Here’s why real estate developers are launching luxury projects in Delhi-NCR

There’s been a flurry of luxury real estate launches in Delhi-NCR of late, both by listed and local developers with a good execution track record

There’s been a flurry of luxury real estate launches in Delhi-NCR of late, both by listed and local developers with a good execution track record. This, experts say, is primarily on account of healthy offtake and demand for upgrading homes in the luxury segment.

DLF Chairman Rajiv Singh said recently that the listed real estate company remains bullish on India's housing sector and expects strong sales momentum to sustain on the back of rapid urbanisation, improved affordability and aspirational needs. The company’s FY23 annual report has also noted that there was a resurgence in demand in the luxury housing segment that has almost doubled in the last five years. This, the report said, is primarily on account of the improvement in the financial position of reputable and larger real estate players.

The company clocked Rs 8,000 crore in sales bookings from a single luxury housing project ‘The Arbour’, which was launched in Gurugram during the March quarter. The launch almost set a trend for the real estate sector in Delhi-NCR and there has been a slew of luxury real estate launches in Gurguram and Noida priced above Rs 10,000 per square foot.

Luxury launches galore

Real Estate firm Godrej Properties announced last week that it has emerged as the highest bidder and has secured the Letter of Intent (LOI) to develop two group housing plots through an e-auction conducted by the Haryana Shehri Vikas Pradhikaran (HSVP). These two land parcels, measuring eight acres, are located in the Golf Course Road micro-market, which is renowned for its upscale residential and commercial developments, making it an attractive destination for real estate development.

Gaurav Pandey, MD and CEO, Godrej Properties, in a statement on July 13 said, “Our foray into the prime Golf Course Road with two luxury residential projects marks a significant milestone for Godrej Properties. It aligns well with our expansion strategy and will further solidify our position as a leading real estate developer in NCR. We will aim to build an outstanding residential community that creates long-term value for its residents.”

Max Estates, the real estate arm of Max Ventures and Industries Ltd, launched 201 luxury apartments in Noida recently and plans to start construction of its first luxury housing project by the third quarter of 2023 and complete it in 48-60 months. The price of these units is Rs 18,000 per sq ft. The company said in its filing that it achieved pre-formal launch sales of over Rs 1,800 crore for the project, which is registered with the Uttar Pradesh Real Estate Regulatory Authority.

The project called Estate 128 is located in Sector 128 of  Noida and will be built across 10 acres.

“There is demand for luxury housing products in Noida and that is evident from our success in both segments, residential and commercial, with Project 128 and Max Towers, respectively,” Rishi Raj, COO of Max Estates, told Moneycontrol.

Delhi NCR-based real estate developer Gaurs Group plans to construct 450 luxury apartments at Jaypee Greens, an integrated township in Greater Noida outside the capital, with an investment of over Rs 500 crore, CMD Manoj Gaur had told Moneycontrol. The developer had said that the apartments will come under the second phase of its ongoing luxury housing project The Islands by Gaurs. The land acquisition for the project has already been completed.

Another Delhi-NCR-based real estate developer Gulshan Group has launched its ultra-luxury project ‘Gulshan Avante’ in sector 16B Greater Noida West where it will offer 92 4BHK luxury apartments at an investment of Rs 190 crore, the company said. These units have been launched at Rs 11,000 per sq ft.

Luxury projects are highly capital intensive

"Real estate developers started launching plots soon after COVID-19 to keep the cashflows moving. That traction has now percolated down to premium housing. They started launching high-end housing after they found that there is better price movement in this segment. Higher margins also make projects viable," said Mudassir Zaidi of Knight Frank, Executive Director – North, Knight Frank India.

Another reason why the premium segment is being preferred by developers is the increase in the cost of land that has gone up multifold. Buyers wanting to upgrade to larger homes with better facilities is also an important reason, he said, adding, these are not first-time buyers but often second or third-time property purchasers.

Ritesh Mehta, senior director at Jones Lang LaSalle, is of the view that luxury projects in South Mumbai are mainly from the redevelopment of existing societies and their members prefer to go with listed real estate firms. A luxury project is highly capital-intensive and deep pockets are required. Also, most units are sold closer to their completion and that requires a strong holding capacity.

“Only a listed developer with a low borrowing rate will have that capability. Also, in terms of margins, while a conventional project commands a margin of 18 percent, a premium project will fetch a 28 to 30 percent margin,” he said.

A recent report by international real estate consultant CBRE has also noted that luxury housing sales increased by about 151 percent annually in the January-March 2023 quarter and that Delhi-NCR led the luxury segment housing sales with a 216 percent growth in the first quarter over Q1 2022.

The post-pandemic uptick in ownership of luxury housing results from homebuyers looking for larger spaces and a higher preference for home ownership with better amenities, the report said.

According to Aniket Dani, director at Crisil Market Intelligence and Analytics, consumer preferences have shifted to larger and bigger configurations in premium housing projects after the emergence of the hybrid work culture after the pandemic.

“In sync with this trend, large established developers have also gradually aligned their new launches to premium projects,” Dani told Moneycontrol.