As many as 16,100 new units have been launched in the luxury segment priced above Rs 1.5 crore across the top 7 cities
Of late, Delhi has seen a slew of new launches in the luxury real estate segment. This includes not only local branded players but also international brands trying to establish their foothold in the market. Both Delhi Development Authority, which has land parcels in the capital, and the Rail Land Development Authority (RLDA) have decided to allow private developers to bid for their land parcels on which construction of premium segment seems to be the most viable option.
The market is undergoing a liquidity crunch following the NBFC crisis and is now reeling under an impending economic slowdown. The question is why real estate developers should even consider launching luxury projects now. And if they do, who will buy them?
Also, there is a drastic change in the category of people who would purchase these luxury units. In sharp contrast to the trend seen in previous years when it was primarily investors who drove demand in luxury housing, this segment is almost completely end-user driven today. An entirely new class of aspirational homebuyers looking for a gated community experience in the capital is likely to emerge for this segment.
It is the “HNIs from India and NRIs cashed in on the prolonged slowdown and the more or less stagnant prices and best-buy deals in their preferred cities” that is the target segment, explains Anuj Puri, chairman – ANAROCK Property Consultants.
Here is how the numbers stack up
Now, for the statistics, as many as 16,100 new units have been launched in the luxury segment priced above Rs 1.5 crore across the top 7 cities – massively up from 5,240 units in the first half of 2017. Effectively, the new luxury housing supply has more than tripled since the first half of 2017 (period immediately after demonetization). In fact, the first half of 2018 saw the new luxury category supply increase by 40 percent since the first half of 2017 to stand at 7,350 units across top 7 cities, says Anarock Research.
MMR and NCR dominated the new luxury supply in the first half of 2019, accounting for a 59 percent overall share, followed by major southern cities with Bengaluru and Hyderabad. MMR saw the launch of 2,500 ultra-luxury units. NCR saw the launch of 870 ultra-luxury units (from just 85 units in the first half of 2017). Bengaluru saw the launch of 800 ultra-luxury units (from 275 units in the first half of 2017) and Pune saw the launch of 570 ultra-luxury units (from zero units in the first half of 2017).
The recent launches
Last week, RLDA decided to monetise its vacant land parcels pan India. To start with, it has called for bids for its 15.2 hectare land parcel located in the heart of the capital, within 1.5 km of the Karol Bagh metro station and the Kishanganj railway station. The reserve price of land is Rs 1,862 crore and the lease period is 99 years.
The entire land parcel, whose existing land use is residential, can support five million sq ft of build up area. Ved Prakash Dudeja, Vice Chairman – Railway Land Development Authority (RLDA), has told Moneycontrol that, despite the slow market, he is optimistic that private developers would come forward to bid in view of the recent policy changes and incentives that have been doled out to the sector.
Interestingly, Unity Group’s Amaryllis project is located in the vicinity, with prices starting at Rs 1.85 crore. The residential project by the Unity Group will have branded luxury towers that will be the tallest in the city and have interiors designed by Versace Home. The project is expected to be delivered in the first quarter of 2020.
"We are developing The Amaryllis with the perspective of providing true luxury living in the city. Versace personifies luxury with a global perspective, and their excellence in craftsmanship and bespoke interiors will allow us to create the most luxurious, lifestyle residences in Delhi,” Harsh Vardhan Bansal, the director of Unity Group, told Moneycontrol.
The Delhi Development Authority (DDA) has also allowed private developers to bid for its land parcels. Tarun Kapoor, vice chairman, Delhi Development Authority confirms that DDA lands would now be opened up for the private sector in a big way. “We have identified some plots. Maybe in a month’s time we would be ready with the options,” he said.
The government has also come up with the private land development policy under which people who own the land in Delhi can develop it based on the development that exists in the vicinity, he said.
Godrej Properties is also expected to launch its project around Navratri in Okhla Industrial Area called Godrej South Estate. The project spread across a 5.15 acre land parcel is expected to consist of 372 units spread across four residential towers. The launch would take place in two phases. The first phase will see three towers being launched. On offer are 2 BHK, 2BHK plus study, 3 BHK and 4 BHK apartments of sizes ranging from 1500 sq ft to 2700 sq ft and priced between Rs 2.75 crore and Rs 5.50 crore.
