Indian Residential Luxury Realty

1 Introduction
Luxury real estate identifies itself with the assets owned and aspired by a select user group
comprising of the billionaires, High and Ultra high net worth individuals (HNIs and UHNWI). Luxury
residential is defined as a property owned by UHNW individuals1, as long as this property is worth
more than US$1,000,000 (Report, 2015). Luxury prices range from $1 million to $ 10 million, with an
average starting price worldwide as $2.2 million (Sofo, 2016). The top Luxury residential real estate
price in 2015 ranged between US$ 50 Million to US$ 194 million in 2015, with going as high as US$
700 million in 2016 ( (Sofo, 2016). This asset class predominantly spatially concentrates in the 21st
century ‘Global cities’ of developed economies, like London, Hong Kong, New York, Los Angeles,
Singapore, Sydney, Miami, San Francisco, Paris, and Toronto to name the pioneers (refer reports by
Knight Frank, Wealth – X, Forbes, and many more). Buying decisions of luxury housing depend on
‘Liveability’ standards and ‘living standards’ offered by property locations. Moreover, buying decisions
by UHNWI are made on the bases of emotional value too, other than business value. Apparently, other
than financial and economic hubs and city cores, we have pristine, scenic and many a times small
towns with high tourism potentials as promising locations across the globe. Though, luxury prefers to
cluster spatially, yet the idea of a second home remains to be a private, isolated abode of a few. UHNW
individuals across the globe own, on average, 2.7 properties each. Typically UHNW individuals hold
their primary properties 15 years and their secondary properties 10 years (Report, 2015). They are
increasingly holding properties outside their home countries and the secondary residence on an
average are 45% more valuable and twice as large. Consequently, as illustrated in the following table,
we find ‘jet-set’ destinations and weekender locations with higher starting prices ranking only after
the global economic hubs.

Location Starting price for a luxury home in US$ (millions)

Global economic hub 3.6
Metropolitan 1.1
Suburbs 1.8
Lifestyle and regional resort 1.5
Jet set destination 2.3
Weekender 2.2
Source: (Shirley, 2016)

There are several Luxury Residential real estate indexes designed to measure their markets. Most of
them typically assess markets on the rise in the number of houses owned by the UNHW population.
These indexes are aggregated data assessment of properties in cities selected on the bases of the
rising number of UHNW population. They directly co-relate the total sale of these properties to the
market worth, without normalizing pricing to local market contexts. Thus, the understanding of
‘luxury’ is largely remaining confined to mapping the preferences of this select group and analysing
their changing attitude towards property, investment and spending pattern and situate them
geographically on the globe. The appreciation is not of the property but the reasons why it could
attract this unique end user.

1
Ultra high net worth individuals (UHNWI) are people with investable assets of at least $30 million, excluding personal assets and property
such as a primary residence, collectibles and consumer durables. UHNWIs comprise the richest people in the world and control a
disproportionate amount of global wealth.
2 Defining luxury:
Luxury is contextual wherein the user should not be the context, but it’s spatial and market embed,
its uniqueness and property attributes should create its wealth. Prices of prime properties are set by
location, features, size, rarity, and provenance. Luxury residential property is a prestige property.
Luxury has ever since been associated with Desire and not need. It is elegance with aesthetical
superiority. Luxury correlates to the art of designing beautiful and comfortable. But, its appreciation
has long been undermined in valuing luxury, in the blind race of allotting more square footage to the
properties. Often understood as being ‘rare’ and ‘few’, the concept of limited addition and unique
with no two similar copies is central to the idea of luxury. So much so, that often bungalows are given
individual decorative and descriptive names. Of late, Luxury housing is being forecasted as
synonymous to amenities, services and a new definition of luxury as ‘smart homes’ equipped with
latest technology has come up in suburban areas. As well as in some locations that may be closer to
an urban landmark. In this era of internet of things, automation is slowly reaching all, and is no more
a rarity. Thus, the concept of smart homes has scaled itself to becoming 5 star serviced luxury
apartments/condos. Another format of luxury is termed as destination property, associated with the
purpose of leisure, recreation, holiday or business tourism.

2.1 The Luxury Matrix:

The following table below highlights the luxury properties and their attributes:

Unit Size Amenities and support Design Intangible Appreciation

Location
infrastructure additions/Art
City core/CBD Medium Marginal and High High High
dependent on city
provisions
Sub-urban Large Limited but self- High High Low
contained
Destination/resort Large Fully self-contained High High Low
housing

Common attributes that do not vary with location are

 Price
 Design and appreciation of art
 Limited supply
 Connectivity

Any property qualifying to be a luxury property shall invariably have a high pricing, superior
architectural design and affluent interiors embellished with art pieces. Such properties are low density
developments with a limited supply. Presence or absence of local or regional connectivity does not
affect the saleability of such property. Private jets and copters are a prevalent mode of transport.

