🚀 Is India’s Booming Luxury Housing Market Bad for You?

Luxury homes are on fire right now! According to Mordor Intelligence, luxury homes comprised just 7% of the market in 2019, but it increased to 21% in 2024. That is a 3x growth in the past 4-5 years.

This trend is not expected to slow down anytime soon, as India’s luxury residential real estate market is expected to grow to $101.92 billion by 2029, from $38.02 billion in 2024. This represents a growth rate of more than 21.8% CAGR.

The result is already visible in rental prices in the top cities of India.

📈 Homes get costly across most cities

If you are in the market to buy a house, especially if it is your first purchase, a price hike must be visible. Also, the number of affordable homes is shrinking, as those with extra cash are buying up properties left and right. This means that many first-time homebuyers are stuck with renting.

But there's more! According to an Economic Times article, home prices increased by 4.3% last year. However, it is expected to rise by 7.75% this year, which is higher than the previous prediction of 6.0% in May. Furthermore, property prices are expected to continue rising at a rate of 6% to 6.25% in the next 2 years.

Rents are expected to rise even faster in urban cities, ranging from 6.5% to 10%, which is more than the consumer price inflation number (~4.5%) during the next 2 financial years.

🏦 Why India’s Rich Are Loving It?

There are multiple factors behind this luxury housing boom:

• Bigger Paychecks: Average salaries have been rising in India, especially in the top cities, which has enabled many new earners to enter the affluent class. As income rises, individuals are looking to upgrade their lifestyles, and owning a luxurious home is seen as a status symbol.
• Tax Benefits: Investing in luxury property can be a smart financial move for some. Some wealthy individuals who hold stock options can even save on taxes thanks to exemption under capital gains up to $1.20 million (₹10 crore) by investing in luxury real estate.
• Pandemic Lessons: The 2019 pandemic taught us about the value of comfortable, well-equipped homes. It also taught the amenities like gyms and other amenities of a good, gated society. This has further fuelled the demand for spacious living spaces and gated communities. As per a Mint article, buyers who were previously looking for a 2,000 square feet apartment now prefer larger 4,000 square feet apartments. This segment has also become the biggest contributor when it comes to luxury homes.

🔢 Numbers do not lie.

With all factors, housing sales are at a record high, with sales hitting an 11-year high of 1.73 lakh units between January and June of 2024, according to a Knight Frank report. Luxury housing contributed 41% of total sales during the same period.

For instance, India’s most expensive real estate market, Mumbai, saw a record number of sale of ₹12,300 crore in the first half of 2024. This was substantially more than ₹11,400 crore of luxury homes in the first half of last year.

Among other buyers, millennials were the majority, with a 54% share in home purchases in 2024. Based on the increasing demand, builders are also focused on the premium segment. As per a Cushman and Wakefield report, 61% of new residential projects in Q1 2024 were in the luxury segment.