Luxury housing segment sees pick-up in demand

The demand for premium housing picks post the second wave of Covid-19 as work-from-home continues and becomes permanent for some employees.

According to a report by ANAROCK Property Consultants, of 36,260 units launched in the second quarter of 2021 in the top seven cities, the premium segment (priced between Rs 80 lakh and Rs 1.5 crore) had the highest launch share of 36 per cent (approx. 13,130 units), followed closely by the mid-segment with a 32 per cent share (approx. 11,760 units).

“The main southern cities of Hyderabad, Bengaluru and Chennai together accounted for at least 72 per cent of the total new premium supply in the second quarter. Prominent realty hotspots NCR and MMR had the highest share of affordable housing supply at 52% of a total of 7,230 units launched in this category,” said Anuj Puri, Chairman – ANAROCK Property Consultants.

Well-to-do Indians demanded luxury residences as they relocated from independent residences in the centre of cities to projects that offered a socially rich lifestyle.

Trends

“Our own experience with Noida and Greater Noida has been positive, prompting us to transition to the luxury market after providing premium and affordable luxury. The segment has always been robust because, as we all know, people who are interested in luxury are protected from economic ups and downs. If an offering offers good amenities and a great location, a luxury buyer isn’t concerned about the price. The only stipulation is that the property matches the price and adds value to their lifestyle, as they are spending a handsome amount on the purchase,” says Amit Modi, Director, ABA Corp & President (Elect), CREDAI, Western UP.

“Another element in favour of luxury in the current situation is the interest demonstrated by well-to-do NRIs,” he adds.

Affordable housing segment sees dip

A report by Ambit Capital suggests the developers within the premium/branded housing have been more successful than those in the affordable housing segment in terms of business.

“Unlike the affordable segment, large developers focusing on the mid-to-luxury segment of residential real estate which involves creation of a brand have been relatively successful in terms of profitability (median ~30% EBITDAM) and cash flows (0.5-1.4x of finance cost historically, ex-Oberoi). Further, most of these developers have been able to extend their brands from the residential segment into annuity businesses (commercial, retail, hospitality),” says a sector report by Ambit Capital.

The real estate industry received much-needed relief post-Covid-19 on the demand and the supply side. While consumers could take home loan at cheaper rates thanks to the RBI repo rate being at a decadal low of 4 per cent, developers got more time to complete the projects. Restructuring of retail loans and 2 -3% reduction of stamp duty by states like Maharashtra, Karnataka also helped consumers.