Knight frank reports rising demand for luxury real estate

22 Feb 2023 CW Team

Due to a rise in sales and consumer demand in the luxury real estate market, last year was lucrative for the sector. The luxury market became the industry’s growth engine in 2022, and this pattern is anticipated to continue in 2023. Over the past few years, luxury real estate has become a popular choice among NRIs and HNIs. In spite of a number of factors, nine out of ten Indians with ultra-high net worth increased their fortune in 2022, according to a new analysis from the real estate consulting company Knight Frank.

In the next two years, more HNIs plan to purchase luxury real estate or second residences. NRIs are also seeing this as a fantastic opportunity to develop larger and better assets back home, made possible by a significantly stronger purchasing power and steep decline in the rupee.

While the performance of other investment channels and the stock market, as well as the sentiment of luxury purchasers, are all tightly correlated, the correlation between home loan interest rates is lower. This is mostly due to the fact that the majority of homebuyers in this segment rely less on home loans than they do on other forms of investment to cover their purchases of homes. Additionally, the Budget 2023’s measures will have an influence on luxury housing just as they will have an influence on homebuying decisions across all market sectors.

Change in preference of investment
High net worth individuals' (HNIs) investing behaviours have shifted dramatically as investment complexity, regulatory and taxation burdens, and asset class volatility have increased. HNIs have always preferred traditional real estate investments over other types, but the current economic climate has pushed the luxury segment to the fore.

In today's unsettling environment, real estate remains the best investment despite local and international challenges. Right now, the stock market is excessively erratic and pessimistic. FD interest rates are still low. The housing market is more or less stable and significantly more positive than the volatile stock market. Residential real estate investing provides both a return on investment and long-term appreciation. Because it is a tangible asset, it also serves as a hedge against potential financial uncertainty. It remains the best option for investors.

The main drivers of demand for second homes or vacation properties are high net worth individuals, non-resident Indians, and corporate professionals. People who have a steady income and savings but work remotely prefer to invest in opulent vacation homes surrounded by lush vegetation. Penthouses, condos, and villas in gated communities with open spaces, scenic views, good broadband access, security, and cutting-edge amenities such as a swimming pool, gym, spa, and health centre are in high demand. Given that the pandemic had isolated everyone for a long time, their desire to treasure community living has changed.

Post-pandemic perspective shift
Following the pandemic and lockdowns, there has been a paradigm shift in investors' perspectives. Gold and real estate have taken precedence over intangible assets. People are not afraid to put their money where their mouth is. As a result, rising demand from wealthy buyers is driving up the number of luxury home launches.