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Is Luxury Realty Covid Proof in India?

The Covid-19 lockdown saw a short-term dent in realty sales, however the merit of owning one’s residential property over renting has become extremely apparent

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Luxury housing has remained largely insulated from a slowdown if past statistics are anything to go by. The luxury market is driven by end-users at the top of the pyramid and unlike the affordable and midincome housing, it depends more on personal wealth rather than on home loans. Historically, investment in the real estate sector had witnessed numerous fluctuations over time yet it has remained resilient even during periods such as the 2008 global recession. Real estate has continually offered good risk-adjusted returns in comparison to other asset classes. The realisation over the significance of investing in real estate is apparent, as opposed to the risk and unreliability associated with stock market investments. Therefore, one is still witnessing an increase in the flow of capital to this sector. 

The Covid-19 lockdown witnessed a short-term dent in realty sales, however the merit of owning one’s residential property over renting has become extremely apparent. The pandemic has re-affirmed that residential real estate is the safest asset class to invest in. Around the world people have realised what “freedom of movement” is and the value of a “home” – a ‘safe’ haven that is also a de facto school, an impromptu office or gym. Demand for housing remains resilient despite the hit to the economy. 

Two factors spurring the growth of luxury housing in India: 

• NRIs are taking advantage of the drop in prices of property and increase in the exchange rate of the dollar and dirham as compared to the Indian rupee; and 

• In the medium to long-term, we are registering interest and demand from buyers to expand further to the likes of wanting to browse and invest in bigger residential properties with larger areas, demarcated workspaces and wide-ranging amenities including gyms/yoga studios and recreational areas within the homes. 

Every downturn brings a revolution and this pandemic can be regarded as an inflection point for the real estate segment. Going forward, we expect the pervasive role of technology in real estate with IPCs and developers leveraging 3D walkthroughs and Virtual Reality, among others, to facilitate the buying process and sustain the momentum of sales digitally. The overall hygiene, health and wellness concerns will work in favour of developers with sound credentials and an enviable track record. 

With ‘work from home’ being the new normal, we are likely to see a shift towards a preference for ‘weekend homes’ from being an aspirational want to now as a need for a safe, secure and prudent real estate investment. Initially buyers were adopting a wait-and-watch approach but now they are coming out in preference of suburban, second-homes which can offer better value propositions along with lower risk. India Sotheby’s International Realty has received increased queries for ready to move-in properties in the recent times especially for larger open spaces. 

Simultaneously, more real estate developers are increasingly outsourcing their sales and marketing tasks to IPCs (International Property Consultancies). Collaborations with established IPCs help them forge the desired connections with UHNIs which is their primary target audience. 

Going forward, we will have to keep a watch on the overall macro level as the longevity of the crisis is uncertain. A silver lining here is that this crisis has offered developers an opportunity to rethink their strategy and make the luxury segment more attractive for buyers.  

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Amit Goyal ..

The author is a seasoned real estate and private banking professional with over 18 years of work experience in private banking and investment advisory with large MNCs such as Hyundai Motors, ABN AMRO Bank, Citibank and BNP Paribas Wealth Management

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