Living life King-size

Call it the spillover of bulging wallets, or the simple desire for scaling up. India's aspiring middle and upper classes, eager to upgrade their lifestyle, are driving the real estate market to new highs. The numbers speak for themselves - as developers build up their capacity to meet this growing demand, the luxury apartments market (Rs 1 crore to Rs 5 crore) has grown by over 25% in 2006.

Take a look around. Luxury apartments, which often feature standalone villas or high-rise apartments, continue to pop up in and around big cities - with each vying to provide the best of luxuries, from the usual air conditioning, parking and security to the unimaginable - jacuzzis, pools and spacious yards.

Says Anshuman Magazine, managing director, CB Richard Ellis, South Asia: "Luxury housing in India is on a high growth curve. People are now willing to shell out premium for quality, larger space and amenities.

There is a lot of pent-up demand for luxury housing. The demand is being driven by globe-trotting executives, new and successful businessmen, higher income levels and NRIs whose interest level in India has increased, besides availability of mortgage. The shortage of good housing in the country is also pushing the demand for high-end homes. The consumer is now exposed to global standards. They look for good infrastructure and hi-tech amenities."

Agrees Sanjay Verma, executive MD, Cushman & Wakefield: "Property prices increased by 30 to 40% in 2005, but last year saw prices appreciating by almost 60 to 70% and in some cases by even 100% for projects under construction and other Grade A luxury properties. New benchmark rates were created as prime stock of apartments hit price levels that were higher than 1995 levels."

Due to higher returns on investment, many developers are switching to the luxury housing segment, especially in heated markets like Mumbai and the National Capital Region (NCR). Not to be left behind are Hyderabad, Bangalore, Chennai and Pune, where a number of luxury residential projects are under construction. Another thing that has attracted more demand for these apartments is the rising aspirational level, leading to demand for better quality homes built on international standards offering state-of-the-art modern amenities.

Many locations in Mumbai, where demands for high-end options far exceed supply, have witnessed significant appreciation in property prices ranging from 80% to 120% over the last 12 to 15 months, according to Cushman & Wakefield. At the high-end segment, the size of large apartments used to be about 3,000 sq ft. Today, that space is about 5,000 to 7,000-sq ft in the city. In addition to space, the newer complexes offer ample parking space, swimming pools, gardens and health clubs.

Even grander in scope - and price - are the full-scale city communities, much like those in Dubai, which are being developed around the nation. Among the pioneers in this arena is RIRIC, the Vancouver-based global real estate investment firm, which has plans to launch multiple planned city sites around India in the next few years.

Says Rohtas Goel, CMD, Omaxe Group: "The buyer seems to be impressed by the hi-tech amenities being provided by various developers. These luxury apartments are in exclusive neighborhoods done by renowned architects with plenty of space, luxurious interiors, private lifts, landscaped gardens, gyms, swimming pool, mini spas in bathrooms, children's play areas and security and CCTV."

Developers even provide billiard rooms, sound-proof cinema halls, three to five covered garages, open air Jacuzzi, 16-seater home theatre, semi-covered 100-foot pool-facing scenic walks and gardens with gazebo. Security features promised include high-tech perimeter security, videophone doorbells from main gate, compound movement sensors with intruder alarms and infrared car proximity sensors.

The demand for luxury housing would continue at the back of expected economic growth, resulting in increased purchasing power for larger number of people. But just because there is demand doesn't mean there is supply or enough supply, anyway. The demand and supply dynamics clearly point to an unabated demand for good housing in this country.

As far as the market is concerned, luxury apartment prices are end-user driven to a large extent. For instance, this kind of development is led by individuals buying their second or third homes. Developers are, therefore, able to construct and develop more projects of this kind. In the residential sector, the price boom is a phenomenon that literally feeds itself.

Says Vikram Sabharwal MD, Sabharwal Developers: "The current boom in luxury apartments has been largely contributed by rising income levels and affordable interest rates on mortgages. The rising interest rate scenario, coupled with the rising property prices will not effect the off-take of this segment. Merrill Lynch has forecast that the Indian realty sector will grow 7.5 times by 2015."

The demand for quality options far outweighs the supply with too much capital chasing too few properties especially in the Rs 1 to 5 crore range. As a result, the upward trend is likely to continue over the next 12 months with a stabilising of prices at current levels.