Luxury Housing As Investment In India by Mr. Santhosh Kumar, JLL India

 Luxury & ultra-luxury residential projects have witnessed 10 fold appreciation over their launch prices over the last decade

 Implying more than 100 % annual returns on investment.

 Price points for luxury homes in the prime locations of Mumbai range from Rs. 25,000 per square feet to Rs.  1,10,000 per square feet

 Luxury housing in the prime areas of South & Central Delhi range from Rs. 15,000 per square feet to Rs.  65,000 per square feet.

 In the prime areas of Gurgaon, they range from Rs. 7,500 per square feet to  Rs. 30,000 per square feet.

In India’s largest cities namely Mumbai, Delhi -  NCR and Bangalore – luxury & ultra-luxury residential projects have witnessed 10 fold appreciation over their launch prices over the last decade, implying more than 100 % annual returns on investment.

Many of these projects saw encouraging pre-sale activity & were sold out completely very quickly.

In fact, demand for luxury and ultra-luxury housing in cities such as Gurgaon has always outpaced supply, which has encouraged developers to increasingly shift their focus on this segment.

Why Luxury Works For Developers?

Because of the tendency of ultra luxury projects to garner extremely good pre-sale volumes, their developers / promoters are generally able to secure significant fund flows to capitalize the completion of their projects.

Luxury & ultra-luxury projects yield much higher returns to developers than projects geared towards the affordable & mid-income segments.

Santhosh Kumar JLL India.

While it is equally true that the input costs for luxury homes are also much higher, the developer / promoter stands to benefit from the increased visibility of his / her brand among highly affluent, top-end clients. This means that the developer can uniquely position himself on the basis of quality luxury projects.

This increased visibility & the credibility attached to a reputation for superior construction is automatically attributed to all projects by such a developer / promoter. In other words, even mid-income housing projects that he launches benefit, and will invariably see higher sales than comparable projects by developers / promoters who have not ventured into luxury housing.

That said, there is considerable responsibility on a developer / promoter of luxury homes. He / she must mandatorily be able to introduce features which compare with or surpass those in other luxury projects on the market.

Buyers for such projects have very high expectations and want their homes to offer as well as reflect a high lifestyle quotient. There is very little tolerance for flaws in design, construction & amenities. Thus, a botched luxury project can have significant negative repercussions on the developer’s credibility and future success.

Luxury Housing As Investment..!

The ultra-luxury housing segment is comparatively recession proof. 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 is able to self-finance their investments through their saved earnings.

Recession might take a toll on the response generated and time taken in project selling out completely at the targeted price points; however, the quantum of impact that luxury projects face in times of economic uncertainty is significantly lower when compared to residential projects aimed at other categories.

India’s Hottest Cities For Luxury Housing Investment..!

Mumbai..!

As the India’s financial capital, Mumbai still stands alone as the costliest Indian city in terms of real estate pricing. This phenomenon applies equally to all categories of housing. But is especially true for luxury housings. The Mumbai city has limited land parcels left within the prime centre locations; this has direct implications on the cost of land acquisition, and therefore on the pricing of the end product.

Also, most luxury housing in these areas can not offer the kind of ambient surroundings usually associated with such projects. It is not un-common to find a project with units priced at few crore rupees overlooking a slum.

Nevertheless, this unique variable has not subdued the appetite for luxury home. Mumbai is home to the headquarters of the largest financial institutions as well as of multi - national corporates (MNCs), and the incomes earned at the highest levels are staggering.

This naturally gives rise to very high aspirations when it comes to housing the city’s super-rich, who are willing to pay for the privilege of a penthouse or designer luxury apartment in areas such as Prabhadevi, Lower Parel & Bandra Kurla Complex.

Price points for luxury homesin the prime locations of Mumbai range from Rs. 25,000 per square feet to Rs.  1.10,000 per square feet.

Delhi -  NCR..!

Apart from South Delhi, Gurgaon remains a hot market for the super luxury housing segment as it has a generous complement of buyers with high financial clout & therefore aspirations to own such homes. Gurgaon is home to a considerable number of HNIs who account for a lot of demand for any project launched in this category.

With Gurgaon having successfully positioned itself among leading MNCs as the most prime and desirable business destination in North India, the saturation of affluent CXO level individuals in this city is high.

In addition, Gurgaon is the destination of choice for investors with large investment appetite because of the handsome returns they can expect for luxury housing. For these reasons, all luxury projects in Gurgaon so far have done extremely well.

Price points for luxury housing in the prime areas of South & Central Delhi range from Rs. 15,000 per square feet to Rs.  65,000square feet. In the prime areas of Gurgaon, they range from Rs. 7,500 per square feet to  Rs. 30,000 per square feet.

Bangalore..!

As the undisputed Silicon Valley of India, Bangalore has reaped the highest benefits of the country’s IT / ITeS boom. The housing market in Bangalore has not seen major setbacks even during the worst of the real estate market slowdown.

With a stupendously high saturation of highly educated and qualified IT professionals, it has for the longest time been the city of choice for most outsourcing of software development &  IT enabled business processes.

Moreover, unlike Mumbai, Bangalore is a growing market in terms of geography, meaning that it still has considerable land parcels which can be added to the real estate map.

With many software parks having come up in its peripheral rather than central locations, new catchments for all types of luxury homes have been and are still being created.

Meanwhile, the incomes of the highest paid IT professionals as well as corporate head honchos in Bangalore are more than eminently suited for luxury housing. This is a city where the growth of the luxury and super luxury residential segment is likely to continue unabated for many years to come.

Price points for luxury housing in the prime areas of Bangalore range from Rs. 20,000 per square feet to Rs. 30,000 per square feet.

Note: Price points for individual luxury projects & units on the re- sale market may be higher than indicated above, depending on the dynamics of the location & the luxury components provided.

About the Author..!

Mr. Santhosh Kumar is CEO (Operations) at Jones Lang LaSalle India (JLL India)

Santhosh Kumar

CEO – Operations

+91 124 460 5000

santhosh.kumar@ap.jll.com

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