Monday 21 August 2017 News Updated at 08:08 AM IST
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The viability of vanity - Deccan Herald
The viability of vanity
Rajeeb Dash
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 Rise of high income groups is a natural indicator of higher appetite for luxury housing in the country.  representative picture

Luxurious things are alluring, but worthy of owning only if there is value for money, be it a phone or a car or a home. Consumers in the luxury home segment are often caught in this conundrum - does the purchase merely fulfil their vanity or is it a wise investment? A luxury home buyer, though not pressed for money, needs to be sure of its financial viability.

In India, luxury housing is defined based on several aspects. One reason why the luxury housing space has always been in demand is the way it has been presented and sold to customers. Projects in the segment have always been presented as unique in terms of design, innovation, services, and amenities. Primarily, it is associated with the location where the property is developed.

If we look at Bengaluru’s booming luxury housing market, Koramangala, Indiranagar, Fraser Town, Rajajinagar, Malleswaram, and Jayanagar would stand out as preferred areas. While Indiranagar is catching up, Malleswaram and Jayanagar have been catering to the luxury home needs of the City’s high net-worth individuals (HNI) for long now. Apart from these locations, Banashankari is also emerging as the next luxury hotspot for people looking for a home away from the chaos of the City. The presence of social and commercial infrastructure in these surroundings is what makes them attractive to both developers and home buyers.

However, location is not the sole distinguishing feature of a luxury home. While signature settings are important, some of the imperative characteristics include the opulence quotient of the living space, privacy, and the level of ultra-modern amenities it offers to the residents. Also, significant is the uniqueness of design elements used in constructing the homes, such as designing from international architects, various theme-based homes by renowned architects to make it more luxurious.

In fact, luxury takes different concepts and themes - be it Mediterranean, Spanish or one that brings man close to nature. Some are ornately designed luxury condos in high-rise buildings with a built-up area of 5,000 to 10,000 square feet and world-class amenities such as exclusive clubhouses, spas, and indoor swimming pools, right in the centre of the City. Others are located in the periphery of metros, with independent villas nestled in the serenity of nature, offering privacy, exclusivity and pleasant living.

What drives the market

Rise of high income groups is a natural indicator of higher appetite for luxury housing in the country. India’s widening consumer market and the population of HNI that aspires to own and indulge in luxurious living are the key demand drivers of this segment that is witnessing an upswing. Research suggests that the country’s realty market will almost double to $180 billion by 2020 and luxury housing constitutes almost 4-5% of the total market. In addition, the GDP per capita income in the country is expected to increase to $3,500 by 2020.

Research pins Bengaluru’s luxury home market at more than a billion dollars; the City has 1100 super luxury home units tagged at Rs five crore in various stages of planning and construction. In fact, the capital values on the City’s super luxury homes market are more attractive than those in Mumbai or Delhi.

With India expecting to see almost a 105% in the HNI population by 2025, going forward, we are likely to witness an increase in demand for luxury housing. Besides high-income groups based in India, Non-Resident Indians (NRIs) make for a major consumer base in the luxury segment. The desire and capability of this cohort to invest in a fancy second or vacation abode in their home country is also driving the luxury home market. Given its strong demand and supply dynamics, investing in a luxurious home will always be an immensely lucrative proposition for two reasons.

Firstly, an affluent buyer is always willing to pay, and secondly, developers are going the extra mile to fulfil the rising demand. In the luxury housing market, the dynamics of real estate are changing quickly and are on par with the buyer’s preferences. Its niche ecosystem reflects aspirations and lifestyle of the wealthy population that are sure to strengthen a developer’s profit margins.And unlike affordable housing, personal wealth drives this segment rather than home loans, thus giving it an edge.

Many a time, this aspect also makes it immune to market fluctuations. The earning potential and the vast range of disposable income of well-heeled clients helps investors in the luxury housing segment to operate within a fail-proof inner circle.

Furthermore, there is a strong possibility that most of these luxurious second homes, which are otherwise treated as vacation villas, could graduate into primary residences, especially for NRIs who are planning to move back to the country. The expansion of luxury housing projects in Bengaluru has resulted in a well-informed and discerning consumer, who is not only looking for fancy facades and facilities, but also ecologically enhanced living spaces.

They want to own a luxury home that does not negatively impact the community and the environment. There is greater awareness among them on the technological advancements used for sustainable building. To make most of this dynamic segment, developers have no choice but to use enhanced methods of construction to develop sustainable edifices that meet these preferences. And from a buyer’s perspective, only a luxury home that is prudently built and bought with proper market analysis can be a sensible, well-yielding investment.

(The author is head, corporate marketing, Tata Housing Development Company Limited)