Low returns in traditional investment vehicles such as gold, fixed deposits and the stock market lead luxury investors to look to the luxury real estate market.
Although the Coronavirus pandemic has slowed down the investment flow of the high net worth a bit, the reopening of the real estate markets has led to increased interest from the very wealthy in the real estate sector. According to a recent survey, HNIs and the ultra-wealthy investors are very enthusiastic about investing in the real estate market, especially in the real estate segment above Rs 5 crore.
Taking the period of the Coronavirus crisis into account, the wealthy investor class invested in luxury real estate mainly for personal use and not for valuation/ROI purposes. Due to the uncertain times, it was logical not to experiment.
However, the ultra-wealthy are once again optimistic about investment in luxury real estate with the economy gradually opening up. Taking the metro cities of Delhi and Mumbai as examples, 2021 saw multiple real estate deals worth over 100 crore. As the national capital, Delhi has remained the favorite of the uber-wealthy. Multiple deals up to Rs 1000 crore were registered in the capital in the year 2021. Areas such as the Lutyens zone, Vasant Vihar and South Delhi continued to be the popular real estate destinations. Experts believe the trend will remain the same for the next year.
The commercial capital of Mumbai is equally favored by the ultra-wealthy. In this case, the short-term stamp duty exemption announced in the wake of the Coronavirus crisis played a huge catalyst for the high-end real estate transactions. The High Net Worth Individuals (HNIs) took the opportunity and saved a significant amount of stamp duty.
Experts believe that the high-quality investors who are continuously looking for high-end properties only go for branded and established developers with a proven track record. Logical, because the investors don’t want to get into trouble because of the procedural mistakes on the part of the developers.
One segment of High Net Worth Individuals (HNIs) that has contributed significantly to the growth of the luxury market is the Non-Resident Indians (NRIs). Although the pace of investment from the expatriate community slowed during the pandemic period, NRAs were as eager as ever to invest in high-quality properties from the established markets. Moreover, the declining value of the rupee is a blessing in disguise for the NRA investors as they can buy high-quality properties with relatively less investment.
It has been noted that NRAs also prefer to invest in large plots on the outskirts of metro cities. Peripheries of cities like Delhi, Gurgaon, Noida, Pune and Bangalore have seen many such investments in the recent past.
In addition, one of the key trends observed in the luxury real estate market is investors’ affinity with the commercial segment. The metro cities are buzzing with commercial showrooms and office spaces in the more expensive locations. Due to the slowdown caused by the Coronavirus pandemic, the price range was not that high and luxury investors did not hesitate to take advantage of such opportunities.
Experts believe that due to the supply chain problems caused by the pandemic, the supply of high-end luxury properties could take a while before the market bounces back and the witch-keepers are no longer ready to wait.
The luxury market investors are reaping the benefits of low interest rates and are using loans to invest in high-value real estate. Low returns in traditional investment vehicles such as gold, fixed deposits and the stock market are leading luxury investors to focus on the luxury real estate market.
One trend that will dominate the luxury market is the preference for turnkey homes. The luxury investors are wary of believing in real estate under construction promises and want immediate ownership.
In summary, as the real estate market rebounds and is positive about a robust recovery in the year 2022-23, the luxury real estate market will naturally pick up and contribute to the overall real estate recovery cycle.
(By Suren Goel, Partner, RPS Group)
This post Luxury real estate market sees robust growth in 2022-23: should you invest? was original published at “https://www.financialexpress.com/money/luxury-real-estate-market-to-see-robust-growth-in-2022-23-should-you-invest/2463694/”