Real estate has traditionally been considered one of the safest forms of investment, with recent research pegging 10-year returns on real estate investments at 10 percent. However, savvy investors are now diversifying their portfolios with considered luxury real estate purchases that bear the allure of even higher returns and more market stability. Factors such as better build quality, prime locations and the world-class amenities that are synonymous with luxury real estate prove to be significant advantages for buyers, in the long term.
Better capital appreciation
Luxury real estate has an enhanced potential for long-term capital growth, as these properties are often situated in prime neighbourhoods where the demand of quality housing is constantly on the uptick. The value of these luxury homes, therefore, increases steadily over time, culminating in significant gains for investors. The plush, state-of-the-art amenities, as well as the exclusive features that are designed into modern-day luxury homes enable their value to appreciate more rapidly as compared to other real estate assets. Many buyers are also willing to pay a premium for the superior craftsmanship, amenities and location, further driving up the market value of these assets.
Stable and secure
Even within the real estate sector, luxury real estate is considered especially secure. The demand for luxury homes has been observed to be the most resilient to economic uncertainties and market volatility. This can be attributed to a couple of reasons – since luxury real estate is typically owned and sought by HNIs who are better shielded from economic instabilities, the value of these luxury homes remains relatively unscathed even the broader market is experiencing a downturn. The prime location and high quality of construction that are typical to the luxury segment ensure that these properties are deemed desirable over an extended period. Thus, luxury homes emerge as a stable and reliable asset.
Enhanced rental income
The higher rentals commanded by luxury properties can be a significant source of income for investors. The value of these homes is measured not just in terms of the location and the square footage, but also in terms of how premium the build quality is and how exclusive and well-appointed the overall property is. Luxury home tenants are extremely discerning and are willing to extend their budget in lieu of an upgraded lifestyle. Consequently, for homeowners, these properties can enhance cash flow and offer greater returns on their investment.
A healthier supply-to-demand ratio
The luxury real estate segment in India is being propelled upwards by several favourable factors. The country’s burgeoning millennial population, which accounts for 36 per cent of the total population of the country, contributed 54 per cent of homebuyers in 2023. This segment boasts of unprecedented amounts of disposable income, which inspires them to seek bigger homes and high-end residences. NRI buyers are increasingly looking to India for big ticket residential purchases, inspired by the relative stability, the prestige of owning a luxury residence, and the potential for rapid appreciation in the value of these assets. As the demand for luxury housing surges, so do the relative returns that homeowners can receive from their investment.
As the luxury real estate market continues to grow and evolve, we foresee many HNIs actively investing in luxury residences. This trend is anticipated to continue an upward trajectory, making luxury real estate purchases an indispensable part of contemporary investment portfolios.
