Among the cities with the largest market share of new launches in the luxury& ultra-luxury housing, NCR tops the list. Deepshikha Singh gives the sense of this market and its distinct characteristics.
As per a KPMG report, “Luxury is the fastest growing segment in residential housing. Between 2008 and 2012 about 182 luxury projects housing 25,570 units with a value of $30 billion were launched in top seven cities. Many were absorbed, fuelled by strong growth in the number of high net worth individuals. As Rajeeb Dash, AVP Sales & Marketing Tata Housing said, “With hundreds of MNCs, best of schools, b-schools, professional colleges, Gurugramis emerging as a millennial city and is one of the leading business destinations. The presence of Ultra HNI’s and HNI’s has fuelled the demand for luxury housing segment as infrastructure in the city is improving rapidly resulting in the city’s swift growth in real estate.”
What defines luxury?
The luxury housing is not just defined by the size of the home, but by all the facilities and technical finesse added to it. Luxury properties offer custom designs, opulent finishes and attention to details. “The utmost consideration for a developer is to conceptualize these dwellings such, that the customer feels great pride in owning such homes. For instance, our project of 60 exclusive residences at King’s court in W Block, G.K-II, South Delhi will be approximately 7300sqfton a single floor overlooking the 430 acres of Jahapanah forest. Due to its sheer size and the view of greenery in the heart of the national capital, the product due to its rarity can be termed as a luxury project,” stated Dr. Ananta Singh Raghuvanshi, Executive Director- Sales & Marketing, DLF Universal Ltd.
Ultra-luxury residences offer a higher quality of life and exquisite amenities, coupled with hassle free possession and comprehensive after sale support for installations, for example, the penthouses or Sky-villas with private elevators, terrace gardens, sky lounges and helipads etc. With 85000 UHNIs investing about 40 percent of their investment dealings in real estate, Indian luxury housing is sure to be the bandwagon for a long time to come.
Key features
The high net worth customers prefer homes rich in wellness features to cope up with the fast paced life. Gyms, jogging tracks, steam rooms, saunas, and game rooms are features that are increasingly incorporated in ultra-luxury residences. Integrated Golf course, high end club house and house-keeping services are the bench marks of a truly luxurious housing project. Environment management to support a healthy lifestyle along with large green belts surrounding the area and the latest in technology to ensure proper building management, smart parking solutions and security are some of the must have features for any ultra-luxury residence.
From smart fittings that have embedded sensors capable of communicating with a control hub to security gadgets like password enabled locks that are capable of communicating with each other and with a central control panel make these a smart home. Cloud computing and smartphone technology further enables remote access and control of the smart fittings such as light fixtures, air-conditioners, entertainment systems, curtains and even connected kitchen appliances. The embedded sensors can even be programmed to detect human presence in a room and switch the lights on or off as required.
Developer’s inclination towards luxury properties
It is the dream of every developer to have a luxury residential project under their portfolio. A successful well conceptualized luxury segment project can very well raise the profile of a developer a notch higher. There is a steady and rising demand for luxury projects mostly from the newly rich Indians as also from NRI’s returning to India looking for the same level of comfort and amenities they have got used to. Corporate heads of multi-national companies and expat CEO’s of these MNC’s form a part of the demand for such projects.
In addition, the credibility of the developer and quality of the product are the two prime considerations for buyers. Due to limited availability in prime locations of main cities, these projects tend to give superior returns even when demand is not very good. In a given location, luxury properties offered by reputed and trusted developers tend to appreciate more. According to Aman Singh Gehlot, Director, Ambience Group, “Developers often shy away from developing a luxury project on account of the small market for it and risk of unsold inventory. Thus luxury projects form a minuscule part of the residential projects undertaken at any given point of time.”
Indeed, the demand for luxury properties in key luxury housing markets has witnessed steady appreciation in prices over the last few quarters. The growth in luxury segment in Gurgaon is around 20-25%. Amarjit Bakshi, Managing Director, Central Park explained the reasons, “The luxury home buyers want to live in homes that announces their arrival, have a similar profile of neighbours and which offers a higher lifestyle rather than just a postal address. Given the fact that luxury homes are always in demand even in the secondary market, HNIs see them as the perfect investment opportunity that guarantees multiplied returns in the future.”
