CBRE Luxury Real Estate Report

The Ascent of Indian 'Luxe RE'

Foreword

India is witnessing a significant surge in demand for luxury goods and residences. This growth is fuelled by a burgeoning aff luent class with a growing desire for sophisticated living experiences. This report, "The Ascent of Indian 'Luxe RE'", delves into this dynamic market and explores its impact on the real estate sector.

Luxury Retail: A Flourishing Landscape

Luxury retail sales trends in India are robust, projected to reach USD 9.9 billion by 2028 according to a recent report by GlobalData Established luxury brands are capitalising on this growth by expanding their presence in major metropolitan cities and strategically entering new markets.

A confluence of factors such as rising disposable incomes due to economic growth, a growing desire for sophisticated lifestyles, and the enduring influence of cultural heritage that values luxury and exclusivity is expected to propel the luxury retail sector forward. This is likely to position India as a focal point for both discerning consumers seeking exclusivity and luxury brands eager to capitalise on this booming market.

Luxury Real Estate: Evolving to Meet Aspirations

The Indian luxury residential market is mirroring the trends in retail, offering a wider range of premium options beyond traditional bungalows. The pandemic's influence on security and community living has fuelled the popularity of branded residences, penthouses, sky villas, and independent floors within well-equipped townships. This segment witnessed a significant revival in 2023, driven by high-networth individuals (HNIs) seeking spacious homes with enhanced security features. Mumbai currently leads the luxury housing market, followed by Delhi-NCR and Hyderabad.

The Future of Luxury: Sophistication Redefined

In 2023, the luxury housing segment experienced significant growth, with sales quadrupling and a 75% Y-o-Y increase. New launches in the luxury segment also increased, reducing unsold inventory levels. The outlook for the luxury real estate sector in India remains positive, with developers expected to launch new units to meet the growing demand.

The definition of luxury in India is undergoing a transformation, encompassing a broader concept of sophisticated living experiences. Lifestyle-centric residences, branded residences, and sustainable homes are shaping the future of this sector. With rising disposable incomes and evolving preferences, the demand for larger, high-quality homes with bespoke amenities is expected to propel further growth.

This report offers a comprehensive analysis of these trends, exploring the key factors shaping the ascent of Indian 'Luxe RE' and the exciting opportunities it presents.

I sincerely hope you will find this exploration to be a valuable resource.

Foreword

The Real Estate Sector is one of the oldest and globally most recognized sectors. It is among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of an economy.

In India, the Real Estate Sector is the second-highest employment generator, after the agriculture sector and has been contributing nearly 5%-6% to the Indian GDP. Going forward the Real Sector is likely to grow and contribute up to 15%-18% to the Indian GDP by 2030.

In the Amrit Kaal, the Real Estate segments including Residential, Retail, Commercial, and Hospitality are likely to showcase descent growth as these are well prepared for further growth by improving corporate environment and the demand for office space as well as urban and semi-urban accommodation.

The Indian Real Estate sector is expected to touch $1-trillion mark by 2030 with affordable housing playing a significant role in the growth. The Affordable Housing segment was granted Infrastructure Status and it has helped in obtaining loans at preferential or lower rates and the benefits being passed on to end-consumers as savings.

A number of factors have contributed to this growth including rapid urbanization, growing emergence of nuclear families, rising income levels of population, new real estate developers entering the sectors and availability of financial options for the developers as well as the home buyers.

The focus of the government has been on empowering every stakeholder involved in the process, especially developers who are capable of spurring development of quality products and infusing the much-needed stability in the market.

PHDCCI has organised the Real Estate Summit 2023 as a prominent platform for all important Stakeholder to share views and discuss all such aspects and prospects to help the Indian Real Estate to evolve and be future-ready. We understand this Summit will play an important role and going-forward be an important platform for the Real Estate Sector.

Contents

1. India’s Rise in an Upscale Lifestyle

6. Luxury Residential Sector: What Lies Ahead

2. Demographic Shift: The Catalyst to the Evolving Real Estate Landscape

3. Why Are Luxury Brands

Setting Up Shop in India?

4. Mapping India's Luxury Retail Real Estate Landscape

5. The Advent of Luxury Residential Real Estate

7. India Real Estate Investment Market: Overview of 2023

8. India’s Investment Landscape: Opportunities and Challenges

India’s Rise in an Upscale Lifestyle

India's burgeoning middle and upper classes are a direct consequence of the country's robust economic growth and accelerating urbanisation.

This phenomenon has manifested in a remarkable surge in wealth accumulation, with India boasting an estimated 326,400 individuals classified as millionaires (USD 1 million+) as of December 2023, representing an impressive 85% increase in wealth over the past decade1 This significant wealth creation can be attributed to India's economic boom, fuelled by factors such as sustained economic growth, a thriving business environment, and a young and productive workforce.