3 Opportunities for Indian markets

Indian landscapes in the last couple of decades have attracted healthy real estate estimated
to contribute about 13% to the GDP by 2028, with presently housing alone contributing about 6% of
the GDP already. India is slowly climbing the ladder up the scale of ‘ease of doing business’ index. The
economic environment for foreign direct investments are more robust. The latest regulatory reforms
like RERA (Real Estate Regulatory Act 2016), Land Acquisition and Rehabilitation and Resettlement Act
2013 and the enactment of GST are setting the stage for a more transparent and healthy market.
On the globe, we have a limited 1, 87,468 UHNWIs (Shirley, 2016), this no. has been rising and is
expected to grow to be around 1, 63,483 by 2025. Out of these, it is estimated that India would
account for 5 per cent of the total UHNWI population. Simultaneously, Indians are estimated to
comprise 6 per cent of the billionaire population across the world by 2025. These HNIs on an average
own four properties each. The spatial distribution of these billionaires (as illustrated in the following
map) is a definite opportunity to Indian Real estate markets. Especially in a consistent economy with
a GDP annual growth rate of 7.3%. Creation of Luxury realty is highly dependent on the availability of
world class physical infrastructure. UHNW population spending decisions are also triggered by access
to world class education institutions. Also, the prestige related to ‘the bigger the better’ plays its role.
Design, architecture and construction techniques, have a huge bearing on creation of luxury. With
population densities peaking up to 29650 persons per sq.km (Mumbai) and deficiently serviced
suburban areas of our metropolitan cities, the question we may ask is if our Indian city scape is ready
for Luxury residential realty. More importantly, how exciting are our Land development models and
do they at all support suburban growth? Alongside luxury realty markets being dependent on NRI
investment, there is an increasing number of Indians investing and residing in luxury real estate.

Legend: Total US$ billionaires by country, 2015

No data or 0 11-50 501+
1-5 51-100
6-10 101-500
Source: Accessed from https://upload.wikimedia.org/wikipedia/commons/1/13/Billionaires_%282015%29.png

6% of the world’s UHNW population is made up of expatriates (Report, 2015). Fortunately,

the Indian 30.8 million2 NRI population (2016) is spatially spread across the globe (refer map below)
with descent numbers in world’ most progressive economies. India's diaspora population is the largest
in the world with 16 million people from India living outside their country in 20153. There are 17
million persons of Indian origin abroad and 30.8 million overseas Indians in 2016. These 17 million
people have average household incomes 76% higher than the USA average4.

2
Accessed at http://mea.gov.in/images/attach/NRIs-and-PIOs_1.pdf
3 Source: http://economictimes.indiatimes.com/nri/nris-in-news/india-has-largest-diaspora-population-in-world-un-
report/articleshow/50572565.cms
4
Source: http://greaterpacificcapital.com/march-2013/
Source: http://greaterpacificcapital.com/wp-content/uploads/2013/03/March-Sign-Pic-1.gif

Luxury property spending patterns of NRIs are largely noticed to be located in India. It is generally
believed to be either an investment decision, a retirement plan or an emotional/sentimental value
playing reasons behind such spending patterns. Mumbai has been reported to be the favourite NRI
destination for luxury residential real estate. After Mumbai, Bengaluru is expected to be the most
favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa,
Delhi and Dehradun (IBEF, 2016). Along with being favourite luxury realty destinations, these cities
are also the spatial concentration nodes of the Indian UHNWIs. Currently, with 1,094 UHNWIs (Ultra
High Net worth Individuals), Mumbai leads in India followed by Delhi with 545. The next decade will
see Mumbai increase to 2243 and Delhi to 1128 UHNWIs5. Besides Delhi, Mumbai, Chennai and
Kolkata; non-metro cities such as Bengaluru, Ahmedabad, Pune, Hyderabad, Nagpur, and Ludhiana
contribute 45% to the Indian ultra-HNI population, where we see a lot of projects launched in the
‘luxury’ segment. In addition to all the above opportunities, a new trend in residential real estate
indicates spending in a leisure area that is heavily oriented towards tourism (Sotheby’s report 2015)
Destination luxury homes thus are a more possible strategy, especially when tourism based
destination homes are expected to gain traction. With government initiatives like HRIDAY and AMRUT,
we look forward to heritage (tangible and intangible) becoming the ‘value trigger’ to the Luxury
residential real estate.

