India's inventory of unsold luxury homes falls 12% to 43,000 units in Q1

Unsold inventory of luxury homes in some of the top cities in India has seen a distinct fall in first quarter of calendar year 2019 buoyed by the rising demand from non-resident Indians (NRIs), high networth individuals (HNIs) and ultra-high networth individuals (UHNIs).

According to a recent research by ANAROCK Property Consultants, the overall unsold inventory of luxury homes, priced Rs 1.5-2.5 crore, declined by 12 per cent to 42,650 units in Q1 2019 from 48,300 units in Q1 2018. 

Among the top cities, Bengaluru led from the front, recording a significant 49 per cent reduction in unsold luxury stock within a year — from 6,370 units in Q1 2018 to 3,260 units in Q1 2019. Bengaluru was followed by Kolkata with a 37 per cent decline in unsold luxury stock, and National Capital Region (NCR) and Mumbai Metropolitan Region (MMR) each witnessing 7 per cent yearly decline.

Historically, NRIs have bought luxury homes for good return on investment or for their own use. However, after a prolonged wait-and-watch period post the recent reformatory changes in the Indian real estate market, the trend is now decidedly skewed towards personal use, said Shajai Jacob, chief executive - GCC (Middle East), ANAROCK Property Consultants. "As always, they have an eye open for attractive capital appreciation — luxury properties have an edge as the incremental value is higher than affordable or mid-segment properties if prices appreciate."

What's more, HNIs and UHNIs are refocusing on the luxury segment for three reasons. First, due to NRIs’ predilection towards an aspirational lifestyle. Two, because of the potential for better returns when market rebound meets restricted supply in luxury areas. Third, price points of most luxury properties are at their lowest, with developers additionally offering lucrative deals.

One major feature distinguishing luxury and ultra-luxury properties between various cities are their price range. For instance, properties priced more than Rs 1.5 crore are considered ultra-luxury in Bengaluru. In Mumbai, properties priced above Rs 4 crore fall into this category.

According to Jacob, the most convincing incentives for NRIs to invest in luxury and ultra-luxury properties include higher potential for capital appreciation for properties located in prime areas, and higher and steady cash flow (via rental income) of properties in prime areas as against affordable housing in far-flung areas. 

Further, ANAROCK’s recent consumer sentiment survey also indicated that 28 per cent NRI respondents are looking to buy luxury and ultra-luxury properties in the price range of Rs 1.5 crore onwards across cities. The survey also indicated that 31 per cent of NRIs currently prefer to invest in a property in Bengaluru