Additionally, the rise of the middle class, globalisation, development of financial markets, technological advancements, and various government reforms have further propelled this upward trajectory.

Cities such as Mumbai and Delhi stand at the forefront of this wealth generation, ranking among the top 10 wealthiest cities in the BRICS nations for 2024. Mumbai boasts an estimated 58,800 millionaires, while Delhi has approximately 31,000. While Bangalore did not make the

current list, projections suggest remarkable wealth growth exceeding 80% by 2033.

The surge in high-net-worth individuals (HNIs) and ultra-high-net-worth individuals (UHNIs) is rapidly reshaping the landscape of India's luxury market. A Bain & Company report underscores the immense growth potential, projecting that the country’s luxury market could expand 3.5 times its current size by 2030, alongside an anticipated influx of 35 -40 million mid- and high-income consumers by the same year2

This growth trend underscores India’s attractiveness for luxury brands and developers, positioning the country as a key market for upscale residential and retail real estate investments.

Demographic Shift: The Catalyst to the Evolving Real Estate Landscape

Demographic Shift: The Catalyst to the Evolving Real Estate Landscape

India's consumption story is experiencing a booming phase, with a notable increase in the allocation of incremental earnings towards discretionary spending. This trend is observed across various income categories, particularly in the higher income bracket. The anticipated growth in India’s luxury consumption hinges on four key pillars:

Rise of the Gen Z and Millennial powerhouse

The young and dynamic Gen Z and millennial populations have created a significant consumer base with increasing purchasing power. For instance, as per CBRE’s Live-Work-Shop Survey 2022/233, 54% of Gen Zs displayed the intention to move to a new home in the next two years, while almost 50% of millennials planned to move in the next two years.

Rise in E-commerce penetration

The growth of e-commerce has expanded brand reach, closing the aspirational divide between urban and rural areas.

Growing desire for aspirational shopping

Social media platforms curate a world of luxury, fostering a sense of aspiration and desire among consumers. Influencers and celebrities play a crucial role in promoting luxury products, experiences, and lifestyles, further fuelling the desire for aspirational consumption.

Rising disposable incomes

With a growing economy and rising incomes, individuals now have the means to indulge in aspirational shopping and purchase beyond necessities

Demographic Shift: The Catalyst to the Evolving Real Estate Landscape

Fig 2:1 Anticipated shift in India's income pyramid

Percent share of households by income distribution, 2021

Above 35000

Percent share of households by income distribution, 2031

Above 35000

Source:Why this is India’s Decade, Morgan Stanley, October 2022

Demographic Shift: The Catalyst to the Evolving Real Estate Landscape

Note: The percent change above the bar represents YoY change, except the year 2030

Source:Oxford Economics, December 2023

Demographic Shift: The Catalyst to the Evolving Real Estate Landscape

India’s per capita income is expected to rise from USD 2,278 to USD 5,242 in 2031, which could aid discretionary spending further; most income brackets would have more to spend on discretionary items. As per the 2017 – 2019 data, food items currently account for more than 40% of annual household expenditure across the low-income (low < USD 1,550) categories, which is one of the highest globally. It is anticipated to decrease to 20% over the next few years4

Consumer spending in India has witnessed significant growth over the years, driven by various factors such as rising disposable incomes, urbanisation, expanding middle class, and changing lifestyles. Between 2023 - 2030, consumer spending across discretionary categories such as clothing and footwear, recreational and cultural services, along with restaurants and hotels, is expected to grow by 1.6x, 1.8x and 1.9x, respectively, while consumer spending across housing, water, electricity, gas, and other fuels is expected to grow by 1.5x.

(CAGR 6 years)

Restaurants Housing, water, electricity, gas and other fuels 0 5,000 10,000 15,000 20,000

(CAGR 6 years)

and Consumer spending, (INR billion) 2030 F 2024 F 2023 2022

Note: The percent change above the bar represents YoY change, except the year 2030

The findings of the CBRE Live-Work-Shop Survey 2022/235 also support the growing trend of discretionary spending. Over 45% of respondents reported an increase in dining out, while approximately 50-60% agreed that they are dedicating more time to leisure and cultural activities.

4 Why this is India’s Decade, Morgan Stanley, 2022

5 CBRE’s Voices from India: How will people live, work and shop in the future? February 2023

Why Are Luxury Brands Setting Up Shop in India?

Why Are Luxury Brands Setting Up Shop in India?

As of 2022, India has already been ranked amongst the world's 10 largest consumer spending markets6. Fuelled by a growing middle and upper class, the country is witnessing a surge in demand for premium and luxury goods. This shift in consumer preferences is poised to reshape the retail landscape, transforming India into a crucial hub for global luxury brands. A confluence of factors such as rising disposable incomes, a growing desire for sophisticated lifestyles, and the enduring influence of cultural heritage is expected to propel the luxury retail sector forward.

