The country’s real estate market may not be in the pink of health, yet the current sluggish phase has not cast an ominous shadow over the prospects of luxury housing, a segment which continues to witness unabated demand, riding on rising number of high net worth individuals with enhanced lifestyle aspirations, coupled with the promise of high return on investment.
From designer homes to intelligent living spaces to sports and entertainment-centric living to homes with world-class concierge and allied services, developers today are raising the bar to come up with product and service offerings, to redefine the luxury real estate market in India. Mumbai, Pune, Bengaluru, Kolkata, Delhi-NCR and to a certain extent Chennai are the most responsive markets for luxury housing in the country. The changing demographics and the rising aspirations have given luxury living a new identity altogether.
Rise in the number of high net worth individuals, rapid pace of urbanisation, influx of global lifestyle trends and an increase in the number of non-resident Indians have contributed significantly towards increasing demand for luxury housing in India.
In cities like Mumbai, Delhi-NCR and Bengaluru, luxury and ultra-luxury residential projects have witnessed ten-fold appreciation over their launch prices in the last decade, implying more than 100 per cent annual returns on investment, claims Santhosh Kumar, CEO, Jones Lang LaSalle India. Most of these projects saw encouraging pre-sale activity and were sold out swiftly, he adds.
In fact, demand for luxury homes in cities like Gurgaon has always outpaced supply, which has encouraged developers to increasingly shift their focus on this segment.“In the last few years Gurgaon has become synonymous with luxury housing owing to the launch of a plethora of high-end projects. Sales have gone up with end-users and foreign nationals not averse to paying a steeper price for world-class features that most of these projects boast. Demand has spiked along with appreciation in their value,” says Ashish Jerath, VP-Sales, Emaar MGF.
Noida, recently, has also seen an increase in demand for luxurious projects. Prateek Group, for instance, tasted success for their maiden luxurious project ‘Prateek Stylome’ in Sector-45. The project had all the ingredients of a luxurious project and it changed the perception of Noida as a destination for affordable housing only. The group’s second offering in this space is ‘Prateek Edifice’.
“Luxury villas and farm house culture have become the latest trends in the Indian real estate market and Delhi-NCR is no exception to this. Luxury housing and premium villa projects coming all over the region have become a massive game changer in this part of the realty market,” says Anil Kumar Sharma, CMD, Amrapali Group and President, CREDAI-NCR. Amrapali has a host of luxury projects including Amrapali Sapphire in Noida and Amrapali Leisure Valley and Amrapali Dream Valley in Greater Noida West.
Although definition of luxury can vary from city to city and locality to locality, over 1.5 crore price tag is usually referred to as the start of luxury segment. Developers, on their part, are trying to outdo each other in breaking fresh ground in luxury. From a typical golf-based to spa-based, wellness or destination-based project, they are now experimenting with various global themes. For instance, Emaar MGF’s Marbella in Gurgaon is an impeccably planned ultra-lavish Spanish style villa community with 4 & 5-bedroom villas. Spread over 110 acres, the villas measure 267, 350 and 500 sq yds. Emaar The Palm Springs, located on Golf Course Road, Gurgaon, is another gated community spread over 19 acres and comprises approximately 230 high-end apartments and 80 luxury villas.
Why luxury works ? :
Ultra-luxury projects have a tendency to garner extremely good pre-sale volumes, hence their developers are generally able to secure significant fund flows to capitalize the completion of their projects. “Luxury and ultra-luxury projects yield much higher returns to developers than projects geared towards the affordable and mid-income segments,” says Arjun Shivshankar of Suvilas Properties.
However, Kamal Sagar of Bengaluru-based Total Environment has a different opinion. “High quality homes require an exponentially higher degree of effort and cost. And, at the current level of maturity in the real estate market, developers end up with much lower returns to developers, since several customers continue to look at ‘cost per square foot’ instead of value-for-money.”
While it is also true that input costs for luxury homes are much higher, developers stand to benefit from the increased visibility of their brands among highly affluent, top-end clients. This means that the company can uniquely position itself on the basis of good quality luxury projects. This increased visibility and superior construction is automatically attributed to all other projects by the company. In other words, even mid-income housing projects launched by the developer get benefitted, and will invariably see higher sales compared to projects by developers who have not ventured into luxury housing.
