After ditching luxury property construction during the global recession, developers in India are again returning to the high end of the market as demand rises.
According to consultants Jones Lang LaSalle Meghraj and Knight Frank India there are about 7,000 luxury apartments to be delivered within a year in Mumbai alone.
‘Real estate developers are back building high-end super luxury projects because there is good demand for such projects. At the same time, margins are also higher in these projects,’ explained JLLM chairman Anuj Puri.
Anand Narayanan, Knight Frank India’s national director said that in the central business district of Bangalore, 400 high-end luxury apartments are going to hit the market in 2010.
Similar high-end projects are coming up in the National Capital Region as well, but nowhere in other parts of the country as demand for such projects depend on many things, including the location of the property and its novelty.
The higher cost of such products is justified because not a single one has a common design and lay-outs are also never identical, the consultants said.
‘Developers engage renowned architects for such products and each product is different from the other not only in the entire lay-out, but also in design,’ Narayanan said. Buyers are prepared to pay a premium for individual properties, he added.
In general prices are rising and according to Knight Frank they have increased 30% in Mumbai in the last six months, and may be rising too fast. ‘We are seeing resistance at higher prices and as a result volumes have declined,’ said Pranay Vakil, chairman of Knight Frank.
But there seem to be increasing demand from non-resident Indians who expect better returns from residential real estate this year than from other types of property. ‘We have seen a huge spurt in demand for homes from non-resident Indians,’ Vakil confirmed.
Developers are also bullish about a tightening of monetary policy and believe that the decision by the RBI’s to increase rates will not have a negative impact on housing demand, as they do not foresee any increase in home loan rates.
‘It’s a very balanced and calibrated announcement meant to control inflation. The signals from the PSUs as well as private banks are favourable and they expect no increase in home loan rates.
This will be the ultimate interest of the home buyers,’ said Rajeev Talwar, group executive director, DLF.
‘I do not foresee interest rates going upwards. Therefore, there is no concern for the real estate sector,’ said Pradeep Jain, chairman of Parsvnath.
Property consultants also feel that the hike in policy rates would not have any significant impact on the housing sector, which has witnessed a revival in demand.