This is likely to position India as a focal point for both discerning consumers seeking exclusivity and luxury brands eager to capitalise on this booming market.

In 2023, luxury retail sales in India reached a staggering USD 7.7 billion, and this figure is projected to balloon to USD 9.9 billion by 20286, reflecting a robust growth trajectory of approximately 1.3x.

Why Are Luxury Brands Setting Up Shop in India?

Post the pandemic, the luxury segment was among the first categories to witness a rebound. Luxury retailers capitalised on a combination of pent-up demand and strong retail expansion, fuelling further growth over the past year as well. Sustained activity and increased footfalls across major malls and high streets across the country further contributed to growth in this category. Several key factors are expected to continue driving the demand for luxury retail in India; these include:

Generational trends

Millennials and Gen Z collectively hold a significant market share in the luxury retail sector. Notably, the spending power of Gen Z, and even the younger Gen Alpha (born between 2010-2024), is projected to grow nearly three times faster than other generations until 20307 . This trend highlights a more precocious attitude towards luxury, with Gen Z consumers becoming conscious of luxury products much earlier than even the millennials (at the age of 15 vs. at 18–20). It is anticipated that Gen Alpha will exhibit similar behaviour in their approach to luxury consumption.

Beyond sheer spending power, the internet and social media have become a gamechanger and constant exposure to luxury brands has skyrocketed awareness among these shoppers. This digital immersion is likely to continue to shape their aspirations and influence how they live. For these generations, luxury isn't just about price; it's a way to express themselves – a badge of social status, refined taste, and individuality.

The brick-and-

The flagship experience continues to be a compelling factor for physical retail across all touchpoints, including luxury brands. It presents a distinct opportunity for brands to demonstrate their essence, values, and unique attributes. Luxury brands, in particular, benefit from the flagship experience as it allows them to create an immersive environment that enables them to engage with customers on a deeper level.

Luxury brands can prioritise localised and personalised offerings in their in-store experiences, catering to the unique preferences and needs of their target markets. They can provide high which include personalized exclusive 'black book' offerings to enhance the customer experience. By curating exclusive collections, local collaborations, and cultural infusions, luxury brands can woo their target consumers. Several luxury stores now offer exclusive entry to selected luxury shoppers by appointment only.

The findings of the CBRE Live revealed that over 65% of consumers across all generations preferred shopping in brick-andpurchases such as luxury products and jewellery, regardless of the store's location (city centre, suburbs, small town, etc.). Consumers value the opportunity to physically see and interact with these products in-store, often seeking the assistance of sales staff before making a purchase decision.

7 Renaissance in Uncertainty: Luxury Builds on Its Rebound, Bain & Company, January 2023.

8 Trunk sales is a form of personalised shopping experience that involves customers video calling a store manager and requestin customer's doorstep, allowing them to evaluate and make their final selections at their convenience.

9 CBRE’s Voices from India: How will people live, work and shop in the future? February 2023

Why Are Luxury Brands Setting Up Shop in India?

Why Are Luxury Brands Setting Up Shop in India?

Global shoppers spending closer to home

Prior to the pandemic, affluent Indians often indulged in luxury shopping abroad. However, travel restrictions and the decline in tourism disrupted this trend, leaving luxury shoppers unable to embark on their usual shopping trips. Consequently, international retailers had to reassess their strategies, and they ensured their Indian customers had access to the current season trends across their stores in India. Additionally, they eliminated the price disparity between Indian stores and their counterparts in other global cities. As a result, global shoppers who were accustomed to luxury experiences abroad are now seeking comparable encounters within the country without the need to wait for their next international excursion.

Global players conquering Indian markets

Global luxury brands are actively expanding their footprint in India, establishing flagship stores and boutiques to enhance the accessibility and availability of luxury products in the market. Prominent brands such as Tiffany & Co, Valentino, Balenciaga, and RIMOWA, among others, have established their presence in India over the last few years. International luxury fashion brands such as Brioni, Roberto Cavalli and Dunhill are expected to launch in 2024. French luxury company SMCP, in partnership with Reliance Brands Limited, also plans to launch two luxury brands, Sandro and Maje, in 2024. Additionally, Galeries Lafayette, a leading shopping centre based in Paris, is also planning to enter India by opening two stores in Mumbai and Delhi-NCR in collaboration with Aditya Birla Fashion and Retail Ltd.

The recent inauguration of the Jio World Plaza in Mumbai and Mall of Asia in Bangalore exemplifies the increasing interest of Indian consumers in luxury retail.

High-end online shopping

In recent years, India has also witnessed the emergence of high-end luxury online shopping platforms, catering to the growing demand for luxury products in the digital space. Tata Cliq, Jio Luxe, and Nykaa Luxe are dedicated platforms catering to online luxury shoppers in India. They offer curated selections of high-end fashion, accessories, and lifestyle products from renowned luxury brands. Additionally, online marketplaces such as Myntra also feature luxury products through dedicated sections or collaborations with luxury brands.

