Moneycontrol Pro Panorama | The global trend towards premiumisation 

The rise of premiumisation is an indication of the K-shaped recovery.

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Irrespective of the state of the economy, the premium segment always keeps on growing. When the economy finds its stride, the premium segments gallop. We are witnessing this phenomenon unfold in the Indian and global markets.

At a recent real estate launch in Noida, over 90 percent of the nearly Rs 2.5 crore apartments were sold on Day 1. This is not a one-off event -- we have seen sales of luxury and premium homes pick up over the past few months. Sales of these houses have risen despite a 3-18 percent increase in prices across major markets.

New launches of luxury units in Gurugram have increased by more than three times in the first half of 2023, with nearly half of them in the premium segment.

New launches are preferred by buyers as their appreciation is better and they come with the latest amenities. Under-construction projects in metro cities have thus witnessed higher appreciation. Millennials accounted for 50 percent of home purchases. A survey by Statista in 2022 revealed that 56 percent of millennials preferred investing in a home to other investments.

According to Anarock Property Consultants, there has been a 24 percent decline in inventory of unsold homes priced above Rs 2.5 crore in the Mumbai region.

Growth in the premium segment is now higher than that of affordable housing. Though the premium market is still small in terms of units sold, the per unit cost is much higher.

Premiumisation is not restricted to housing, it is seen in automobile sales also. The luxury car market in India is poised for its best year in 2023, surpassing pre-COVID-19 peak sales. Lexus expects to double its sales in India and CRIC Research in February said it has met its target for the year in the first month itself.

The thing about luxury cars is that India has a lot of ground to catch up. Luxury cars account for around 1 percent of the total sales of automobiles in India as against 7-8 percent in China and the high double-digits in America.

To give a perspective, Mercedes-Benz sells under 16,000 cars in 2022 in India as compared to 7.5 lakh cars in China in a normal year. Sanjay Thakker of Landmark Cars says only 5 percent of the dollar millionaires in India buy luxury cars as against 60 percent the world over.

Growth in the premium segment is not restricted to India. Even though there is a housing crisis in China, sales of high-end homes priced between CNY10 million (USD1.4 million) and CNY30 million surged 45 percent in the five months ending May 31, 2023, compared to a year ago, according to real estate think tank CRIC Research Center.

In the automobile segment too, luxury car sales in China are above 15 percent despite a flat overall automobile market.

Premium segments in most countries, despite the status of their economies, have done well. The benefits of growth in the premium segment will percolate down to the economy over time. For the time being, however, the rise of premiumisation is an indication of the K-shaped recovery.

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Shishir Asthana
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