Luxury homes back in business as Indian economy maintains pace

V Nagarajan

With the Indian economy maintaining its growth momentum, a niche segment in residential sector is getting a big boost with a spurt in sales. Rising income levels and aspirational investment in high-end homes are driving the attention of leading developers to focus on the ultra-luxury homes to cater to the exclusive market.

“The quest for a better and dignified lifestyle became the new force driving the luxury market. This was evident by the new launches in Gurugram and Bengaluru that increased 2.7x and 2.8x respectively in 2022 over the preceding year. The Delhi market too witnessed a fresh launch of approximately 1,550 luxury units in the same year,” said Shveta Jain  Managing Director, Residential Services, The Private Office and Megha Maan, director, research and consulting, Savills.

The spur in luxury sales recorded in recent times cannot be attributed alone to the dynamic market forces. Statutory interventions like reduction in stamp duty by various state governments have also been playing a vital role in keeping the sales buoyant. What has been proved to be an icing on the cake in pushing the luxury sales in H1 2023 is the limit deductions from capital gains on investments in residential houses to INR 10 crore, which is supposed to come in force from April 1, 2024, say Shveta Jain and Megha Maan.

During the third quarter this year, sales of luxury homes priced Rs 4 crore ($0.5 million) soared 97% in the top seven cities with top three markets dominating the list such as Delhi-NCR, Mumbai and Hyderabad, according to CBRE.  While Delhi reported 3,400 units accounting for 37% in the total luxury home sales, Mumbai accounted for 35% and Hyderabad at 18%, followed by Pune at 4%.  The share of high-end homes is up from 20% in Q2 to 27% in Q3, the report adds.

According to CBRE, the overall units sold during the nine months of this year is 9,246 units against 4,689 units during the corresponding period last year.  Investment activity regained momentum, witnessing an increasing trend in Q3 2023. Land activity remained strong while opportunistic and core / core plus bets dominated the capital flows.

The capital flow in Q3 is up 44% q-o-q at $2.3 billion and 63% y-o-y.  Mumbai, followed by Delhi-NCR and Chennai accounted for a cumulative share of nearly 68% in investment inflows in Q3.  The developer activity has picked pace in third quarter, accounting for a share of nearly 72% in overall investments, followed by institutional investors (17%).  

Institutional investors continued to infuse capital in built-up, operational assets, whereas developers remained largely focused towards acquiring land for greenfield developments.

Significantly, while the share of domestic investors (predominantly developers) in capital inflows in Q3 is ~45%, the share of foreign investors in the total investment volume is ~55% during the same period and investors from Japan accounted for ~62% of the foreign capital inflows.  

While ~81% of the total capital inflows in site/land acquisitions were deployed for developing residential projects, ~11% were deployed to develop warehousing projects.

Investment and development platforms worth upwards of $700 million were set up during the third quarter across office and residential sectors, in addition to capital infusion of $2.3 billion, says CBRE survey.

A land promoter recently sold Panchayat approved plots.  What way it is different from DTCP approved plots?  Is it safe to invest in Panchayat approved plots?  Kindly clarify.  Ricky Thomas, Sharjah.

Generally, Panchayat approved plots are not safe and it is always better to invest in DTCP approved plots which alone is a legally permissible plotting of land.  

This is because they have access to the government’s land acquisition areas and approval is given after due diligence.  Even today a number of developers are selling panchayat approved plots.  However, it is advisable for investors to invest only in DTCP approved plots only.   

Can I give power of attorney to my relative in India to invest in immovable property?  What type of specific power would be advisable?   Prasanna Shetty, Dubai.

Usually, a generally power of attorney is given to execute buying and selling of immovable property in India on behalf of NRIs.  There were several instances where relatives or authorised representatives have sold the property without the knowledge of NRIs leading to litigations in the court.  As a result, the Supreme Court has held that NRIs properties cannot be transferred based on a general power of attorney.  It is advisable to provide a specific power of attorney (PoA) to your relative, if you wish to buy or sell immovable property in India.