Mapping India's Luxury Retail Real Estate Landscape

Mapping India's Luxury Retail Real Estate Landscape

While several luxury brands are present in prominent malls and high streets in India, there are specific malls and high streets that cater exclusively to the discerning luxury clientele. These select destinations are carefully curated to offer a unique luxury retail experience, featuring a concentrated collection of high-end brands, and providing an environment that aligns with the expectations and preferences of luxury shoppers

DELHI-NCR

DLF Emporio Vasant Kunj

Select Citywalk, Saket

Ambience Gurgaon, NH-8

DLF Chanakya Mall, Chanakyapuri

Jio World Plaza, BKC

Jio World Drive, BKC

Phoenix Palladium, Lower Parel

Linking Road

Kopa Mall, North Main Road

Koregaon Park

CHANDIGARH

Nexus Elante, Chandigarh

KOLKATA

Quest Mall, Syed Amir Ali Avenue

Park Street

Camac Steet

HYDERABAD

Jubilee Hills

Banjara Hills

CHENNAI

Khader Nawaz Khan Road

Anna Nagar 2nd Avenue

BANGALORE

Mall of Asia, Bellary Road

UB City Mall, Vittal Mallaya Road

Commercial Street

Indiranagar

Brigade Road

Source:CBRE Research, Q1 2024

Mapping India's Luxury Retail Real Estate Landscape

Luxury brands already established in India are actively seeking expansion opportunities in metro cities in locations where their presence is currently limited. They are also pursuing larger space take-ups in existing locations to accommodate their growing offerings and to cater to the increasing demand. Moreover, luxury brands are now looking beyond the top-tier metro cities and adopting an aggressive expansion approach by opening stores in cities such as Hyderabad and Ahmedabad, among others.

Since 2020, there has been a notable upward trend in retail space take-up from the luxury category, which experienced an exponential growth of 162% Y-o-Y in 2023. This surge in leasing has been accompanied by the entry and expansion of various international luxury fashion, watch and accessories’ brands in newly completed malls along with the opening of several jewellery stores by local retailers across different locations.

City-wise leasing split across the luxury category, 2023

Delhi-NCR Mumbai Bangalore

Kolkata Pune Ahmedabad

Chennai Hyderabad

Source:CBRE Research, Q1 2024

*These numbers denote total leasing across various retail formats and percent share indicates leasing across the luxury category

Note: High streets are typically open markets in a prominent area with a strong retail presence (more than 2-3 stores) while standalone developments are individual developments housing one or more major brands (typically less than 10 brands)

Mapping India's Luxury Retail Real Estate Landscape

Identifying the consumer base of luxury destinations

Luxury malls across major metros are strategically positioned to attract a wider audience, drawing customers from cities within a 400-500 km radius. The increase in disposable income is not exclusive to tier I cities and affluent consumers are present in tier II cities as well. However, luxury shopping options in these smaller cities remain predominantly limited to domestic jewellery brands or specialised ethnic wear. While a potential customer base exists, eager to spend on luxury goods, international luxury brands have yet to establish a significant presence in these locations. This gap has prompted residents of tier II cities, who desire a broader range of luxury items, to frequently opt for travel to nearby metro cities instead of pursuing international destinations. For example, luxury malls in the Delhi-NCR region serve as a shopping haven for discerning customers across North India, while Mumbai attracts luxury shoppers from cities throughout Gujarat and Maharashtra.

Some luxury brands often facilitate trunk sales across cities, enabling them to showcase their curated collections from Bangalore to Hyderabad. While Bangalore effectively caters to the luxury needs of most major cities in the surrounding region, Hyderabad boasts of a sizeable catchment area for potential luxury retail growth. As Hyderabad continues to witness a growing influx of affluent residents, the allure of luxury brands is undeniable. Recognising its luxury market potential, prestigious luxury brands are making a beeline to establish a presence and capitalise on the city's surging demand for high-end goods.

Kolkata, despite having a relatively smaller luxury market presence, also serves as an important destination for luxury shoppers from East India and international visitors, particularly from Bangladesh. While the luxury sector in Kolkata may be limited in size, it plays a significant role in catering to the discerning tastes of these consumer segments, offering exclusive shopping experiences and access to luxury brands.

Unlocking the future potential

Despite a growing market, the pipeline for luxury retail space remains relatively narrow nationwide. This scarcity is particularly evident when considering the upcoming supply, with most anticipated developments concentrated in the Delhi-NCR region. This powerhouse region already boasts nearly 80% of the country's international luxury brands, and its dominance is set to continue.

