The amazing rebound of uber-luxury real estate

India’s luxury housing market, however, slumped. While sales continued to trickle in for a few top-end developers till 2020, the market appears to have accelerated many times over in the past 10 months. The under construction Trump Towers project, jointly developed by M3M Group and Tribeca Developers, sold about three units a month until last year. In 2021, sales have more than doubled to seven units. The homes are priced at ₹8-9 crore each.

The Trump Organization is now bubbling over with hope. This time around, it is looking to build not just luxury Trump Towers residences, but also ‘second homes’, which has emerged as a hot asset class during the pandemic. The plan is to develop gated communities of super luxury villas and farmhouses across Delhi-NCR (national capital region), Bengaluru, Hyderabad, Goa, Alibaug and Pavna (Maharashtra), founder of Tribeca Kalpesh Mehta said. Tribeca is the official representative of The Trump Organization in India.

“As with the US and most parts of the world, Indian residential real estate is witnessing a strong boom," Donald Trump Jr. said in an email response to Mint. “We are incredibly proud of the successes we have experienced over the years and look forward to once again raising the standard of luxury in India and beyond," he added.

Other luxury developers have similar stories of a sales revival to share. Residential units, 3,000-6,000 square feet in size, and priced in the range of ₹3-11 crore, are selling like hot cakes across the country. The pandemic has played its role. While the market had an oversupply and was marred by construction delays, things changed from a demand standpoint over the last few months as the rich hunted for larger homes that were also well spaced out.

Low interest rates, favourable government policies—stamp duty cuts in Maharashtra, revised circle rates in Delhi—and more ready-to-live-in projects contributed to the sales momentum. The first nine months of 2021 clocked total home sales of 1,45,650 units in the top seven cities, of which luxury sales’ share was 12%. In 2019, of the total sales of 261,000 units, the share of luxury housing was around 7%, according to Anarock Property Consultants. Mumbai, Bengaluru, Pune and Delhi are the key markets driving luxury sales today.

“While the affordable segment was doing well, luxury was in a very tough spot. The shift to gated communities has now created an unprecedented demand for decks, gardens, balconies in homes, which were actually tough to sell earlier," Prashant Bindal, chief sales officer at Macrotech Developers Ltd, said. “We have almost run out of our ready-to-move-in stock. There’s also unusual demand for ‘jodis’ where joint families and business families want two units together," he added. Macrotech sells under the Lodha brand and will launch two-three premium projects in south-central Mumbai in the next few months, with homes priced at a minimum of ₹5 crore.

Fall, rise again

So why did the luxury market slump before the pandemic?

In short, it was because investors stayed away due to the uncertainties in the property market. At the end of 2019, about ₹1.59 trillion worth of luxury housing stock remained unsold, which was about nearly 34% of the total value of all unsold homes across top residential markets. There were 89,200 unsold luxury units (homes priced at ₹1.5 crore or more) in 2019 compared to 81,290 units in 2018. Luxury was the worst-performing segment across all categories of homes. Then came the stamp duty cuts. After the first lockdown in 2020, the Maharashtra government had in August said it would temporarily reduce stamp duty on housing units from 5% to 2% until 31 December 2020. The stamp duty from 1 January to 31 March 2021 stood at 3%.

In Mumbai, India’s most valuable property market and luxury realty capital, where prices were stagnant for over half a decade, the stamp duty cut signalled a turnaround. South and central Mumbai, the heart of the city’s luxury projects, witnessed a massive jump in terms of unit sales between January and August 2021. The sales recorded during this period were, in fact, more than the full-year sales made each year since 2017, according to a report by real estate intelligence platform CRE Matrix. More than 90% of the housing sales in the region were above ₹2 crore.

Mumbai-based K Raheja Corp. sold more homes in its ultra-luxury project ‘Artesia’ in upscale Worli than what it had managed in the past three years. Homes at the 176-unit project are priced at ₹22-25 crore each. “In Artesia, we will have about 100 families living. That’s because many have bought two or three apartments; some even an entire floor (four apartments)," said Ramesh Ranganathan, chief executive officer-residential business at K Raheja Corp.

The developer’s other project, ‘Vivarea’, which is located in the upscale locality of Mahalaxmi in Mumbai and has apartments priced at ₹12-14 crore, saw good sales too. “We did about ₹1,000-1,200 crore of sales from just these two projects," he added.

Those investing in luxury housing perhaps always had the money. However, many were waiting for a correction in the market. The pandemic and the stamp duty cuts made the fence-sitters active again. Projects that sold well were either ready or nearing completion. Those with occupancy certificate did well too, mainly because they are exempt from the 5% GST (good and services tax) applied to under-construction home. “I was apprehensive of the stamp duty exemption rollback. But the momentum has continued, because people are buying for individual use. In most cases, customers are upgrading, from standalone south Mumbai buildings to modern buildings with amenities. For the first time, 3 BHK (bedroom, hall and kitchen) flats sold better than 2 BHKs. In luxury projects, bedroom sizes are increasing to 180-200 square feet from 140-150 square feet earlier. Master bedrooms can be even bigger because people want the extra space post covid-19," Rangathan added.

