Bespoke realty development
The definition of luxury may differ,but the imperative characteristics of a luxury real-estate remain the location, privacy and the lifestyle amenities. Realty Plus examines the luxury real-estate segment in the country.
The Indian consumer sector has grown at an annual rate of 5.7 per cent between FY2005 to FY 2015. Annual growth in the Indian consumption market is estimated to be 6.7 per cent during FY2015-20 and 7.1 per cent during FY2021-25. According to the Asia Pacific 2016 Wealth Report, by 2025, India is expected to see almost a 105 per cent growth in HNI population. Not surprisingly, the dynamics of real estate are fast changing in keeping with the buyer’s preference for an ecosystem that reflects their aspirations and lifestyle.
The Indian consumer is more aware of international trends and lifestyles. This coupled with more spending power and a dearth of truly luxury offers great scope for growth in the luxury residential segment. Explaining the newfound meaning of a luxury home, Sanjeev Dhingra, Founder and MD of Turtle Group, Goa said,” Moving away from the long held notion of overt and ostentatious elements thrown together without much thought, opulence today is more understated and minimal, directed towards creating unique user experiences.” Offering a different point of view, according to Ashish Purvankara, Managing Director, Puravankara Projects, Bengaluru, luxury is an abused word. “In Bengaluru a half a million dollar apartment is luxury, while in Mumbai it is anything above a million dollar. Prima facie, luxury today is defined by the location, size and most importantly the developer’s brand value.”
Key markets for luxury housing projects
It goes without saying that the budget for luxury properties differs from city to city. Amongst all the major metro cities in India, Mumbai Metropolitan Region (MMR) leads the show with luxury residential market followed by NCR, Bangalore, Chennai, Hyderabad, Kolkata, Ahmedabad and Pune.
Segment-wise break-up of Residential Properties as per QuikrHomes
- Delhi: Gurugram is the major hub of luxury projects. The sought-after destinations are Golf Course, Golf Course Extension roads and upcoming destinations are Sohna Road and New Gurgaon.
- Mumbai: India’s financial capital has been the prime market for luxury houses. It also commands a premium over other metro cities.
- Bengaluru: The city is the hub of India’s information technology industry, whose top management is the main buyer of luxury houses. Areas like Whitefield and North Bengaluru have seen good growth.
All the major metros have recorded a balanced supply in the ultra-luxury segment with exceptions of Bangalore, NCR and Pune.
Source: QuikrHomes Data
Luxury now is not limited to just the very top or the 0.01% of the population. Industry reports estimate that close to 40% of the Indian luxury consumers are living outside of metros. Increase in high disposal income, lifestyle standards and accessibility and availability of luxury brands in the countryhave changed the face of the luxury in India. “Consumer wants to engage with brands that are high on quality and offer bespoke experiences. Luxury is no longer the privilege of the few. There is now a larger consumer base, which has the money to splurge but want a real value proposition,” mentioned SurajMorajkar, Managing Director, Sun Estates, Goa.
So, what defines luxury in India?
Exclusivity and social refinement are the major considerations for the buyers in this segment. This also means that a premium is placed on the signature locations. No wonder, the developers of these properties focus on the occupant’s profile of the projects. Apart from the selective profiling of the buyers, the pricing attribute ensures the desired profile of occupants. While, traditional upmarket location in any city continues to rule the roost, the new luxury locations are being hard-sold by the developers by offering superior amenities and specifications for thenouveau riche to move up the social ladder. Karan Chandrashekar, Managing Director, Karan Property Developments Pvt Ltd, Bengaluru, points out another fact, “People have been monetizing their bungalows and independent houses paving way for luxury developments because maintaining stand-alone bungalows has become very difficult. Most homeowners today prefer the comfort of maintenance that comes with a luxury property development.”
