Double Whammy for High-End Luxury Realty Market

THE high-end luxury real estate market is facing a double whammy. The demand from domestic buyers has already dried down and now even non-resident Indians (NRIs), who constituted a significant market for luxury real estate developers, are developing cold feet. “With the US property market witnessing a correction due to subprime crisis, the NRIs are expecting the same to happen in India and are holding back on their purchases,” says Delhi based real estate firm Omaxe CMD Rohtas Goel, who recently launched a luxury project in the National Capital Region (NCR).

Three-four years ago, there were only a few big developers into the game of building luxury homes. But the higher margin in the business prompted many others to join.“The developers entered the luxury segment without a proper assessment of the market. Now they are faced with a major supply-demand mismatch. In Punjab, Delhi NCR and Mumbai suburbs, the supply far outstrips demand,” says real estate consultancy firm Jones Lang LaSalle Meghraj India chairman Anuj Puri, adding that the exit of speculators and investors has impacted these markets, where the supply exceeds demand by 25-35%.

Adding to this is the near absence of NRI buyers, who constitute around 20% of the luxury home buyers, according to property consultants estimates, “The price correction in the US has prompted NRIs to evaluate buying properties in their local market, where they can easily control and manage them, unlike in India, where managing property has been an issue with them,” says Cushman & Wakefield Director (residential) Aditi Vijayakar. She also points out that Indian developers carry a wrong notion that every NRI is a billionaire and can afford a Rs 2-3 crore property. Besides a demand problem, the competition among developers has intensified as they are wooing the same segment of NRIs. Says Ansal Properties and Infrastructure, president (marketing) Kunal Banerjee says, “The NRI market is a bit too crowded these days. Therefore, we are looking at attracting PIOs (person of Indian origin).”

PIOs are second or third generation people across the world, whose forefathers had migrated from India during British Raj and settled abroad. There is a good population of PIOs in Africa and Australia. The recent attempts by the Indian government to renew ties with PIOs by hosting Pravasi Bharatiya Divas may also have a positive push to the marketing efforts of developers such as Ansals.

Besides targeting a new segment, developers are also offering freebies to woo NRIs. “Firms are offering free tickets to potential NRI home buyers to visit India and take a look at their property. This is done in association with banks, which maintain a list of high net worth individuals,” says Knight Frank India chairman Pranay Vakil.

Souce: indianrealtynews.com