“Almost 75 per cent of the established builders across India have taken up luxury segment very seriously and the competition is quite intense. It does involve huge amount of risk as well. So, if developers are not sure of the projected returns, they would not invest in this segment,” says Sanjay Raj, ED& CEO, Golden Gate Properties.
Buyers for luxury projects have very high expectations and want their homes to both offer and reflect a high lifestyle quotient. There is very little tolerance for flaws in design, construction and amenities. Thus, a botched luxury project can have significant repercussions on the developer’s credibility and future success.
Investment wise :
Experts reason that luxury is a recession-proof segment. According to Manju Yagnik, Vice Chairperson, Nahar Group, as most of the buyers in this category are the C-Suite of the corporate world, successful entrepreneurs and business tycoons, their financial appetite is not limited to or governed by the economic considerations that give the middle-class sleepless nights. A significant percentage of buyers for such projects are able to self-finance their savings from their earnings.
Recession might take a toll on the response generated and time taken in selling project at the targeted price points. However, the kind of hit that luxury projects take in times of economic uncertainty is significantly lower when compared to residential projects aimed at other categories.
A case in point is DLF which says that despite the current economic slowdown they have received fairly good response from a sales point of view. “We have been receiving fairly good response when it comes to our overall luxury project sales,” says Ananta Raghuvanshi, Executive Director-Sales & Marketing, DLF Universal Ltd. DLF has several offerings under luxury segment. To name a few, the company has Kings Court in New Delhi, Samavana in Kasauli, Samatara in Shimla, Bella Greens, New Town in Bengaluru and Riverside in Kochi.
“From an investment perspective, luxury housing is far better than other segments as it will always yield better returns. The demand is at niche level where one decides on quality and amenities and not on cost,” states Sushant Muttreja, MD, Cosmic Group.
“Luxury projects have witnessed over tenfold increase in prices in the last decade, pointing at huge return on investment on these projects,” adds Ravi Saund, COO, CHD Developers. Rajesh Vardhan, MD, Vardhman Group also affirms that luxury housing produces superior returns for the developers. Vardhman Group has luxury projects – Vardhman Flora and Vardhman Height at Byculla, Mumbai.
However, Deepak Kapoor, Director, Gulshan Homz says, “The luxury segment is all about lifestyle and status and so this segment is not good for short term investment. However, for medium and long term, luxury segment provides great returns.” Under this segment, Gulshan Homz has its projects — Vivante Select and Gulshan Ikebana, both situated on Noida Expressway.
Elaborates Girish Shah, Executive Vice President (Marketing & Sales), Godrej Properties, “The most important and prime variable in luxury homes – be it a first home or a second home – is its location. Almost all luxury properties claim to insulate you from the hustle and bustle of city life. But the ideal location could be within the heart of the city, not on its periphery, which will eventually result in good investment.”
Several projects in this segment, in time, become much sought-after ‘brands’ in their own right. This pushes up their re-sale and rental value. Over the long term, luxury projects provide excellent investment opportunity and offer quick exit options, feels Neville Vaswani, MD, Vaswani Group.
However, Bijay Agarwal, MD, Salarpuria Sattva Group has a different take, “While the segment may be recession-proof, however homes in this segment are not moving ahead as second homes. So, even if people invest in luxury homes, the return would be less.”
Intelligent Homes :
While location continues to be a key factor, branded residences are an emerging concept that offers not just a premium address with large spaces but evolved amenities with artificial intelligence, branded fittings such as Roca, Kohler, Grohe etc. and in many cases superior project management.
For instance, Delhi-based CHD Developers plan to launch luxurious studio apartments in their commercial tower CHD Sky One at Sector 109, Dwarka Expressway. With an ‘intelligent’ design, the tower will be energy efficient with optimal utilisation of space. The Group also launched a luxury tower Tee 9 within 106 Golf Avenue on Dwarka Expressway. It has a world-class golf community of exquisite 6-hole chip and putt. Above all, it includes exclusive Golf Concierge.
Developers are also increasingly focussing on creating intelligent living spaces through latest gadgets and technology. Digital locks, electronic surveillance systems, temperature control, wireless communication for Internet and in-house entertainment are common in most luxury homes.
Developers are using systems with sensors to enable residents to control ambience, light and temperature, among other things, through pre-programmed machines. These homes are intelligent enough to sense human presence and accordingly adjust light and temperature. Mantri Developers recently collaborated with networking provider Cisco to deploy information and communications technologies in its projects – Mantri Espana and Mantri DSK Pinnacle.
