Although the real estate sector has been witnessing significant demand for the past few quarters, the activity is not the same across the segments. During the July-September 2023 quarter, while the luxury segment jumped 39 per cent in terms of housing sales, the affordable segment saw a 2.6 per cent decline, according to a recent Knight Frank report.
This is the first time that sales in the high-end segment have overtaken sales in the affordable segment. Here’s why this is happening:
Manoj Gaur, president of CREDAI-NCR and CMD of Gaurs Group, said, “Even though the affordable segment took a slight beating, the premium and luxury segments continue to perform well, notably due to the country’s economic growth, the need for a large home and the aspirations to lead a better lifestyle. As far as price trajectory in the next 3-4 years is concerned, we expect it to go up by 50-60 per cent.”
Mayank Ruia, founder and CEO of Bengaluru-based MAIA Estates, enlists a number of reasons why the luxury real estate sector is booming in India:
Rising Affluence:
India’s growing economy has led to an increase in the number of HNIs (high networth individuals) and NRIs (non-resident Indians) investing in luxury properties. This affluent class is looking for residences that offer comfort, amenities, security, privacy and other features that can only be found in high-end real estate.
Global Exposure:
The increasing global exposure has made Indians more attuned to global luxury standards. Many are looking for properties that match global benchmarks, complete with world-class amenities and unique architectural designs.
Investment Perspective:
High-end real estate often offers stable and higher returns on investment. It’s seen as a tangible asset that appreciates over time and offers more rental income, compared to affordable housing.
Focused Developments:
Recognising the potential, many developers are focusing on creating niche luxury projects with exclusive features, further fuelling the segment’s growth.
On the affordable housing segment, Ruia said that while it remains crucial for a vast section of the population, it has not seen the same growth trajectory due to:
Land Prices:
Rising land costs in major cities make it challenging for developers to offer affordable housing in prime locations.
Financing Issues:
Securing funding for affordable housing projects can sometimes be more challenging compared to luxury real estate projects.
Over the past decade, and no different than now, Bangalore has consistently been at the forefront of delivering higher-than-average growth and high-quality residential assets. This is largely attributed to the significant boost the city has received from the startup ecosystem in the IT and services sector.
“In the aftermath of the pandemic and as we witness a gradual return to office spaces, there has been a notable absorption of surplus housing inventory from previous years. This surge in demand for new properties has led to a healthy and consistent increase in prices across various parts of the city, as well as within specific product segments and micro-markets,” Ruia said.