Are UHNI homebuyers shopping for farmhouses this festive season?

Construction activity seems to have picked up in this fairly quiet and verdant millionaires’ street located a few kilometres away from Delhi’s international airport. This is largely due to the fact that appetite for farmhouses has built up after the pandemic, with more high net worth individuals wanting to enjoy tranquillity and greenery, away from the humdrum of the city and yet residing within its confines.

Of late, buyers have either been picking up old farmhouses from legacy owners who probably bought them two decades ago, and settling in them or knocking down an older building to build modern homes. Brokers have seen demand for this asset class improve over the last two years, and say that these properties can set you back by nothing less than Rs 100 crore to Rs 120 crore for a 2.5-acre parcel.

Boutique property consultants in this area are quick to point out the frequency of transactions in these farmhouse areas was generally just about two deals brokered in a year before COVID-19 struck in 2020. But after three waves, these areas have witnessed close to 100 deals in a year. The focus has now shifted to horizontal residential developments rather than vertical, high-density ones.

It’s not just high net worth buyers (HNIs) who are hoping to turn this area into their primary home, it’s also caught the fancy of developers who are aggregating land in the hope of monetising these assets once the one-acre farmhouse policy comes into force. As for sellers, who are mostly legacy owners, many of them non-resident Indians (NRIs), these properties that they have inherited, offer an opportunity to unlock value and consolidate their assets in India.

According to a report by 360 Realtors, 58 percent of the 400 HNIs it surveyed want to buy farmhouses or other related properties in the near future.

Typically, these farmhouses, generally built on a one-acre to 2.5-acre property, are spread over an area of 4,000 sq. ft. and above. The cost starts at about Rs 20 crore and can be more than Rs 100 crore. The most-sought-after locations are Westend Greens, Vasant Kunj, Chhatarpur, Radhey Mohan Drive and Sultanpur.

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Often dubbed as Millionaires’ Row, WestEnd Greens is home to Deepak Seth of Pearl Group; Gautam Singhania of Raymond’s; the Jain Family, owners of INOX; the Jaipurias of Varun Beverages; the Mehra Family, owners of the Jaquar brand; and Sheetal Arora of Mankind Pharma, among others.

Recent deals

Jaipuria, whole-time director at Varun Beverages, one of the largest franchisees of PepsiCo in the world outside the US, had bought a sprawling 2.5-acre farmhouse at Delhi’s Westend Green for Rs 120 crore in June 2022, making it one of the biggest transactions in terms of value in Delhi.

Last year, JC Chaudhary, the founder of Aakash Educational Services Ltd, bought a five-acre farmhouse in south Delhi’s Pushpanjali Farm area in Bijwasan for around Rs 96 crore. Chaudhary’s purchase of Pushpanjali Farm at Bijwasan came close on the heels of ed-tech platform Byju’s acquisition of the tutorial chain in a cash and stock deal for $950 million.

Akarsh Gujral, owner of boutique property consultancy DOMUS, said that it is mostly people with net worth of over Rs 2,000 crore who reside in the WestEnd Greens area. For many, this has become a primary home, rather than a weekend home after the pandemic.

Before the pandemic stuck, the farmhouse market was witnessing a down cycle. Post COVID-19, almost 80 percent of properties that were on sale have been sold. Across all farm houses uptick easily over a 100 transactions in farm house areas, he said.

Of late, many sellers, who were fence sitters all along, have come forward to complete the transactions. Many of these are old businessmen, legacy owners, who bought these farmhouse lands way back in the 1980s for as little as Rs 1 crore.

Many of those who are buying into farmhouses are doing so to diversify their portfolio, using gains from stocks to invest into real estate, or buying properties for capital gains adjustment.

Many of those who are buying farmhouses are doing so to diversify their portfolio, elevate their lifestyle, to own larger spaces and alternate wealth investments such as using gains from stocks to invest in real estate.

“People are also looking at consolidating their portfolios, especially unused and surplus assets, and focusing on consolidating the non-core assets in their portfolios and redeploying them into other assets to generate income,” said Shveta Jain, Managing Director and Head - Residential Services, Savills India.

NRIs are also trying to unlock value and in many cases looking at repatriating the funds, experts said, adding there is another set of sellers who do not have an immediate need to consolidate their assets and are holding on to the property because there is an expectation around the future of the asset class and the opportunity that may come by way of the new farmhouse policy.

Bang for the buck

Property experts point out that the value of farmhouses have increased by almost 40 percent post the pandemic.

This is how the math works. A buyer who intends buying a property in Vasant Vihar, may end up spending almost Rs 80 crore for 1,200 square yards. Instead, he can buy a two-acre farmhouse, which is almost 9,000 sq yd, and construct a house of around 30,000 sq ft on it, explains Gujral.

Amit Goyal, CEO of India Sotheby's International Realty, points out that most owners of farmhouses, especially those who bought multiple farmhouses as an investment, are monetising these lands as prices have shot up by almost 40 percent in the last two years.

New farmhouse policy

The Delhi Development Authority (DDA) has approved the draft ‘Green Development Area’ or ‘GDA policy’ to provide an integrated framework for development of lands falling in the designated green belt and Low Density Residential Area (LDRA), as per the Master Plan of Delhi, 2021. Under the draft policy, a three-rung approach for development of lands falling under GDA has been adopted, namely Grade 1, Grade 2 and Grade 3.

Under Grade 1, 600 sq mt up to 4,000 sq mt, spread over one acre, has been proposed; under Grade 2, 4,000 sq mt up to 10,000 sq mt, spread across 2.5 acres, has been proposed, and under Grade 3, 10,000 sq mt and above has been proposed.

“Once this is cleared, smaller sized farm houses will get more sanctioned area or floor area ratio (FAR). One would be able to get a larger area even in a smaller sized plot and that would further spur demand for farmhouses,” explains Amit Goyal,

Things to keep in mind before buying a farmhouse

The land should have been demarcated on the Aksh Shijra/layout plan issued by the land revenue department and physical measurement should have been conducted to ensure that actual land possession is as per title documents, say legal experts.

Besides, the land parcel should be a clearly divided portion and not undivided portion of any other land and mutation should have been carried out in the land revenue record in the name of the owner.

Last, but not the least, buyers should check for any acquisition notices issued by the government for road widening or construction of metro projects or any other purpose, said Sunil Tyagi, Senior Partner and Co-founder of ZEUS Law.