Apparel Men's Formal Wear Watches Jewellery Beauty Handbag & Accessories Footwear Travel

Source:CBRE Research, Q1 2024

Mapping India's Luxury Retail Real Estate Landscape

India is projected to maintain its position as one of the top five luxury markets in the Asia -Pacific (APAC) region. From 2023 to 2028, the luxury market in India is expected to experience a compound annual growth rate (CAGR) of 5.3%.10 Some of the key themes anticipated to shape the sector during this period are as follows:

Global luxury brands will continue to be on the move

Luxury brands are aggressively pursuing new avenues to attract both seasoned and aspiring luxury consumers. As the demographics of these high-end shoppers will continue to shift, brands are likely to recalibrate their strategies and expand their physical presence to capture a larger market share. While established players might navigate expansion cautiously and focus on key locations in metro cities, new brands planning to foray into the Indian market will continue to view it as a promising destination.

Experiential stores to captivate high-end shoppers

Luxury brands are revolutionising the shopping experience by crafting unique in-store environments. These experiential havens serve a dual purpose: fostering deeper customer engagement and amplifying the perceived quality of their products. Physical stores not only provide a powerful platform to showcase product lines but also help the brands cultivate a distinctive image.

Adoption of omnichannel strategies to build a powerful brand identity

Luxury retailers will continue to utilise cutting-edge technologies such as augmented reality (AR) and artificial intelligence (AI) to weave digital elements into the physical store experience. This is likely to create a unique omnichannel journey that not only highlights their brand heritage but also fosters deeper engagement with the consumers. Similar technologies could be harnessed online to create immersive experiences that solidify a distinct brand image. Customers could directly interact and shop through these platforms, forging a seamless connection between online and instore channels. This tech-powered approach is expected to grant luxury brands a significant edge over generic online marketplaces, ensuring a consistent and captivating customer experience across all touchpoints.

The Advent of Luxury Residential Real Estate

The Advent of Luxury Residential Real Estate

Luxury real estate11 has long served as a coveted asset class for discerning homebuyers and astute investors, reflecting their aspirations and evolving lifestyle preferences. Once solely characterised by standalone bungalows in prestigious locations, luxury residences now encompass a broader spectrum, covering a holistic blend of premium specifications, robust infrastructure, and integrated technology, seamlessly complementing residents' multifaceted lifestyles.

The pivotal influence of the COVID-19 pandemic has further reshaped the landscape, placing an elevated focus on security and access to essential support infrastructure. Consequently, the paradigm of luxury housing has shifted, with a distinct preference for branded residences, penthouses, sky villas, and independent floors within well-equipped townships. These contemporary options effectively address the desire for luxurious living while also fostering a sense of community and security.

What distinguishes a luxury residence?

Key distinguishing parameters Luxury homes Other housing segments

• Mansions

• Penthouses

• Sky villas

Development type

Buyer Profile

• Independent floors

• Standalone villas

• Branded residences

• UHNIs and HNIs

• Executives

• NRI’s

• Industrialists

• Businessman / woman

• Apartments

• Condominiums

• Service apartments

Purpose of buying

• Trophy homes, marquee developments

• Differentiated product

• Brand loyalty

• Assurance on quality of services

• Exclusive amenities & facilities.

Caters to a wider cross-section of society

• Lifestyle upgradation,

• Need for larger apartments

• Need for better surrounding / community

• Affordability

Amenities & Facilities Offered

Source:CBRE Research, Q1 2024

• Privilege of loyalty programs

• Exclusive club memberships

• Professional housekeeping

• Concierge service

• Premium F&B options

• Any other luxury amenity

• Swimming pool

• Recreational area

• Clubhouse

• Gym

The Advent of Luxury Residential Real Estate

Tracking the luxury real estate cycle

The early 2000s witnessed a surge in the popularity of the luxury housing market in the country. This growth trajectory was, however, impacted by the Global Financial Crisis (GFC) of 2007-2008, leading homebuyers to prioritise affordability in the face of economic slowdown. Moreover, the government's initiative to promote "housingfor-all" in the mid-2010s further incentivised the affordable housing segment, resulting in a period of relative stagnation for the luxury market.

However, a significant shift in market dynamics emerged with the onset of the pandemic in 2020. An increasing number of homebuyers began preferring spacious and premium residences with convenient access to essential support infrastructure. This trend has revitalised the luxury housing market, prompting renewed interest from buyers seeking upgraded living experiences.

Moreover, the luxury housing market has become an increasingly attractive investment avenue, particularly among HNIs and nonresident Indians (NRIs). These individuals seek to protect their investments amidst global macroeconomic uncertainties while capitalising on the strengthening of the US Dollar against the Indian Rupee – which has fuelled the demand for premium and luxury housing segments.

Besides the aforementioned factors, the government's various announcements at both the state and central level, along with attractive offers from developers, have powered this revival. As a result, the luxury housing market has reached unprecedented heights, with property registrations for luxury assets significantly increasing during the 2021-2022 period.