Second homes 2.0

Meanwhile, covid-19 triggered another fad: a home away from the hustle and bustle of the city. With work-from-anywhere becoming the new norm, non-metro locations are suddenly in vogue. So are second homes. The price tag ranges between ₹50 lakh and ₹20 crore or above.

Sunteck Realty Ltd, known for its ultra-luxury projects in Mumbai’s Bandra Kurla Complex, has acquired a 110-acre river front land parcel at Pen-Khopoli Road, about an hour-long drive from the city. Here, it plans to sell second home plots and bungalows. “The bungalows will be priced at around ₹4-5 crore, and we will be targeting HNI (high net-worth individual) buyers. This is our first second home project, given the huge demand the segment has seen," Kamal Khetan, chairman and managing director of Sunteck Realty, said.

Developers such as Tata Realty and Infrastructure Ltd (TRIL), DLF Ltd and Isprava are sensing a demand for larger homes (with office space) at higher budgets—in Goa, Kasauli (Himachal Pradesh), Coonoor (Tamil Nadu), Alibaug (Maharashtra) and other ‘away from city’ locations.

“Many developers have built mid-market and affordable homes for long. Given the demand in both second homes and luxury residences after a gap of five-six years, developers now have a chance at repositioning their brand. Most of the second home inventory we sold was ready to move in," said Sanjay Dutt, managing director of TRIL.

Currently, TRIL has a high-end residential project on Hailey Road, Delhi, in its design phase. Not just in India, TRIL is planning to launch three luxury projects in Maldives as well, including a luxury villa project.

Shveta Jain, managing director of residential services at Savills India, a property advisory, held that besides self-usage, second homes generate good rental income and are becoming an investment product. In Goa, second homes can generate 6-9% annual rental yield. “There are two models. One, wherein an operator takes your property on rent and gives you a fixed rental. Second, there can be a revenue sharing arrangement of 70:30 between the owner and operator," Jain said.

Pricing power is back

The big question now: can the momentum in sales sustain? Developers appear hopeful. They also sense an uptick in prices given the demand.

Amit Goyal, chief executive officer at India Sotheby’s International Realty, expects demand to remain robust in the luxury and second homes market, with domestic ultra-rich individuals concentrating more on India. “We are seeing new markets such as Coonoor, Rishikesh (and regions) in and around Shimla, open up with more inventory. There will also be an uptick in prices, which have been stagnant since the past several years," he said.

The sort of discounts developers doled out in recent years to offload stock has started reducing. Sotheby’s recently sold a 5-acre villa property in Goa for ₹90 crore— probably the most expensive transaction in the state.

After dhanteras, Macrotech is planning to increase prices as well. “We are increasing prices now, but buyers are smart. They know limited inventory is available and prices will anyway go up," Prashant Bindal, chief sales officer at Macrotech, said.

Meanwhile, India’s largest developer DLF has seen a quarter-on-quarter rise in sales of its luxury projects, including the super luxury Camellias in Gurugram, where it sells bare shell homes at an average ₹25 crore. “We gave no discounts and played the product game. Super luxury has to be sold on its strength. The inventory is almost ready and 20 odd units are left out of the 429 units. Going forward, we expect more non-resident Indian (NRI)-led sales happening," said Aakash Ohri, executive director at DLF Homes.

Meanwhile, the demographic profile of the investor group is changing, too. “The definition of investors has changed. Today, there are no faceless investors. We saw 30-40 year-olds investing in our independent floors," he added.

Tech entrepreneurs, corporate professionals and non-resident Indians have been driving the demand for luxury apartments and second homes. Now, even the start-up crowd, who earlier believed in rental living, appear to be buying homes. That’s a paradigm shift, some developers held.

If the luxury story sustains over the next several months, it may usher in more elusive investors and NRI buyers.

“The luxury market has matured. Earlier, most developers defined luxury by Italian floors, expensive bathroom fittings. With covid as a trigger, they are now thinking of what the ultra-HNI really wants and are customizing homes accordingly," said TRIL’s Dutt. “There is more focus on technology, intelligent and healthy buildings, with better indoor quality. Buyers want a fine dining restaurant and a banquet hall, among other amenities," he added.

While the Real Estate (Regulation and Development) Act (RERA) has certainly added to the confidence of the homebuyer, not all luxury developers can win even in a scenario of high demand and constrained supply. Market watchers said that trust—developer credibility, on-time project delivery and rational pricing—will continue to play an outsized role in the luxury market. And trust will be the key to avoid yet another slump.