Sunteck Realty, a Mumbai-focused developer, has tied up with luxury mobile phone manufacturer Vertu to provide concierge services in a residential project aimed at top corporate executives. Each apartment will have a handset through which the residents will be able to call a dedicated concierge desk.
Raheja Developers’ Revanta in Gurgaon has restaurants, cafes, spas, lounges, common swimming pools, valet parking, automated car-wash and helipads.
“Luxury today has evolved and has moved several notches up and includes various lifestyle aspects such as theme-based developments – entertainment -centric living, golf/sports living in which projects are developed with a certain theme in mind. Leading lifestyle brands such as Versace & Armani are now being roped in to take care of flooring, wall designs, fittings as well as sanitary ware,” says Harinder Dhillon, Sr. VP, Raheja Developers. The Group is also coming up with another iconic project – Raheja Oma on NH-8, Dharuhera.
Spacious luxury apartments and villas invariably come with top-quality interiors, bathroom fittings and kitchen decors, often imported from abroad. For instance, One Avighna Park at Lower Parel in Mumbai promises to be amongst the most-sought-after residential addresses globally. Its material selection is based on quality, durability and service. For instance, imported switchgears from France, windows from Germany, water-proofing products from Malaysia, fire-fighting systems and pipes from UK, etc. The project is already 51 storeys up with delivery scheduled in 2014.
Pricing trends :
By virtue, luxury and ultra-luxury comes with a price tag. Pricing largely depends on the location of the project. In addition, amenities, type of construction and interiors also determine the pricing of the project. Opulent interiors with superior quality fittings in living spaces is a mark of luxury housing. External lifestyle amenities also add to the overall living experience of the residents. Today, many developers are associating with international architects and landscape designers to provide the best in class product to their customers. All these factors add to the premium charged by the developer.
According to Ashok Gupta, MD, Ajnara India, “The pricing is 25-50 per cent more than the mid-segment rates prevailing in the same area, depending upon the kind of amenities and the quality being provided.” The group is coming up with Grand Ajnara Heritage, a luxurious project located in Sector-74, Noida.
Prices differ city-wise as well. In Bengaluru, anything above 6000 per sq ft could be considered luxury. But it may not be the same in Mumbai where prices above 15,000 per sq ft come under this bracket. On an average, the pricing of a luxury home would be over 1.5 crore, while a super luxury apartment would be from 5 crore onwards. Whereas in tier-II cities houses above 3 crore come under the ultra-luxury segment while in a tier -III city anything upwards of 1 crore will be considered super luxury.
According to Ravi Gurav, Vice President – Marketing, Dheeraj Realty, “in luxury housing there is no particular pricing trend. It all depends on certain factors – location, brand value and amenities and facilities provided.”
Future Outlook :
Innovations and evolving lifestyle aspirations will drive the luxury housing market in India. Technological advancement coupled with design innovations are evolving fast and continuously raising the bar of luxury offerings. What is important to note is that these luxury offerings need to be in sync with local culture, demography and residential density components to provide an optimum impact and the real luxury experience. “As we see it, this segment promises great growth potential in the near future,” says Devang Varma, Director, Omkar Realtors & Developers.
However, Anshuman Magazine, CMD, CBRE South Asia, sounds a note of caution, “The short-term outlook is difficult for the segment, considering subdued demand levels and supply-demand mismatch. At present, developers are focused on clearing off existing inventory before launching any fresh projects. A silver lining, however, has been the increasing trend of non-resident Indians (NRIs) purchasing housing property to leverage the depreciating value of the rupee.”
In Gurgaon, demand for luxury segment is expected to soar further in the coming four years. The entry of newer players in NCR, mainly connected with the IT, services and industrial sectors, has contributed to the hike in housing demand, which is expected to go up further with the influx. “Gurgaon will continue to see significant rise in luxury housing as the infrastructure is improving significantly and the city has witnessed a rapid pace of urbanisation over the last one and a half decade,” claims David Walker, ED of SARE Homes.
While Mumbai real estate market may see prices dip temporarily in certain micro markets, yet over the long term, real estate prices here will certainly see an upswing. There is definite lack of delivery but not supply. States Nishant Agarwal, MD, One Avighna Park, As a wise man once said, don’t wait to buy real estate, buy real estate and wait.”