Trend of global brands entering India
Hong Kong-based real estate firm Risland Holdings has forayed into the Indian market and is developing the company’s first luxury housing project in Delhi’s Chattarpur area at an estimated cost of Rs 700 crore. Sky Mansion is a 100-metre tall ultra-uxury residential condominium. The construction has started and the project would be ready for possession in November 2021. Risland is developing 160 units (3BHK and 4 BHK) priced between Rs 7-12 crore. The rates of the 11,000 sq ft penthouses are Rs 22-25 crore.
Asked why the company is launching the projects in the current market, Li Qiongjia, Risland’s North India Director told Moneycontrol that “This is our landmark project. It may not be difficult to sell as we have only 160 units to start with. There are around 2,500 farmhouse owners in the vicinity. We are not in a hurry to push sales. We have already reached level 14 in terms of construction. The project is expected to be complete in November 2021, but we are targeting to complete it much earlier.”
The reason why global realty firms are entering India is because post the reformatory changes has become far more disciplined, transparent and viable than it was any time before. Unlike earlier, the sector is more organized with only those players surviving the heat in recent times who actually want to do fair business. Government’s favourable policies are an added advantage.
This is obviously something which global developers with long-term business prospects look for while expanding their horizon. Moreover, India is still a developing country with higher potential for growth. That’s why, despite all headwinds within and outside, India continues to be the fastest growing economy in the world, steadily widening its lead over China.
“Also, data suggests that the number of millionaires in the country will see a phenomenal 53 percent rise between 2018 and 2023 and luxury housing demand will see a rise in demand by these nouveau-rich millionaires. Thus, few global developers have either entered or planning to make their foray into India via tie-ups with leading Indian developers,” says Puri.
The international brands foraying in India not only replicate the expertise and the experience of their developed markets but also sync their offerings to suit the demand of the globe-trotting consumers back here. For millionaires scouting for luxury properties in India, they are getting a taste of global standards, he says.Prominent ongoing projects of international players with Indian partners
|Project Name||International Brand||Indian Partner||City|
|Tribeca Trump Towers||Trump Organization||M3M India & Tribeca Developers||Gurgaon|
|Trump Tower||Trump Organization||Unimark Group, RDB Group and Tribeca Developers||Kolkata|
|Emaar Gurgaon Greens||Emaar Group||Emaar India||Gurgaon|
|Emaar Imperial Gardens||Emaar Group||Emaar India||Gurgaon|
|The ICON, Uptown Manhattan||Risland Holdings||Risland India & Siddhi Group||Thane (MMR)|
Source: Anarock Property Research
Who should buy and impact on property prices
There are very few marque residential properties in Delhi and not much supply is being created with these launches and most of these projects are coming up on smaller plots. In a market where economic slowdown is looming large and there are better investment opportunities available in other asset classes for investors, this may not be the right time for investors to enter the market, say real estate experts.
Having said that, real estate developers who command a brand name, have a track record of completing their projects on time, may still manage to sell a few units to end-users if they were to launch a luxury project in Delhi, says Mudassir Zaidi, executive director – North, Knight Frank India, adding the price at which these units are launched may not have an impact on prices in the market as developers in the current market are “price takers and no longer price makers.”
With the launch of this and other luxury gated projects in Delhi, a new customer segment is expected to emerge which is not the conventional investor but the high net worth end-user who is looking for a gated community experience within Delhi or an NRI who is desirous of settling his parents in a project that offers all modern amenities that are unheard of till date in the Capital, say real estate brokers active in the South Delhi market
“A new customer segment is likely to emerge with the launch of this and similar projects across Delhi - people who want a Delhi address or perhaps NRIs for their old parents. The target audience of this project is expected to be a Delhi-based HNI resident or an NRI who aspires for community living, a gated community complex offering all luxury amenities either for self-use or his parents. His decision is not necessarily based on the locality address or the brand name of the colony,” says Rohit Chopra of SandAdvisory.
These launches are also unlikely to impact the NCR market as they are at best competing with the builder floors market in Delhi. But having said that, a 2000 sq ft apartment in GK 1 or for that matter in Vasant Vihar will command a price starting Rs 6 crore and not anything less than that price, say brokers active in South Delhi area.
A resident of a premium condo in Gurugram spread across 8000 sq ft will certainly not want to shift to a high-end apartment spread across 4000 sq ft near Karol Bagh perhaps commanding the same price, he email@example.comGet access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.