The sun shines brightly on India’s luxury housing—Demand likely to remain strong

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The sun shines brightly on India’s luxury housing—Demand likely to remain strong


Gone are the days when people bought homes for the sole reason of having a roof above their heads and didn’t really look for specific amenities or have a residence that reflected their standing in the society. The new breed of entrepreneurs, the nouveau riche, people who have managed to break through the glass ceiling of the middle class—are now seeking luxury or premium housing—one that will give them the lifestyle that they are looking for and also reflect their success in life.

There are three factors that are driving this rising interest in the luxury housing segment. Firstly, India is witnessing a strong economic turnaround today. In April 2017, the International Monetary Fund (IMF) released its predictions for the Indian economy—The growth rate for India is pegged at 7.2% in the current financial year and is predicted to rise to 7.9% in 2018-19.

The economic turnaround is expected to have a favourable impact on the real estate market, especially the luxury housing market in the country, thanks to growing per capita incomes and purchasing power parity (PPP). According to the First Advance Estimates of National Income, 2016-17 released by the Central Statistics Office (CSO), the per capita net national income during 2016-17 is estimated to be Rs 103,007 at current prices, which is 10.4% higher than 2015-16. A PwC report estimates that India’s economy is set to go past the US by 2050 in PPP terms and will be ranked second in global GDP rankings.

Secondly, the number of ultra high net worth individuals in India is increasing. According to the latest Wealth Report by global property consultant Knight Frank, the number of super-wealthy Indians grew the sixth-fastest in the world between 2015 and 2016 and is expected to move to the third spot in the next decade. Currently, India has around 2% of the world’s millionaires (13.6 million) and 5% of world’s billionaires (2,024). According to Knight Frank India, even though the residential market in India is reeling under pressure, 40% of HNIs are likely to invest in residential properties over the next couple of years. Thirdly, the twin impacts of Real Estate Regulatory Authority (RERA) Act and Goods and Services Tax (GST) will increase transparency in the real estate sector and lead to high quality investments in this segment.

After suffering from a lull post demonetization, the sun is shining brightly on the luxury housing segment. According to a report by Jones Lang LaSalle, 45,000 luxury housing units were launched and 47,000 sold in FY16 with top 9 cities constituting 21% of the total residential launches and 17% of the total residential sales in the country. Bengaluru leads both the luxury home launches and the luxury home sales with 30% and 29%, respectively in FY16. In sales, Bengaluru is followed by Mumbai (16%) and Pune (15%).

Unlike affordable homes, the market for luxury housing is not driven by home loans. For the buyer, it is a question of when, how much and where rather than if. Hence, the luxury market in India will continue to thrive as it is driven by a new set of investors who look for nothing but the best, with all the bells and whistles in great locations.

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