India’s residential real estate sector is currently undergoing a transformative phase, witnessing a booming demand for luxury homes that has outstripped the supply of affordable housing options. Over the past five years, there has been a pronounced shift in the sector, underscored by a remarkable 1,000 per cent increase in the launches of high-end residential units priced above Rs 1.5 crore between 2019 and 2023. In stark contrast, the introduction of new housing units priced below Rs 75 lakh, which includes the affordable segment, has seen no significant growth in the country’s top seven cities, despite a notable 27 per cent rise in sales.
The intriguing phenomenon of soaring demand for premium housing is further highlighted by the declining levels of housing inventory – the lowest recorded in a decade – and a significant 26 per cent hike in average property prices over the same period. The evident tilt towards higher-end properties is fueled by developers seeking lucrative returns and the increasing consumer appetite for more opulent living spaces.
Despite the fact that affordability is currently in a better state than it was in 2014, the unprecedented spike in luxury launches paired with the stagnancy in affordable housing availability prompts questions about future affordability, particularly for those aiming to purchase their first home.
Data analyzed from JLL India throws light on the situation: both in 2019 and 2023, developers across seven major residential markets, including Delhi, Mumbai, Bangalore, and Chennai, launched approximately 74,000 units within the sub-Rs 75 lakh bracket. However, by 2023 the proportion of these smaller-ticket launches shrank from 55 per cent to a mere 25 per cent, even as their sales maintained a relatively high share, dropping from 61 per cent to 41 per cent in the same timeframe.
Meanwhile, developers’ interest in upscale housing is evidenced by the surge of big-ticket launches – from about 8,000 units in 2019 to a staggering 95,000 units in 2023. This sector’s growth represents an eye-opening 1,000 per cent increase with its market share soaring from 6 per cent to 33 per cent over the five-year period.
Sales in the premium segment also surged, with 62,000 units sold in 2023, up from 18,000 units in 2019, an over 230 per cent increase. Although these sales numbers do not yet match the volume of big-ticket launches in the same year, they reflect a compelling and increasing demand for luxury housing, according to sector experts.
A report from CII-Knight Frank underscores the trend, attributing this upscale shift to stronger economic growth, wealth creation, and elevated consumer aspirations. The report projects that the household share of High Net Worth Individuals (HNIs) and Ultra High Net Worth Individuals (UHNIs) in India will triple from 3 per cent currently to 9 per cent by 2034, a statistic that bodes well for the continued demand for luxury residences.
The trend was further magnified by the COVID-19 pandemic, which led to a spike in demand for larger dwelling units, as work-from-home policies necessitated more spacious living environments. In support of this shift, Anarock Research data shows the average size of apartments grew from 1,167 square feet in 2020 to 1,300 square feet in 2023. In specific cities like Delhi-NCR, the average apartment size increased significantly, jumping by 51 per cent from 1,250 square feet in 2019 to 1,890 square feet in 2023.
Rohan Sharma, director at JLL India, attributes part of the demand for upscale housing to a demographic of middle-segment buyers who now desire better amenities and flexibility in their homes to accommodate work-from-home practices and family needs.
This demand for grander homes has contributed to the rise in housing prices. Anarock data indicates that the average price per square foot has risen from Rs 5,600 in 2019 to Rs 7,080 in 2023, further driven by increasing input costs and property rates.
The phenomenon of increasing luxury property launches alongside the stagnation of affordable housing points to a potential impact on affordability down the line, especially when considering how inventory levels reached a decade-low in 2023, with the inventory overhang falling to just 15 months.
The JLL Home Purchase Affordability Index (HPAI) sheds some light on the current situation. It suggests that despite the price increase, affordability was better in 2023 compared to 2013, albeit future dynamics could challenge this affordability. The report points out that while property prices are on an upward trajectory, rising incomes may provide a buffer.
As the landscape of residential housing evolves, the mid-range market, with units priced between Rs 75 lakh and Rs 1.5 crore, has also grown, climbing from 39 per cent of the market share in 2019 to 42 per cent in 2023. The number of these medium-ticket launches experienced a jump of 130 per cent over the same period, indicating a slight diversification of the market.
This recent data reaffirms that India’s residential market is experiencing a profound shift towards luxury living, which could potentially reshape the idea of home ownership for many aspiring buyers in the years to come.
