Luxury Housing Back on Track with NRI Investors
Authored by Jacob, CEO - GCC (Middle East) ANAROCK Property Consultants
The Indian luxury property market may not have been very attractive to the resident Indians in the recent past - but it scores high with the NRIs due to their greater buying power. Multiple factors draw the attention of NRIs towards this segment. For one, it promises a high standard of living to them if they chose to return to their country of origin.
Also, the rentals can be decent if the property is located in a prominent employment hub. This segment has also not seen the kind of huge unsold inventory that was witnessed in mid-income housing, largely because builders consciously restricted new supply in this segment over the last couple of years.
As per recent research by ANAROCK Property Consultants, the overall unsold inventory of luxury homes (priced Rs 1.5 crore – Rs 2.5 crore) declined by 12% to 42,650 units in Q1 2019 from 48,300 units in Q1 2018. Bangalore led from the front, recording a significant 49% reduction in unsold luxury stock within a year – from 6,370 units in Q1 2018 to 3,260 units in Q1 2019. Bangalore was followed by Kolkata with a 37% decline in unsold luxury stock, and NCR & MMR each witnessing 7% yearly decline.
Concurrently, unsold stock in the affordable segment saw an increase of nearly 3% as maximum new launches catered to this segment during the period.
Luxury real estate hotspots in key Indian cities
One major feature distinguishing luxury and ultra-luxury properties between various cities is its price range. For instance, properties priced greater than INR 1.5 crore are considered ultra-luxury in Bangalore while in Mumbai properties priced above INR 4 crore fall into this category.
Some prominent luxury markets in the top cities:
With the resurgence of the Indian economy and the ongoing construction activity in this segment, there has been a concurrent rise in both end-user and investor demand for luxury real estate. ANAROCK Research states that the returns on investment for luxury and ultra-luxury homes is around 3-5% and 2-3% respectively.
Investment Rationale
Historically, NRIs typically bought luxury homes either for good ROI or for their self-use. After a prolonged wait-and-watch period post the recent reformatory changes in the Indian real estate market, the trend is now decidedly skewed towards personal use. As always, they have an eye open for attractive capital appreciation - luxury properties have an edge as the incremental value is higher than affordable or mid-segment properties if prices appreciate.
This may not look handsome at the moment, but HNIs and UHNIs are nevertheless refocusing on this segment for three reasons – NRIs’ predilection towards an aspirational lifestyle, the potential for better returns when market rebound meets restricted supply in luxury areas, and the fact that price points of most luxury properties are at their lowest, with developers additionally offering lucrative deals.
The most convincing incentives for NRIs to invest in luxury and ultra-luxury properties are:
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