India’s housing market, particularly in the top cities, has shown remarkable resilience post-pandemic, fueled by pent-up demand and growing aspirations for homeownership, but the luxury segment has seen a veritable boom. The share of luxury homes sold in India has tripled over the past five years, according to a report by property consultant Anarock Group.
Luxury homes — categorized as those priced over Rs 1.5 crore ($179,650) — made up 21% of all residential units sold across the top seven Indian cities in the first quarter of 2024, according to the Anarock report. It was 7% for the same period in 2019.
Interestingly, sales of luxury homes have crossed that of the affordable ones. Affordable housing units saw their share of sales decline to 18% from 37% in the past five years, while the mid-range and premium housing segment — homes priced between Rs 40 lakh to Rs 1.5 crore — remained the dominant segment with nearly 59% share.
The luxury shift
The product mix in India’s housing market continues to shift towards the mid-to-premium and luxury segment, with launches in the affordable segment expected to remain muted, as per a recent report by ratings agency CRISIL Ratings. Continuing premiumisation along with rising per capita incomes is expected to help large, listed residential developers build 10-12% volume growth in the current financial year after an estimated growth of nearly 14% on a high base in fiscal 2023-24, as per CRISIL Ratings.The residential real estate market in India recorded robust growth in the first quarter of 2024, propelled by persistent high demand. The high-end and luxury segments made a substantial contribution to this growth, while the mid-segment retained its leadership position in terms of the sheer number of launches or shares, mentioned Cushman & Wakefield’s Residential Marketbeat Report for Q1.Shalin Raina, Managing Director, Residential Services, Cushman & Wakefield, said, “Over the past year, a significant rise in demand for high-end and luxury properties has emerged at both national and local levels. This shift reflects a change in homebuyers’ growing desire to invest in a place not only to live, but as a high-quality asset that reflects their lifestyle aspirations”.In Q1-2024, the high-end and luxury segment remained dominant, accounting for roughly 34% of all property launches. This trend has been consistent in recent years and is a reflection of the evolving aspirations of homebuyers who seek enhanced lifestyles.
“The demand for larger, more luxurious homes has attracted established developers with the capital and expertise to deliver premium, customized living spaces that cater to the aspirations of modern India. This trend has led to a surge in launches by established developers, significantly increasing their y-o-y contribution to the residential market. We expect this momentum to continue throughout the coming fiscal year (FY 2024-25) as well,” Raina said.
What explains the luxury housing boom?
Rising incomes coupled with the prevailing trend of premiumisation are two big reasons behind the boom in luxury housing segment.
A general trend of premiumisation is sweeping across the market and has come to define consumer demand in India, as India is producing more high-networth individuals due to a fast pace of wealth creation and pent-up demand from the Covid times as well as the YOLO (you have one life) factor are driving sales of luxury products.
Real estate has found its way into the portfolio of the rich. The trend has been continuing for two years. Ultra-high-net-worth as well as high-net-worth individuals had started investing in luxury real estate in 2022 itself, the annual Luxury Outlook Survey 2023 by India Sotheby’s International Realty showed last year. 75% of these super-rich people surveyed by India Sotheby’s International Realty believed real estate would do well over the next two to three years. 61% of them were looking to buy ultra-expensive houses. Delhi-NCR, Mumbai, Goa and Bengaluru were the preferred locations.
Yet another reason is the shortage of luxury apartments at key locations such as Gurgaon. Also, earlier the rich used to buy bungalows which have now become ultra expensive and have limited availability due to preferences for location and neighbourhood. Moreover, a big house in a colony such as Greater Kailash in New Delhi isn’t as attractive to an HNI as a posh apartment in Gurgaon for reasons of security, navigation and amenities as well as design, quality, sophistication and exclusivity.
The NRI money is also boosting the luxury housing segment. The NRIs are contributing nearly a fourth to the total residential sales at large developers, up from 7-10% before the pandemic.
