Luxury Real Estate Market to Boom in 2022-23. Should You Invest?

Although the Coronavirus pandemic has slowed down the investment spree of the High-Net-Worth Individuals a bit, the reopening of the property markets has led to an increased interest of the uber-rich in the real estate sector. According to a recent survey, the HNIs and the ultra-rich investors are very keen on investing in the property market, especially in the properties segment of over Rs 5 crore.

If the Coronavirus crisis period is considered, the rich investor class was investing in the luxury real estate mostly for personal use and not for appreciation/ROI purposes. Owing to the uncertain times, it made sense not to experiment.

However, the ultra-rich is again bullish on the investment in luxury properties with the gradual opening up of the economy. If the metro cities of Delhi and Mumbai are taken as samples, the year 2021 saw multiple property deals worth over 100 crores. Being the national capital, Delhi has remained the hot favourite of the uber-rich. Multiple deals of up to Rs 1000 crore were registered in the capital in the year 2021. Areas such as Lutyens’ zone, Vasant Vihar and South Delhi remained the hot real estate destinations. The experts believe that trend will remain the same in the upcoming year.

The commercial capital of Mumbai is equally preferred by the ultra-rich. In this case, the short term stamp duty waiver announced in the wake of the Coronavirus crisis played a huge catalyst for the high-end property transactions. The High Net Worth Individuals (HNIs) made use of the occasion and saved a significant amount in stamp duty charges.

Experts are of the opinion that the high-value investors who are continuously on the lookout for high-end properties go for only branded and established developers with a proven track record. It makes sense as the investors do not want to run into any trouble due to the procedural flaws from the developers’ side.

One segment of High Net Worth Individuals (HNIs) which contributed significantly to the luxury market’s growth is the Non-Resident Indians (NRIs). Although the pace of investment from the ex-pat community slowed down during the pandemic period, the NRIs were as keen as always to invest in high-value properties of the established markets. Moreover, the falling rupee value is a blessing in disguise for the NRI investors as they can buy high-end properties with comparatively lesser investment.

It has been observed that the NRIs are also preferring to invest in large land parcels on the outskirts of the metro cities. Peripheries of cities like Delhi, Gurgaon, Noida, Pune and Bangalore have seen many such investments in the recent past.

In addition to this, one of the key trends observed in the luxury property market is the investors' affinity towards the commercial segment. The metro cities are abuzz with commercial showrooms and office spaces in the upmarket locations. Owing to the Coronavirus pandemic induced slowdown, the prices range was not that high and luxury investors did not hesitate in cashing in on such opportunities.

Experts believe that owing to the supply chain issues due to the pandemic, the supply of high-end luxury properties might take a bit to pick up but the market is resurgent and the fence-sitters are no longer ready to wait.

The luxury market investors are reaping the benefits of low-interest rates and availing loans to invest in properties of high value. Low returns in traditional investment instruments such as Gold, Fixed Deposits and Equity market is leading luxury investors to look towards the luxury real estate market.

One trend that will rule the luxury market is the preference for ready-to-move-in properties. The luxury investors are wary of believing in promises of under-construction properties and want immediate possession.

In summation, as the real estate market is resurgent and positive of a robust recovery in the year 2022-23, the luxury real estate market will naturally pick up and aid in the overall real estate recovery cycle. - Authored by Mr. Suren Goel, Partner, RPS Group.