Real estate: Home truth

The home could be in a building situated amid acres of greenery dotted with water bodies that gleam in the sun. There could be an underground road leading to an air- conditioned lift lobby, with a private elevator going up to the apartment, or a helipad on the terrace for those who have even less time to spare. The flat itself could boast of a sauna, a terraced garden within, doors made of teak and handles of polished brass to match the solid wood. The living room could be spacious enough for a tennis match, but filled instead with fancy recliners, sink-deep sofas, leatherettes and side tables aglow with gorgeous lamps and assorted objects of art. It could have its own home theatre for an inhouse movie experience, a library, prayer room and a servant’s quarter with its own lift bay. The bedrooms could have themes that go by individual taste, with large French windows and remote-controlled curtains that open onto well appointed balconies with a splendid view. The bathrooms could have imported porcelain basins and multi-speed jacuzzis. The kitchen could be Italian in design with German fixtures. An extended terrace could lead to one’s own private lap pool set in a separate garden with little waterfalls.

It exists, this promise of a high-rise paradise. It’s just that it seems beyond the reach of just about everybody who is looking for a home to buy. The Indian market for luxury apartments—say, priced above Rs 20 crore for a 4,000-plus sq ft pad—appears to be over-supplied right now. Open any newspaper published in the National Capital Region of Delhi, and the first page is usually dedicated to a housing project that screams ‘luxury’ from corner to corner. The typical amenities on offer include everything from clubs, gyms, medical facilities and schools to shopping arcades, theatres and golf courses, all within walking distance. On top of that, an advertisement would drop the name of some foreign architect said to have done homes for the likes of Jennifer Lopez and David Beckham.

Everything is ‘exclusive’, everything designed to exude luxury.

Just two years ago, the market scenario was different in Delhi NCR, where residential project developers were focusing more on the EMI-conscious middle-class home buyer. But now, luxury is the order of the day. Land scarcity explains it. “In the last few years, the price of land has gone up substantially. Developers who have their land bank in the middle of or around the city feel that any construction on this would be unaffordable for the middle-class. So they have started developing luxury and high-priced properties,” says AS Sivaramakrishnan, head, residential services, CBRE South Asia, a consultancy (formerly CB Richard Ellis) that tracks the sector.

Premium housing usually accounts for only around 10 per cent of Delhi NCR’s new projects, but their advertising is highly prominent. Also, since the real estate industry as a whole is stagnant, many builders see the wealthy—who may be looking to upgrade their lifestyle—as their best bet. According to JLL India, another real-estate consultancy (a unit of Jones Lang LaSalle), new launches in the top segment have fallen to 6 per cent of all projects, as developers struggle to sell their inventory.

The luxury housing market is also investor driven, by and large, with buyers looking to sell their property at higher prices later. However, with top-end prices already at stratospheric levels, there seem little upside gains to be made. Even with an annual appreciation of 6 per cent, a luxury flat these days is not tempting enough as an asset. Moreover, such buyers would rather wait for a project to be completed before putting down money. “Customers are very smart. And luxury housing projects take around six years to be completed. So, for a buyer, it is better to wait and invest in the last two years of the project,” says Sivaramakrishnan. “That makes the developer’s job tougher.” According to him, there has been a decline of around 30 per cent in demand for premium housing in Delhi-NCR over past year. Luxury property deals nowadays take place only when both the buyer and seller are desperate.

In other metros like Mumbai and Bangalore, too, market trackers point to a mismatch between supply and demand. Luxury housing makes up about 5-7 per cent of the real estate market in Mumbai, where the costliest apartment on offer now is Lotus Villa, built by Solitaire Builders, priced at Rs 100 crore. Lodha Builders’ The World Towers, designed by Armani and the Casa Design Studio and touted as the world’s tallest residential building at 423 metres, is also priced at a similar level for each flat. Slightly lower down the scale, Trump Towers built in central Mumbai by international real estate magnate Donald Trump in collaboration with Lodha, has apartments priced between Rs 10 crore and Rs 20 crore, with a host of luxury amenities, including shared membership of a private jet service. Sources say that the launch of this project was delayed because its promoters were waiting for market conditions to improve.

In the assessment of Pankaj Kapoor, managing director of Liases Foras, a realty research firm, the future is uncertain for high-end housing. “The luxury home segment,” he says, “will see a further moderation in investment.” He expects the tony areas of Carmichael Road, Lower Parel and Worli in Mumbai to see an estimated 1,000 new ultra-luxury homes on sale over the next year or so. “They will not be priced less than Rs 7 crore on the lower end. How many of them will actually sell is worth a watch,” says Kapoor.