In the recent survey conducted by QuikrHomes, titled Consumer Sentiments Survey H2 2016, a good number of respondents showed inclination towards luxury and ultra-luxury properties. In Bangalore and MMR, nearly 23 per cent respondents wanted to invest in the luxury segment. While in Chennai and NCR, about 12.5 and 10 per cent respondents respectively showed interest for luxury properties. “We feel that while there are more than enough so called ‘luxury’ offering all across the country, they more or less tend to be upper mid-market offerings at best. Hence there is a serious vacuum when it comes to truly bespoke luxury offerings which marry design, fit and finishes in the right way,” commentedDhingra.
Technology has played a huge role in redefining luxury properties. Buyers expect a certain degree of home automation and security features when investing in a luxury home. Houses where residents can control all lights, air-conditioners and curtains using a smartphone or a tablet are the latest fad. Security is enhanced by using a whole buffet of features such as extensive camera networks, external breach detection sensors, gas leak detectors, fingerprint or numbered door locks and entry-activated door phones.These features have also been positive towards conserving energy; for example, sensors in the lobbies can detect an empty corridor and turn off lights when nobody is around. “Smart Homes is a term that’s used a lot in this space. The discerning buyers expect most advanced automation and security features while paying a premium price for a luxury property,” added Chandrashekar.
Developers’ inclination towards luxury properties
Luxury developments have smaller project life cycles and hence been attractive, as compared to the project life cycle of a large residential development with hundreds of apartments. The assets in these developments are monetized a lot quicker due to the smaller inventories and with the kicker of higher returns most developers are investing keenly in building luxury properties. “Luxury segment does not have over supply problems because of the fact that supply is always limited especially in. Tier-I cities.” Clarified Puravankara.
If we consider data in H1 2016, Hyderabad has recorded maximum supply in the luxury segment with 60 per cent, followed by Chennai and NCR with 41 and 44 per cent respectively. It is interesting to note that percentage of luxury projects are about 30 per cent in every city.Hyderabad stands out mainly as the base prices here are low while unit sizes are bigger with higher BHK configurations.In terms of projects, Chennai recorded a massive supply of 29 projects catering to luxury segment, while MMR has seen about 25 projects in this segment in H1 2016.
Source: QuikrHomes Data
Luxury remains the fastest growing segment in residential housing market.While, the real estate sector has been facing a bit of a slump along with the overall economy, the luxury segment has been able to avoid the downturn. Key luxury housing markets have witnessed steady appreciation in prices. Morajkargave the reason, “Luxury home buyers usually devoid taking loans for their purchases, so high interest rates don’t have much impact on the demand in this segment. HNIs usually finance the purchase from their own resources and are more or less ready to pay higher prices for exclusivity.”Apart from the metros, cities like Bangalore, Chandigarh, Gurgaon plus tourist destinations like Goa, parts of Himachal, Kerala etc. especially from the point of view of the second home market are witnessing gradual increase in luxury housing market.
Brand Engagement or Endorsement
Luxury properties are offered by A-grade developers who bring in world famous architects and designers to deliver the signature style houses. This is what sets these properties apart from even the premium ones. Some examples among many include the international luxury brand Versace alliance with the ABIL Group,Purvankara Developers project designed by German architect HadiTeherani, DesignersJade Jagger and Armani partnership with Lodha Group and Sun Estates engagement of renowned architects BLINK Design Group (Singapore), David Ruff of Design Laboratories (New York), Robert Patzschke of PATZSCHKE Architecture & Urban Design (Berlin) and Lars Thomsen from Denmark.
Purvankara elaborates on the differentiation between Brand engagement and endorsement, “Branded residences are of two types. The first type is where the brand is involved deeply in design and execution of the project. These brands could be hospitality brand or a designer brand for which real estate is an extension. For example: Armani is a brand which makes suits and accessories and for them real estate is just an extension. In hospitality, it’s Leela which possess hotels and shows same involvement towards residential housing and designing.Second type is very loose in concept and is more like licensing a brand. For example a small developer may pay a huge amount of money to celebrities to use their name for their project.”
Concurs Dhingra, “There is a serious difference between a project which draws value from a celebrity by way of their design inputs or specialization and a project which has a famous face just there for the ‘sticker value’. In the case of Turtle Villas Sussanne Khan by way of her expertise and experience in interior and furniture design is more like a partner who is adding value to the overall package than merely providing us with just an endorsement.”
