India’s luxury homes have shown an immense dominance last year encompassing 50% of total sales in 2024. Residential sales during the last 4 quarters sustained a record-breaking growth with close to 3.02L units being sold giving a 11% growth Y-o-Y. The post covid era, i.e., 2022 till date has crossed the average annual sales of the decade preceding covid, i.e. 2010 to 2019. The average annual sales are 63% higher than the stated decade. This is a result of the increased inclination towards “owning a house” rather than being in a rented set up. The financial investment in the real estate asset class, although steadily increasing, is seemingly a preferred investment option for the working class.

Cities like Bengaluru, Pune, and Mumbai have witnessed a rampant absorption by constituting 62% shares of the total sales in India in 2024.

One specific observation in the market is the increasing need for owning Quality over anything else. With better economic conditions, and healing job market, it is observed that an average individual between the age bracket of 38 to 50 years is ready to invest in higher quality homes in order to fetch the desired standard of living. This phenomenon is supported by the higher disposable income in the families and the urge to have all the advanced lifestyle amenities at a hands’ reach.

Amidst this air of demand, apartments for sale over 1 crore has accounted for more than 50% shares in annual sales. As per our JLL reports, there has also been a significant growth of ~86% in the premium (INR 3-5 crore) segment sales and ~80% growth in luxury (INR 5 crore and above) segment sales when compared to 2023, driven by rise in high-net-worth individuals, increasing disposable income levels and evolving buyer preference for bigger, tech-enabled, and future-ready homes.

So What are buyers preferring?

Image Source: Real Estate Intelligence Service (REIS), JLL Research

The above figure clearly shows the increasing share of apartments above 1 crore and parallel to that the biggest decline in affordable home sales.

·       The longest stride is observed in the premium segments of apartments for sale across the cities

·       INR 3 crores and above observed a double-digit share for the first time in the Indian Housing Market.

This rises a lot of queries regarding the premium and luxury housing market; let us address them!

1.       What are the new launches in luxury housing in India? Where is the recent surge in luxury housing launches happening in India? What are the key features of these launches?

 

Renowned developers and most recently few locally established developers are coming up with launches and projects in the tier I cities.

Tier I cities are majorly dense with luxury housing market. Each metro city has its own residential pockets which accommodate the supply of luxury properties for HNIs and Ultra HNIs. To name few major micro-markets, we have the list below –

-          Mumbai – Malabar Hills & Worli Sea Face

-          Pune – Koregaon Park & Shivaji Nagar

-          Hyderabad – Jubilee Hills & Banjara Hills

-          Bengaluru – North Bengaluru, ORR

-          Delhi-NCR – Lutyens

-          Chennai – Central region like Anna Nagar, TN Nagar

 

There is a dedicated thought put behind developing luxury projects. If we look into the past, each and every project that caters to the HNIs demand have one USP or point of innovation which makes it stand apart from the rest of the project. The hygiene aspects remain the same; for e.g., the location – its privacy, gentry, convenience, the view – whether the project is sea facing, or city/skyline facing, and very importantly the neighbourhood, the space – floor to ceiling length, project amenities etc. these aspects are mandatorily considered. However, there has to be one or more point of innovation that the project is pioneering with. The perception of staying in something that’s unique is a decisive factor for the market

 

2.       Where are the potential investors of luxury housing in the current market?

 

City wise, Mumbai holds maximum potential investor, followed by Delhi-NCR, Bengaluru, and Pune. These cities accommodate majority HNIs and are top on the progressing cities list. Most recently, tier II cities have started having a lot of potential demand market. Cities like Surat, Ahmedabad, Kolhapur have HNIs but limited local supply. However, they perceive real estate investment to be a lucrative option.

 

3.       Where is the target audience for luxury housing and the reasons why they would invest in such properties?

 

Apart from the professionals like stockbrokers, diamond merchants, doctors, etc. and industrialists based out of metro cities, tier II cities like Surat, Mangalore, Goa, Kolhapur are growing as a potential market for luxury housing. The businessmen based there are having sufficient funds to park but limited or no supply market in the city. They aim at cities where the development is rampant and keep the investment as a second home or stop-gap residence for travelling and recreation or halt stop while travelling. Mumbai is one of the most preferred markets being the financial capital and junction airport for best and fastest domestic and international travel.

 

4.       What is the current market situation of luxury housing in India? Is the demand for luxury housing still high or has there been a shift towards more affordable options?

 

The target audience for luxury housing aren’t much impacted by the minute ups and downs of the economy. It is majorly impacted by macro scenarios. What we see as of now is a consistent buoyant market with buyers’ demand exceeding the market supply since a considerable time now. The supply side is denser with new launches while the market is looking at ready properties. The Indian economy is an augmented support to the demand which is showing positive signs which means a consistent flow of funds with HNIs and Ultra HNIs. Luxury market basically means uber luxury properties above the ticket size of INR 25 Crores; the only slumber we see in the coming 3 to 4 quarters would be due to the reduction of the cap to INR 10 Crores for taxation benefits under section 54. This might slow down or stagnate the demand, but recovery in this market is faster than others. The market shows a bullish behaviour in luxury segment.

 

 

5.       What is the impact of the Covid-19 pandemic on the luxury housing market and how it has affected the investment patterns of potential investors?

 

Covid-19 had a substantial impact on luxury housing market as well. The market sentiment had a conservative streak and were either waiting for a better future or seeking RTMI supply. Sensing the demand pattern, developers flushed their RTMI supply at good discounts and offers. There were discounts offered on stamp duty registration, better interest rates which increased the market traction. After the offset on covid, the demand behaviour included bigger and better spaces for staying. The presence of a bigger deck area, breathable and recreational space became a mandate.

As a result of RTMI absorption, the supply is dismal. There is a considerable gap between the demand and supply with demand surpassing supply. The prices are going to be high and stay consistent henceforth.

 

6.       What is the future of luxury housing in India? Does it still hold the same allure for potential investors? What are the various challenges faced by the developers? Can the market sustain such high-end properties?

 

Luxury housing in India is an ever growing and established sector. The capital wealth of HNIs and ultra HNIs are growing, and real estate is a safe investment haven for them. Owning a luxury property is also a symbol of status for them. Tier II cities like Surat, Goa, Bhubaneswar, and Udaipur are a growing market for luxury market. The local developers are also jumping in the prevalent market and developing their niche targeted projects.

 

Few challenges faced by developers would be –

-          Initial cashflow is low – the markets’ preference is usually RTMI, they prefer seeing the tangibility of the luxury and then invest. Thus, initial funding is basically completely developers’

-          The initial resources and approvals for luxury development is limited and expensive. The land acquisition, amenities creation, FSI etc. are expensive and limited. The type of differentiation projects offers approvals for the same is cumbersome to acquire

-          Innovation is key decider of acceptability of luxury housing. To continuously look for something to make it stand out and appealing. Thus, the efforts and cost associated is high and requires continuity.

 

7.       What are the risks of investing in luxury housing since it’s a high-ticket investment?

 

-          The funds are locked in this investment for a longer time since resale takes longer than usual

-          The newer supply is a tough and consistent competition

-          Whilst purchasing, taxes proportionate to the property worth is high which is an irrecoverable cost while resale

-          There are few disparities in the agreement which charges for utility areas which isn’t mentioned while signing. These add up huge costs and isn’t recoverable while transfer of ownership since it isn’t drafted for.

 

*Data and excerpts taken from Real Estate Intelligence Service (REIS), JLL Research