Property consultant Sunil Bajaj, who has been marketing some high-end properties, also doesn’t see Mumbai’s luxury realty market picking up until the financial sector bounces back. He says another reason that luxury flats lie unsold is that the neighbourhoods around which some of these projects are coming up have slums close by—something that a wealthy home buyer would rather do without. According to him, the market has shifted from investors to actual residents, and it is they who will now determine the pace at which such homes are bought. In any case, he adds, the ‘liquidity’ of these properties is poor— there is hardly any resale. “This segment came up on perception and not on actual market demand,” he says.

A Kotak-Crisil Report published in 2014 had said that India’s Ultra High Networth Individuals are often willing to pay staggeringly high prices irrespective of the general state of Mumbai’s property scenario. But it also observed that UHNIs were postponing big-ticket purchases, and this had hit demand for luxury homes. However, projects continue to come up. It is, after all, a low-volume, high-margin business.

While the saturation in South Mumbai created new luxury addresses in Worli and Lower Parel, the opening of mill estates led to a market glut. There was suddenly a lot of land available. “Years ago, builders had bought land in government auctions at less expensive rates. They could not go ahead with construction due to a lack of demand and paucity of funds,” says Kapoor, “They already possessed the land, so [the post-2000s] became a good time for them to lure customers into buying über luxury apartments.” It was after the recession of 2008, he says, that the high-end slowdown began. Lack of buoyancy coupled with stagnant sales has made those who can afford these luxury homes rethink their investment options in this sector. Builders too are getting jittery, as initial bookings are not translating into actual purchases. About 50 to 60 per cent of these flats launched after 2006 remain unsold, say sources. “The luxury realty segment will not pick up so easily,” says Kapoor.

Another problem that builders face is the competition from property abroad. Wealthy Indians often opt for second homes in London, Singapore or Dubai. As for NRIs, the fall in the rupee’s value in recent times did draw many of them to Indian property, but enthusiasm is said to have petered out.

Worsening the flagging demand are attempts of the Modi Government to impose curbs on black money, which has traditionally been an inherent part of real estate transactions. Says a market source in Mumbai: “The segment consumes a lot of black money. Therefore no one is keen to expose themselves by buying such highly priced luxury apartments.” An impending law to curtail black money seems to have dampened spirits all around. “If I say, ‘I am worried’, it will mean that I’m taking black money. I do not accept black money. Yes, there is a certain amount of worry which will come with the Black Money Bill,” says a builder who has major projects across Mumbai and its suburbs.

In Bangalore, the luxury market reached a peak in the last three or four years, and there are still an estimated 5,000 such apartments, villas and ‘villaments’ (row villas with common walls) that are available. These units start at Rs 3 crore plus for a compact unit and go many multiples higher. According to an estimated of the Confederation of Real Estate Developers’ Associations of India, builders in Bangalore have planned another 5,000 such luxury units on its outskirts. In the city’s central business district too, ultra-posh apartments are coming up on plots of land that once hosted large leafy bungalows. In 2008-09, when the market slowed down, many realtors waited to ride out Bangalore’s bad phase. But, with construction costs spiralling and few takers in sight, some tweaked their projects as high-end offerings and tried to sell property by reducing the number of units and throwing in saunas, jacuzzis and terraced gardens. When this did not work, sellers started offering gold coins, sedans, furniture and furnishing as bait. Deep discounts became the order of the day in a market full of choices for buyers.

A buyer who can bide his time to get the best possible deal is Kishen Gadcherla, a 41-year-old techie who moved to Bangalore from the US a few months ago. “I just shifted to India after being in Texas for 18 years,” he says. “We have gotten used to large living spaces and the only thing bigger than a 3BHK is what is being described as ‘luxury housing’ here. For me, it is not the money when I am looking at an investment around Rs 3 crore. It is all about needs, privacy as well as maintaining the same standard of living.” People like him are the ones sought by real estate companies for their luxury offerings. Originally from Visakhapatnam, Gadcherla studied engineering and then moved to the US. In the intervening years, he got married to a techie and now has two young children. “As parents and other relatives stay with us for long periods, we keep a third room as a guest bedroom ready. But we also needed another room to put up our home theatre system. We also have lots of American furniture to fill up the place,” he says, “Looking at all this, I know that a decent sized villa or apartment for my needs can cost in excess of Rs 3 crore. Life is about quality living and cost has to be factored into it.”

But are there enough buyers like Gadcherla around? He currently lives on rent in a villament in an estate of 40 row houses. When he learnt that there was one for sale in the same compound, he decided to buy it. But the property was one that had remained unsold for some time. “It’s about three years old and a bare shell. We are buying it directly from the builder,” he says.