Top luxury residential markets in India

The resurgence in India’s luxury residential real estate has spurred robust growth as about 45% of the overall luxury stock was injected in the last five years alone. The segment has also grown at a CAGR of over 9% since 2019 across the gateway cities.

Mumbai stands out as the bellwether of luxury real estate, accounting for nearly half of the country's total luxury inventory. The city has always been a prominent market and is highly coveted, attracting numerous HNIs and UHNIs, including top executives and Bollywood celebrities. Locations such as Altamount Road, Nepean Sea Road, Worli, Prabhadevi, Juhu, and Bandra (West) in Mumbai command high capital values owing to premium locations, with an average ticket size ranging from INR 20 to 60+ crore. Occasionally, apartments priced above INR 100 crore make headlines.

The Advent of Luxury Residential Real Estate

DELHI-NCR

2010 2023 860 5,700 605 4,200 49% 2010 2023 285 390 90 450 2010 2023 705 6,100 815 5,500 2010 2023 150 0 15 265

Source:CBRE Research, Q1 2024

PUNE

2010 2023 8 225 1 165 2010 2023 0 3,200 0 2,030 30% 10% 5% 3% 2%

HYDERABAD

(no. of units) Legend:

The size of the circle denotes the city’s share in overall luxury inventory

New launches (no. of units)

Mumbai Nepean Sea Road, Altamount Road, Colaba, Bridge Candy, Worli, Bandra, Juhu

Delhi – NCR

Amrita Shergil Marg, Prithviraj Road, Golf Links, Sunder Nagar, Golf Course Road

Bangalore Vittal Malya Road, Kensington Road (Ulsoor), Richmond Town, Cunningham Road, Mekhri Circle, Koramangala, Whitefield, Rajaji Nagar, Bellary Road

Hyderabad Jubilee Hills, Banjara Hills, Hitech City, Raidurg, Neopolis (Few pockets of Kokapet), Nanakramguda (along ORR)

Chennai MRC Nagar, R.A.Puram, Mandaveli, Alwarpet

Pune Koregaon Park, Boat Club Road, Kalyani Nagar

Note: The above table does not consist of an exhaustive list and only includes a few notable locations

The Advent of Luxury Residential Real Estate

Delhi-NCR follows closely, accounting for approximately 30% of the country's luxury inventory. Similar to Mumbai, luxury properties in Delhi are concentrated in the southern part of the city, with areas such as Amrita Shergill Marg, Golf Links, and Prithviraj Road commanding average ticket sizes ranging from INR 40 to 60+ crore. In recent years, Gurgaon has emerged as a prominent luxury market within the region. The demand for gated communities intensified during the COVID-19 pandemic, bolstering Gurgaon's reputation as a luxury destination. Locations such as DLF Phase I/II, Golf Course, and Golf Course Extension typically witness average ticket sizes between INR 10 to 20 crore.

Hyderabad, experiencing remarkable growth driven by a pro-business environment, claims the third spot with a 10% share of the country's luxury inventory. The city has witnessed an influx of luxury apartments and a surge in demand within this segment. Areas such as Jubilee Hills, Banjara Hills, Hitech City, Raidurg, and Neopolis report sales with average ticket sizes ranging from INR 20 to over 40 crore.

In comparison, Pune, Bangalore, and Chennai have a smaller share of the luxury housing market, accounting for approximately 5%, 3%, and 2%, respectively. Luxury properties in these cities are scattered across various key locations.

Why this renewed demand for luxury residences?

In line with the rising household and disposable incomes amidst a burgeoning economy and sustained urbanisation, we are witnessing a significant shift in homebuyer’s selection criteria. This trend is characterised by a growing demand for larger and better-quality homes featuring bespoke and customised amenities. These evolving preferences were underpinned by the CBRE Live-Work-Shop Consumer Sentiment Survey 2022/2023, in which ‘a better-quality property’ and ‘a bigger home’ emerged as two of the leading reasons for the respondents in India to move in the next two years.

Interestingly, we are not only observing this change among HNIs, UHNIs, and NRIs but also a new cohort consisting of the upper and upper - middle class entering the luxury segment. These groups are increasingly allocating larger budgets to secure more spacious and premium apartments as they seek opulent living, fuelling the demand for premium and luxury housing segments. Notably, the share of houses larger than 2,000 sq. ft. in overall sales has consistently increased in the last three years (refer to Fig 5.3 on the next page).

The Advent of Luxury Residential Real Estate

How did the luxury residential market fare in 2023?

Despite global headwinds characterised by inflationary pressures and rising interest rates, India’s wealth management landscape displayed remarkable resilience in 2022, as highlighted by the Credit Suisse’s Global Wealth Report 2023. The report reveals a 4.6%12 increase in average wealth creation within the country, attributed to strong market fundamentals. This positive economic outlook, coupled with investor confidence, has spurred significant investments in the Indian real estate sector, with the luxury segment experiencing a surge in demand.

