The global economic crisis has left most construction companies in a tizzy. While low-cost housing projects have become the buzzword for real estate players to survive the downturn, the luxury housing segment though battered is still very much in the game.
With advertisements for budget homes ruling the newspaper classifieds these days, its evident how this segment is accounting for the bulk of demand in the realty sector during these uncertain times. Considering the present market scenario, some of the realty companies are also found to tweak their high-end projects into affordable homes to cash in on the demand in this segment.
During the boom time, the luxury housing builders primarily targeted the elite, corporate bigwigs, and high net worth individuals including the non-resident Indians (NRIs) to generate sales. However, today, even the NRIs have to be wooed to make investment in this segment considering the fears of real estate prices bottoming out in the wake of ongoing downturn.
The reduction in demand for luxury housing has compelled most developers to focus on affordable housing to boost their flagging sales. This is particularly true for the mid-sized and the smaller developers who are trying every trick in the trade to ride out the market slump.
Affordability tops priority
Syed Arif, Director of Unicorn Estates, a mid-sized real estate company in Bengaluru, says, “The last few months have witnessed the paradigm shift in the customers’ attitude as they now prefer the ‘basic’ over the ‘luxury.’ Hence, the high-end villas and apartments have witnessed a decrease in demand.”
People’s craze for fully furnished and centrally air-conditioned apartments that have splash pools, jacuzzis, terrace gardens and state-of-the–art automated systems has gone down significantly. This is because investing in stand-alone bungalows is weighing down heavily on their pockets.
While the demand from the domestic customers has reduced considerably, the NRIs who constituted a huge market for the luxury housing are also changing the minds about buying a luxury apartment.
Abhijit Chowdhury, Director of Maxx Value Realty, a mid-sized real estate company in Hyderabad, says, “With the US realty market witnessing a significant price correction in the past few months, NRIs are becoming skeptical to invest their money in real estate. The luxury housing segment has been further hit by the unfavourable investment climate, salability concerns, spiraling property prices and delay in project completion due to liquidity crisis.”
To an extent, the demand slump in the luxury segment is also a result of the speculative demand and the excess supply in this segment. Till a year back, there was a significant demand in this segment, which prompted many realty players to make a foray into this segment. In affect, this fuelled an excess supply followed by a consolidation period. Nonetheless, the luxury housing segment is slowly showing some signs of revival.
In India, several luxury housing projects thathad to be shelved or deferred due to unavailability of adequate funds have resumed pace. According to the reports of the Confederation of Real Estate Developers Association of India, the demand for luxury houses would soar once the customer sentiment picks up in India. Aparna Mitra |