Real estate companies, however, deny that there is any crisis in luxury housing. Like Homestead Infrastructure, which is offering 110 ‘limited edition’ lifestyle suites in a tower named after Formula One star Michael Schumacher. Conceptualised by the London-based Upton Hansen Architects (UHA) and being built by Shapoorji Pallonji, it has a cantilevered helipad at the apex of the structure. It is still under construction and the current booking price is around Rs 19,000 per sq ft, which makes it one of the costliest housing deals on offer. Rakesh K Gouri, vice-president, sales & marketing, Homestead Infrastructure, does not disclose booking figures. “We launched this project a few years back and we are well placed with the bookings,” he says, “There is no crisis at all.”

Some developers admit a slight decline in demand, but still claim that their own offerings have been completely sold out and there is no inventory pile-up. “Enquiries about new properties have declined, but thankfully we have no inventory lying with us,” says Amarjit Bakshi, managing director, Sweta Estate, which has been selling Central Park as a luxury address in Gurgaon. “It takes around six months to one year for executing a deal in the premium segment, so what might look like inventory to you is actually not,” says Bakshi. “We only do one project at a time, rather than launching too many. Once we complete it, only then do we move to the next project. That makes us a reliable brand in the premium housing market.”

Anil Harish, advocate and partner with DM Harish and Co in Mumbai, agrees that there is a slowdown but doesn’t think it is a sector that has taken a ‘hit’. A bulk of his clients includes NRIs who are keen on buying homes in Mumbai and elsewhere. “It is niche buying. Everyone is looking for a gated community and luxury homes fulfill that need,” says Harish.

Realtors in Bangalore say one thing going for luxury housing in the city is its vibrancy as an infotech hub with a large population of DINKs—double-income and no-kid couples. An oft cited figure in the industry is the Karnataka government’s estimate of 50,000-plus dollar millionaires in Bangalore. That’s a lot of people with over Rs 6.4 crore in assets. Another statistic bandied about is the city’s infotech workforce—placed at 1.5 million, with the best-paid of them earning above Rs 60 lakh per annum. Such professionals are the target audience for most of these homes.

Saleem Shariff is someone who knows the Bangalore market, having been associated with it for 23 years now. Shariff’s company, Skylark Mansions Pvt Ltd, has just completed a sprawling villa project in Whitefield called Skylark Arcadia. “Each standard villa starts at Rs 3.3 crore and goes up to Rs 7 crore, depending on the size. Located on a 30-acre patch of green, its serenity reminds people of the old charm of Bangalore. It is a project with English-style aristocratic spacious villas and private gardens. “We have already sold 93 villas in the first phase and they have all been handed over. In the second phase, we have sold over 80 per cent and these will be completed later this year,’’ he says. Skylark has started a new project on Church Street, in the heart of the city just a few metres off MG Road.

The Tata Group is also coming up with an exclusive project in south Bangalore. Designed by the renowned architect Moshe Safdie, The Promont is a luxurious, exclusive, gated community of hilltop residences in the city’s Promont Hill area at Banashankari. Based on the concept of The Hanging Gardens of Babylon, this luxury estate offers four majestic Apartment Towers in Phase I.

Brotin Banerjee, CEO, Tata Housing Development Company, says the real estate market in Bangalore is doing well. “Bangalore’s real estate market has been experiencing stable demand for luxury homes in the past few years; most end-users in the city want to invest only in the luxury segment. People are in search of furnished and semi-furnished apartments, super-luxury villas and condominiums within the city or on the outskirts, where they can get every kind of comfort and enjoy a high-end lifestyle,” says Banerjee. The starting price of Promont flats is Rs 3 crore, and the figure shoots upwards as one picks higher floors (each tower is 84 metres tall) and larger living spaces. He says bookings have been made for around 70 per cent of the apartments available.

“Builders may say that there is no crisis, but it is there for everyone to see,” says Sivaramakrishnan. “The real estate market has never been great in Delhi-NCR. But comparatively, 2014 was bad.” He even wonders about the wisdom of new luxury projects and says that developers are trying to repackage and advertise existing property as new to promote sales. “Some developers might be doing well, but overall demand is headed downwards, especially in premium housing,” says the real estate market analyst. Builders that have good delivery records and strong reputations are said to be waiting for their buildings to be occupied before moving on to fresh projects.

Meanwhile, prospective luxury home- owners are luxuriating in a buyers’ market. Anuj Kohli, chief experience officer at an infotech firm, is looking for a house. “I can only invest that much money once. So I need time to go through all the offers and then take a call,” he says. “I know the market is not doing well and I’m not in a hurry as I already own an apartment. If prices come down further, I may invest in a property.”

About The Author

Haima Deshpande in Mumbai and Anil Budur Lulla in Bangalore