Luxury real estate demand to remain strong, fueled by HNIs, capital market returns and startup ecosystem: Report

New Delhi [India], March 16 (ANI): Demand for luxury real estate will be sustained, driven by rising High-Net-Worth Individual (HNI) population, strong capital market returns, and a growing startup ecosystem, according to a report by Elara Capital.

Since the onset of the Covid-19 pandemic, the real estate sector has witnessed a major increase in the share of luxury real estate (properties priced over Rs 30 million) in Tier 1 cities, rising by 10 per centage points from FY20-24.

This trend has led to higher average pricing, with a compound annual growth rate (CAGR) of 8 per cent in absorbed volume, while construction costs have remained largely stable, as per the report.

This is positive for overall industry profitability, the report added.

Additionally, key indicators of wealth creation, such as the rising HNI population, strong capital market returns, and a growing startup ecosystem, suggest a strong demand for upgrades in the luxury real estate market, the report added.

The report mentions the Knight Frank data, which revealed that India’s UHNWI population, those with a net worth exceeding USD 30 million, is expected to grow by 50 per cent between Calendar Year 2023-28, outpacing growth in Asia (38 per cent) and the US (26 cent).

This growth is supported by double-digit returns in capital markets, strong earnings from alternative investments like cryptocurrencies, and increased funding in startups and the sports & entertainment sectors.

Notably, real estate remains a key investment choice for HNIs and UHNWI, accounting for over 20 per cent of their wealth.

The report further adds that the share of luxury in overall absorption volume and new supply for Tier 1 cities increased 10ppt 14ppt, respectively, during FY20-24.

The core luxury segment (Agreement to Sell of Rs 50-100mn) witnessed the most traction, posting an absorption CAGR of 54 per cent and an 87 per cent supply CAGR.

As per thereport there is no drag on demand for units priced greater than Rs 100 million despite the tax exemption limit under section 54 capped at Rs 100 million effective 1st April 2023.

The absorption volume for properties priced above Rs 100 million has grown at a 51 per cent CAGR from FY20 to FY24 and increased by 64 per cent year-on-year in FY24.