Luxury and ultra-luxury projects yield much higher returns to developers than projects geared towards the affordable and mid-income segments. While the input costs for luxury housing are also much higher, the developer stands to benefit from the increased visibility of his brand among highly affluent, top-end clients. Moreover, with the tendency of ultra-luxury projects to garner good pre-sale volumes, the developers are generally able to secure significant fund flows to capitalize the completion of their projects. However, a botched luxury project in terms of design, construction and amenities can have significant negative repercussions on the developer’s credibility and future success. Elaborating on the same, Bakshi said, “This segment is immune to economic uncertainties but any HNI customer, before making any investment, does a detailed study of the profile and capability of the developer. One of the reasons, in Delhi NCR market, there are a very few developers who are capable of developing ultra-luxury projects.”
Designed/Endorsed projects
In a bid to boost the value of their properties, the developers tie up with international luxury hospitality/ lifestyle brands or with celebrities/famous personalities and offer a unique preposition to the Indian home buyers.. The target buyers for this segment belong to India’s super-rich section that either identify with that particular designer’s style or prefer homes managed by international hospitality brands. “Endorsed by celebrities these projects exude an elite approach. Likewise, the association of international architectural firms is a tag of global standards that encourages a rich globally travelled buyer for an investment,” said Pawan Jasuja, Director, Finlace Consulting.
Industry experts believes that branded homes are quickly gaining prominence in India for the simple reason that they are helping developers differentiate their offerings in a crowded market and are also adding the elements of trust and quality to the sector. Dr. Raghuvanshi cautions, “Advertising campaigns which are endorsed by celebrities for properties which are not homes to these celebrities are purely an eye wash. And may or may not have the desired impact especially in large cities where awareness is very high. Marketing has to be backed by hard facts and genuine testimonials.”
Challenges
Like most other things for sale, development of luxury residential projects is hugely demand driven. Owing to cost considerations, there is a limited supply of luxury homes in the market. The cost of developing a luxury residential project is also substantially much higher and the slower turnaround time compared to normal residential projects makes it financially hard for most developers to invest in a luxury projects. As Navin M. Raheja CMD, Raheja Developers puts it, “The challenges that all developers face are industry-specific, shortage of skilled manpower, need for more deployment of technology in real estate construction, etc. Apart from this, the kind of materials that builders need to make these luxury homes is not easily available in the country. In addition, there is a need for bringing in latest technological innovations that is the specialty of some foreign companies.”
Though, developers have been hooked on to luxury housing projects, the execution and making of a top quality product for HNI buyers is a difficult task faced by most developers in India. Also, there is a challenge to get adequate land parcels in good locations. The credit availability is the major issue faced by many developers as they are not able to raise fund to build the project. Prashant Tiwari, Chairman, Prateek Group concured, “Credit availability is a major issue for developers. Then non-availability of good land banks also restricts developers to rethink their strategy on luxury homes.”
The luxury element typically thrives in a feel-good market, when the financial environment too is performing well. Bakshi added, “At present, the luxury residential market in India is going through a phase of slow demand and low sales velocity. Given the premium charged, buyers take longer to complete transactions. In addition, HNIs have become skeptical of the capital market due to economic instabilities across the globe and this in turn has forced them to turn towards the real estate sector where growth is demand-driven and not based on speculation. This segment will work when the real estate cycle shows an upward curve, while enabling it with a differentiation for the end-user which is difficult in the sector.”
Prospects for Delhi-NCR luxury housing
In Delhi, the luxury segment does not operate along the lines of traditional housing construction cycle, where there is a perceptible price difference between the pre-launch to the near-completion stage of a property. In case of a luxury property, from the inception to the completion of the project, there is just about a negligible price escalation. In the present market scenario, where there is a significant amount of inventory in almost all housing segments, luxury projects can only hope for interested buyers at the completion and near-completion stages, where the home buyer is assured of a premium product.
However, the luxury and ultra-luxury segment is expected to grow with the increasing earning capacities of people and the awareness for superior and healthy lifestyles. The demand will also continue on account of favourable office space absorption and Delhi-NCR’s position as the preferred residential destination for upper levels of management across various corporations. Concluding on a positive note, Bakshi said, “We expect the luxury segment to gain some momentum in the long term, when prices are likely to rise again. The sector will pick-up in the next quarter or two, with green shoots of revival becoming visible in the economy.”