The Booming Luxury Real Estate Market in India: Trends, Drivers, and Future Prospects
India’s real estate market is undergoing a dramatic transformation, with the luxury housing segment experiencing an unprecedented surge in demand. Rising incomes, growing aspirations for upscale living, and a preference for modern amenities have propelled this transformation, resulting in a boom in luxury home sales across the country. Let’s delve into the factors driving this trend and what the future holds for luxury real estate in India.
A Surge in Demand: The Numbers Speak
India’s luxury real estate market is on an upward trajectory. In a recent highlight, DLF, the country’s largest developer, sold out 795 apartments worth Rs 5,590 crore within just three days of launching its latest luxury housing project in Gurugram. This follows the success of previous projects like ‘The Arbour,’ which saw pre-launch sales worth Rs 8,000 crore in a similar timeframe.
According to recent surveys, the share of luxury homes sold in India has tripled over the past five years. Luxury properties now constitute 21% of all residential units sold across the top seven Indian cities in the first quarter of 2024, up from 7% in 2019. This shift is not just in the numbers but reflects a deeper change in the preferences of homebuyers.
The NRI Influence
Non-resident Indians (NRIs) have played a significant role in driving the luxury housing market. NRIs now account for nearly a quarter of total residential sales at major developers. The allure of luxury properties, coupled with exclusivity and modern amenities, has attracted both domestic and international buyers. This trend underscores the growing global appeal of India’s luxury real estate market.
Changing Preferences: From Affordable to Luxury
Interestingly, luxury home sales have surpassed those of affordable housing units, signalling a shift in buyer preferences. Affordable housing units, which once dominated the market, have seen a decline in sales share from 37% to 18% over the past five years. In contrast, the mid-range and premium housing segments maintain dominance with a 59% share.
Economic Momentum and Wealth Creation
India’s economic growth and the projection of a doubling of affluent individuals within three years have created a favourable environment for luxury real estate investment. Investing in luxury real estate offers not only opulent living spaces but also enduring value and potential long-term returns. The concentration of wealth among high-net-worth individuals (HNIs) has fuelled demand for exclusive properties, particularly in prime locations such as Delhi-NCR, Mumbai, Pune, Hyderabad, and Bangalore.
Investment Potential and Market Projections
Luxury properties have historically exhibited lower volatility and served as a hedge against inflation, making them an attractive asset class for sophisticated investors seeking prestige and profit. Industry analysis projects an 8-10% increase in property prices across key cities over the next two years, further solidifying the long-term investment potential of luxury real estate. This projection aligns with the prevailing sentiment among affluent investors, as evidenced by a recent survey where 56% of HNIs and ultra-high-net-worth individuals (UHNIs) anticipate a reduction in interest rates by the Reserve Bank of India in 2024.
Premiumisation: The Trend Driving Demand
A significant factor contributing to this surge is the prevailing trend of ‘Premiumisation’. With rapid wealth creation and pent-up demand from the COVID-19 pandemic era, consumers are increasingly drawn to luxury products and experiences. This trend extends to the real estate market, where high-net-worth individuals are diversifying their portfolios by investing in luxury properties. Another recent survey found that 75% of ultra-high-net-worth individuals are bullish on real estate, with 61% eyeing ultra-expensive houses.
The Scarcity of Upscale Apartments
The shortage of upscale apartments in prime locations is another driving force behind the luxury housing boom. Cities like Gurgaon are witnessing a scarcity of luxury housing options, leading affluent buyers to seek exclusive properties with modern amenities and sophisticated designs. The shift from traditional bungalows to posh apartments reflects changing preferences among high-net-worth individuals, who prioritise factors such as security, convenience, and exclusivity.
Regional Dynamics
Among the top seven Indian cities driving the demand for luxury homes, the National Capital Region (NCR) and the Mumbai Metropolitan Region (MMR) stand out. In the NCR, luxury homes accounted for 39% of all residential units sold in the first quarter of 2024. Similarly, the MMR has become a hotspot for luxury housing, attracting buyers seeking premium properties and world-class amenities. Other cities like Hyderabad, Bangalore, Pune, Chennai, and Kolkata also have strong demand for mid-to-high-end properties, reflecting diverse regional dynamics.
Conclusion: The Future of Luxury Real Estate
The shift towards luxury real estate is expected to continue, with launches in the affordable segment projected to remain muted. Premiumisation, coupled with rising per capita incomes, is anticipated to drive 10-12% volume growth for large, listed residential developers in the current financial year. As India’s economic momentum continues and wealth creation accelerates, the luxury real estate market is poised for sustained growth, offering both opulent living spaces and robust investment opportunities.