The Indian Luxury residential markets have opened up (see the table below with reference projects).
Sotheby’s alone lists over 70 properties pan India. One needs to carefully understand the typical
features that constitute luxury in India. Luxury in India begins with gated eco-friendly Green
communities, equipped with high security systems and secluded staff quarters. Amenities may include
private airport, helipad, ship dock, boat slip etc. The properties are usually adorned with private golf
courses, artificial private lakes or a waterfront, Vineyards, indoor and outdoor Sports clubs, or even a
winery. Such properties have more than three car garages usually. Each villa privately may have a
personal fitness centre, a library, a media room, a private pool (outdoor door, infinity pools or roof
top puddle pool), a party deck with an outdoor kitchen, a private elevator, a spa and steam room, a

5
the Knight Frank Wealth Report 2016
wine cellar, and even sometimes fire places. The architecture of these properties is typically sensitive
to the site context and location demand, wherein you find designs responding to the local activities
and characteristics like beach fronts, historic settings /antiques and mountainous landforms. There
are examples in Bengaluru city of South India, where Epsilon Villas and Villa Marias are residential
projects that are sold ‘by invitation only’. Epsilon Villas were one of the first projects in India to offers
an 110V electrical line (standard Indian power lines are 220V) so that American gadgets can be plugged
in straight away. Villa Marias are only six signature designer apartments, customized on demand.
Luxury real estate usually sits at a central or expensive location, with limited availability. Delhi state
has a retro ‘Bungalow’ face of luxury where the streets are paved with gold (Sinha, 2012). It is the
address code triggering the value here. An approximately 28 sq.km area in the heart of the city called
as the Lutyens’ Bungalow zone (LBZ) dates back to 1912. This is a heritage, thus protected zone, with
an array of development restrictions. Here we find luxury synonymous to a 3327 sq.ft area (2 beds
and 2 baths) single storied bungalow priced at 22 crore and a 0.426 acres property with 12 beds and
12 baths priced at 10 cr. Delhi has sprawling Farm houses in acres of land along its Southern
peripheries amidst high dense urbanized areas, surrounded by urban villages.

Project name city Unique feature Product mix Price in INR Unit
size in
sq.ft
Embassy Grove Bengaluru Luxury Villaments with Concierge 4 BHK Duplex & 9.11 Cr. 4600
(city) Services triplex onwards to
6000
Villa Maria Bengaluru Villas ‘by invitation only’ six 4 BHK 20 Cr. 6,500
(city) signature designer apartments to
(customized) 10,00
0
Marvel Kyra Pune Luxury apartments with building 4 and 5.5 BHK 3.47Cr - 4665 -
(Suburban) automaton and Concierge Services 6.09Cr 8173
with private elevator, plunge pool sq.ft
and deck
DLF Magnolias Gurgaon Apartment 4 BHK 16.5 cr. 6360
Suncity Township Gurgaon Villa 10 BHK 8.5 cr. 7300
Jaypee Greens Greater Apartment 5 BHK 14 Cr. 7700
Noida
Tilak Marg Delhi Apartment 1BHK 22 Cr 1200
Apartments
Exquisite Farm Delhi Villa 6BHK 70 Cr 13000
house
Trump Twin Pune Apartment 5 BHK 13 Cr- 16 Cr 6100
Towers by
Panchshil
Trump Towers, by Mumbai apartment 3 & 4 BHK 6.99 Cr - 2016 -
Lodha Group 10.20 Cr 2440

4 The Indian HNIs

Indians are increasingly growing rich. Having 4th largest population of millionaires in the Asia Pacific
region, there are 1, 46, 600 HNIs in India in 2016, estimated to be rising to 2, 94,000 by 2021 (Top of
pyramid report, 2016). 55 % of these HNIs are geographically concentrated in the top four
metropolitan cities of India. Unexpectedly 23% of the HNIs are spread across emerging cities like
Chandigarh, Surat, Jaipur, Kanpur etc. This hints at a creation of a new luxury markets.
 Source: 2016. Top of the Pyramid India report, Kotak Wealth Management.

Moreover, these Indians are aggressively investing and living in luxury real estate, in India as well as
at leading Global realty destinations including Dubai, London and New York. As illustrated in the
graphic below, the current decade has witnessed an average of 30% investment across assets by an
Indian UHNI in real estate. The reasons supporting the above pattern may be

 To extract the benefit of Assets Diversification

 Create security in form of real estate at their business locations outside India
 To locate near educational hubs for securing future of their children
 To fulfil aspirations and to add to prestige
 For leisure and holiday
 Source: 2016. Top of the Pyramid India report, Kotak Wealth Management

5 Conclusion
To conclude, opportunities are enormous. Indian landscapes are preparing to find global presence on
the map with its emerging Luxury real estate. The decade to come shall add several Indian cities to
the list that geo-tags Mumbai as a luxury destination. Indian regulatory climate is an evolutionary
state, thus expert advice is suggestive before any investments.

References
 2015. Global Luxury Real Estate at a Glance, New York
 2016. The Wealth Report, The Knight Frank.
 Babar, K., 2016. Trump eyes super luxury realty projects in India
 IBEF, 2016. India Brand Equity Foundation report
 2015. The Global Luxury Residential Real Estate Report, Sotheby's International Realty and
Wealth - X.
 Shirley, A., 2016. The Wealth Report, Christie's International Real Estate.
 Sinha, P., 2012. Where the streets are paved with gold, The Times of India.
 Sofo, M., 2016. Luxury defined. Christie's International Real Estate Inc.