Morajkarpromulgates a new concept, “A house that pays for itselfis a concept which already exists abroad. As the overall room requirements are increasing year after year in tourist destinations like Goa and there is also a rise in demand for serviced apartments vis-a-vis hotel rooms, it plays out perfectly for this concept to work.”
Significant Trends across Cities in H1 2016
There is a very good distribution of luxury and ultra-luxury projects in MMR (18:13), Hyderabad (3:2) and Chennai (19:12).
Bangalore – In Bangalore, out of the total new luxury supply in H1 2016, nearly 44 per cent new projects were located in North Bangalore, followed by 33 and 17 per cent each in South and East respectively, while remaining 6 per cent in the western part of the city.
Great connectivity via Outer Ring Road coupled with the presence of International Airport has turned North Bangalore into a haven for premium properties. Moreover, there is ample availability of land at relatively lower prices along with several infrastructure upgrades in the pipeline. Hence, the sizes of the units were essentially seen to be very large.
NCR –In NCR, the millennium city (Gurugram) tops the ladder in terms of luxury projects, followed by Noida which has lately become the hotspot for premium segment.
Hyderabad – Markets scattered in the western part of the city dominated the luxury spectrum with whopping 80 per cent luxury projects in West Hyderabad, followed by 20 per cent in North Hyderabad. IT/ITeS sector has been a strong development magnet turning the Cyberabad region into a gold mine for premium luxury market.
Kolkata – South Kolkata clearly surpasses other regions in terms of supply in the luxury segment with 86 per cent. Development of New Town coupled with enhanced connectivity to the International Airport and the growth of IT industry has given a major boost to localities in the southern part of the city. Remaining 14 per cent projects were scattered in the localities of West Kolkata.
Chennai – As expected, South Chennai recorded maximum supply (48%) in the luxury segment. The IT Corridor of the city, ie, OMR and the beach-facing stretch of ECR has transformed into a haven for luxury properties and weekend homes.West Chennai also recorded healthy supply with 38 per cent, followed by the central parts of the city with mere 14 per cent.
MMR – In MMR, the western suburbs saw maximum new supply (28%) in the premium segment along with Mumbai South (28%), followed by Thane West and Mumbai Central Suburbs with 20 and 8 per cent respectively. Navi Mumbai and Mumbai Central recorded mere 4 and 8 per cent new supply each in this segment.
Pune – Demand from the IT/ITeS sector has led to the transformation of western and northern regions into premium destinations that recorded luxury supply of 40 per cent each. Eastern and Southern parts of the city recorded 10 per cent supply each in the luxury segment.
Limitations and the Potential of luxury living spaces
It is estimated that over the next 15 years, there will be a need for 1.5 million luxury homes in India. The Indian millionaires and billionaires look to invest in luxury homes, both for themselves and for their children thereby increasing the numbers. But one of the challenges according to Chandrashekar is that when it comes to delivering thecore elements of luxury i.e. quality and finish, developers are faced with the shortage of skilled labour to execute and deliver that quality.
Location forms the crux of most luxury projects. Typically, end-users pay a premium for the location alone, with the remaining cost merely reflecting aspirational lifestyle add-ons.The non-availability of the land with a surge in demand has resulted in a sharp rise in prices. “Goa as a second home market is gaining popularity and steady economic growth will fuel steady demand. Appreciation of properties is at an all-time high compared to previous years. Though, the shortage of good land parcels has restricted developers to expand their luxury homes offering in all cities, we believe luxury housing growth in India will outpace GDP growth by two times in the near future,” said Morajkar.
Some developers find it difficult to gauge the target market and offer a product which would cater best to their current and foreseeable needs, thereby failing to excite the buyers. Dhingra offering the final words said, “Given the seriousness of buyers of luxury residences, we feel that this space is fast maturing and would be a specialist area for developers. This will also help separate companies who can actually deliver such projects to the right specification from others who may just be riding a wave without actually offering much more than luxury which is only skin deep.”