The luxury housing segment registered remarkable growth in 2023, with sales quadrupling since 2019 and registering a 75% YoY increase. Notably, this trend is particularly pronounced in major cities such as Delhi - NCR, Mumbai, and Hyderabad, which collectively account for over 90% of total sales.

Furthermore, a steady influx of high-quality projects offering diverse configurations, such as independent floors, villas, and penthouses , from prominent developers, is further bolstering demand for luxury residences. The new launches in the luxury segment reached approximately 15,900 units in 2023 , demonstrating a near five - fold increase compared to 2019.

Despite a lengthy gestation period in sales , this robust sales activity also led to a gradual reduction in unsold inventory, from 28% in 2019 to 23% by 2023. Consequently, overhang levels declined from an average of 4.3 years to 2.3 years by the end of 2023.

Luxury Residential Sector: What Lies Ahead

Luxury Residential Sector: What Lies Ahead

The Indian luxury real estate sector demonstrates robust fundamentals for sustained expansion, underpinned by consistent increases in household income and consumer spending power. These factors are anticipated to cultivate a segment characterised by discerning buyers prioritising high quality, financial prudence, and a desire for an elevated living experience.

Looking ahead, the definition of luxury real estate is expected to transcend mere opulence, evolving to cater to investors and lifestyle oriented buyers seeking an environment marked by sophistication and refinement. The following trends are projected to shape the future trajectory of the sector:

Momentum expected to continue in 2024

Capitalising on the positive sales trend, developers nationwide are ramping up activity and are expected to launch new units in the segment. This surge highlights developers’ strategic response to address the evolving demand for premium residences and strengthen their balance-sheets through this self liquidating and high-profit margin segment. Prominent developers such as Group, DLF, Prestige Estate, Godrej Properties, My Home Constructions, Aparna Constructions, Sunteck Realty, Navanami Construction and many more have a strong pipeline of luxury residential projects that are expected to be launched in the future.

Luxury Residential Sector: What Lies Ahead

Moving beyond amenities, homes to complement lifestyles

Modern homeownership extends beyond simply acquiring a physical residence - discerning individuals today seek environments that seamlessly integrate with their lifestyles, fostering a sense of fulfilment and enrichment. This growing desire manifests in the rising demand for lifestyle-centric residences featuring a curated selection of amenities. Properties equipped with dedicated play areas, co-working spaces, onsite healthcare facilities, and verdant gardens are becoming increasingly attractive for purchasers seeking to elevate their overall standard of living. This also coincides with the growing emphasis on worklife balance and holistic well-being, further propelling the demand for such residences.

Recognising this shift, developers are actively incorporating enhanced amenities such as larger club spaces and branded apartment options. Security protocols are being bolstered, with upgrades from threetier to six-tier systems. Additionally, technological advancements have streamlined remote property management, increasing NRIs’ confidence in the viability of the Indian real estate market as an investment opportunity.

The growing trend of branded residences

The burgeoning population of HNIs and UHNIs in India presents a compelling opportunity for luxury hotel chains to expand their branded residence portfolio. This aligns with a growing domestic demand for residences that mirror the world-class amenities and personalised services characteristic of luxury hotels. The need for luxurious living experiences is also fuelled by the expanding economy and changing customer preferences; greater innovation and diversification in this market are only to be expected. The wealthy clientele who has travelled and grown to appreciate a brand's style, offerings, and comforts are looking for similar luxury residential experiences. Brands such as Marriott International, Hilton, and EIH have already entered the market of branded residences, while developers are preparing to take advantage of the enormous potential by forming strategic alliances.

Thrust for sustainable homes

The definition of luxury today has become more all-encompassing – it is not limited to top tier fittings and amenities, but also includes integration with the environment. Sustainability has become a critical differentiator in real estate development, with an increasing emphasis on constructing eco-friendly and energy-efficient dwellings. As buyers in this category tend to be more aware of and demanding for such features, developers are integrating features such as energy-efficient appliances, rainwater harvesting systems, indoor air quality control, and renewable energy sources to be able to tick the boxes when catering to the demand for luxury homes.

India Real Estate Investment Market: Overview of

2023

The investment activity in the real estate sector experienced a resurgence in the latter half of 2023, witnessing a notable increase of about 54% in capital inflows compared to the first half of the year However, the year concluded with a marginal decline of approximately 5% Y-o-Y, reaching a total of USD 7 4 billion, compared to USD 7 8 billion in 2022 This dip can be attributed to delays in decision-making and a cautious sentiment surrounding capital deployment. Among the investments made, mid-sized deals (ranging between USD 10 and 50 million) accounted for a significant portion, comprising approximately 47% of the total recorded investments in 2023.

