Home truths: Luxury real estate looks set to retain its sheen this year

Stamp duty cuts, reduced circle rates, changing demographics propel high-end homes to new heights

There is money in the air – whether it’s the vast expanses of land lining the national highways in the capital region or the bustling pockets of cities that seem to mint wealth by the minute. Luxury real estate, in particular, has been a magnet for affluence.

For the sector, the year started on a high. Barely a week into 2024, several national dailies featured a full-page advertisement by realty giant DLF, announcing, “We are sold out.” DLF had managed to sell 1,113 luxury apartments in Gurugram for approximately Rs 7,200 crore within three days of the pre-launch.

Meanwhile, Tribeca Developers, known for its Trump-branded realty ventures worldwide, forged an agreement with the Tejukaya Group to develop a luxury residential project spanning 2.5 acres in Parel, South Mumbai. This will be Tribeca's first foray into Mumbai.

Sales in the luxury housing segment across the top seven cities have grown from 8,301 units in 2020 to 119,130 units last year, according to a report from real estate consultancy Anarock. A record 100,355 units were launched in 2023, constituting around 23 per cent of the total units available.

“The real estate landscape has undergone a significant transformation in the last decade,” said an executive from a leading realty developer who preferred to remain anonymous. “Previously, smaller players dominated the residential market, but now larger brands take precedence.” For instance, DLF has curated a comprehensive living experience in Gurugram, encompassing tech parks, townships, malls, and more, the executive said, highlighting a similar scenario with Hiranandani in Powai, Mumbai.

While the affordable segment continues to drive the real estate sector, the premium and luxury housing segment — units priced at Rs 2 crore and above — witnessed robust sales growth, registering a 70 per cent year-on-year increase in the January-September 2023 period, real estate consultancy firm CBRE Group reported.

Low home loan interest rates, favourable government policies, and the fear of missing out on desirable properties across metro cities contributed to this growth in sales.

Prashant Thakur, research head, Anarock Group, attributed this surge to the long dry spell before the Covid-19 pandemic. “Low home loan rates and pent-up demand are major reasons for the increase in sales in this segment,” Thakur said, noting that this buying spree resulted in a strong cash flow for most developers, leading to the launch of more such projects.

Government’s tax adjustments, including revised circle rates in New Delhi and stamp duty cuts in Maharashtra, also played a role in this growth. In response to the downward trend in the state’s realty market, the Maharashtra government announced a duty cut of 2-3 per cent down from 5. This acted as an incentive for high-end buyers to start looking for a lifestyle upgrade.

“When one is looking for options in the upper end of the market, a 3 per cent stamp duty cut can be equivalent to the cost of a mid-level car,” said Gulam Zia, senior executive director, Knight Frank. 

Historically, the luxury segment barely reached double digits, but in 2023, the market grew by around 41 per cent compared to 2022, Zia added.

Niranjan Hiranandani, founder and managing director of Hiranandani Constructions, concurred. “In my career of 40-plus years, this is the first time I’ve seen the mid-level and luxury segments growing faster than the affordable one." Hiranandani noted that the buyer class is driven by aspirations, with individuals in one-BHK flats seeking two- or three-BHK flats.

Sound investment

Industry experts predict that developers will continue launching more projects in this segment in 2024.

On the buyer side, the luxury segment has emerged as a compelling investment option. Over the years, buyers for such apartments have come to include wealthy young individuals from India’s growing startup sector and non-resident Indians (NRIs). DLF, in a press release for its Gurugram luxury project, had disclosed that 25 per cent of the buyers were NRIs.

Tariq Ahmed, CEO (West) of Bengaluru-based developer Prestige Projects, affirmed this change. “The buyer profile is certainly getting younger, with more first-generation entrepreneurs entering the fray.” Earlier, this segment was largely driven by industrialists and legacy business families, but now many top C-level executives are seeking such real estate, he added.

As part of high net worth individuals’ and NRIs’ portfolio diversification, Thakur from Anarock said that in terms of return and yield, luxury is proving to be a strong investment bet. According to a report by Anarock Research, luxury homes across the country recorded the highest average price appreciation of 24 per cent in the last five years. Average prices of homes costing above Rs 1.5 crore in the top seven cities saw the highest appreciation, soaring from Rs 12,400 per sq ft in 2018 to Rs 15,350 per sq ft in 2023.

Thakur clarified that luxury, by definition, is not just about price or size; it also encompasses locality, developer and amenities. “Developers have acquired land at a higher cost and aim to maximise returns, a feat not achievable with affordable or budget housing.”

Luxury homes, it appears, are set to retain their sheen this year.

Homing in

Across top 7 cities

	2019	2020	2021	2022	2023
Total units sold across categories	2,61,360	1,38,350	2,36,520	3,64,870	4,76,530
Share of luxury homes sold (%)	7%	6%	9%	18%	25%
Total units sold in luxury segment	18,295	8,301	21,290	65,677	1,19,130

Source: Anarock