresee further evolution of this class of real estate, with homegrown as well as international players ruling the market.