When looking at the cumulative performance, the real estate sector has witnessed an influx of nearly USD 33 billion worth of equity capital since 2019, with average annual inflows of over USD 6.7 billion. Despite the prevailing uncertainties and disruptions, the sector has demonstrated resilience by attracting both domestic and offshore capital

25% MUMBAI

22% Delhi NCR 16% Bangalore

7% Chennai 7% Hyderabad 5% Pune

The Indian real estate sector concurrently witnessed the rise of investment and development platforms, which have gained significant traction in recent years These platforms have collectively established a value of nearly USD 22 billion over the past five years

A substantial portion of these investments, amounting to over USD 13 billion or approximately 60%, was raised in the last two years alone These platforms have not only provided a new avenue for investors to participate in the real estate market but have also played a crucial role in funding large-scale development projects

India’s Investment Landscape: Opportunities and Challenges

Opportunities

Selective opportunities arise in emerging cities

From 2019 to 2023, Mumbai, Delhi-NCR, and Bangalore continued to remain the gateway markets for institutional investors, collectively attracting approximately 45% of the total capital deployed. This dominance remained consistent throughout the review period, with over 370 deals representing over 57% of the total activity recorded in these cities. Notably, these markets attracted a combined equity capital of USD 21 billion.

This dominance can be attributed to the relatively larger presence of investment-grade projects, robust urban infrastructure, a diverse talent pool, strong tenant covenants, and overall market maturity in these cities. However, a recent shift in investment patterns has also emerged. While office sector investments remain concentrated in metro / tier I cities, capital inflows are increasingly targeting development across development sites / land parcels, industrial & logistics (I&L), hospitality, residential, and retail sectors in tier-II and III locations. This trend is fuelled by the growing real estate activity and healthy demand in these emerging markets.

Our data reveals a remarkable ~124% YoY growth in capital inflows across tier-II and III locations in 2023, reaching ~USD 1.3 billion compared to ~USD 0.6 billion in 2022. While the average annual inflow from 2019 to 2022 stood at ~USD 0.5 billion, over 85% of transactions in these cities were focused on development sites / land parcels and the I&L sector. Several of these cities, such as Ahmedabad, Indore, Jaipur, and Coimbatore, are also witnessing heightened private equity (PE) interest across sectors such as e-commerce, start-ups, banking, financial services and insurance (BFSI) – all of which can have a complementing impact on real estate investments.

In 2023, tier II / III cities accounted for 18% of the total investment volume worth USD ~1.3 billion

Source:CBRE Research, Q1 2024

Opportunities

Diversification of the sectoral pie

Development sites / land (47%) and built-up offices (31%) captured the most investment inflows in 2023. Notably, the I&L sector witnessed noteworthy growth, with its share in brownfield asset investments increasing by over 11% from almost negligible in the previous year. This surge is attributable to an increasing investor appetite towards diversifying their commitment beyond the office sector, besides heightened deal activity in tier-II and III cities, driven by a spurt in real estate development fuelled by healthy demand. Another noteworthy trend has been the increasing interest of investors in sectors such as hospitality, healthcare, and data centres, amongst

Opportunities

Mid-segment assets vying for their share in the investment pie

Several global investment funds have also exhibited caution amidst an uncertain macroeconomic scenario in leading economies. This has opened a window of opportunity for several mid-sized segment investment funds. The deferment of capital allocation by larger funds is opening avenues for smaller funds to try and gain access to smaller yet high-quality office assets.

The recent introduction of micro-real estate investment trusts (REITs), focusing on smaller, well-maintained properties, further fuels this trend. These funds actively target quality buildings in the 0.5-0.7 million sq. ft. range. Several key players, with fund sizes ranging from INR 500 to over 2,000 crore, leverage their wealth management expertise to raise capital and specialise in building micro, small & medium enterprises (MSME) REITs.

Land acquisitions: Residential leads, “others” catching up

The land acquisition space has witnessed a surge in interest, primarily from developers, in recent times. Between 2019 and 2023, developers and investors have cumulatively acquired nearly 8,600 acres of land. However, the activity has particularly intensified in the past two years, with approximately 56% of the land being acquired since January 2022. The residential segment has garnered the highest traction among the various sectors, accounting for nearly 35% of the land acquired since 2019. This can be attributed to the robust momentum in housing sales that the sector has experienced over the past two years, enabling developers to ride the wave. While the majority of the share for land acquisition is for residential, the increasing acquisition of land across other sectors, specifically data centres, indicates an intent among investors towards having a long-term investment horizon for India.

Opportunities

Source: CBRE Research, Q1 2024, Real Capital Analytics, VCCircle

*The

Opportunities

Acquired land to unlock roughly 735850 mn sq. ft. of saleable development potential; approx. USD 44 -52 bn required for construction

Source:

Applicable

Challenges

Shrinking sources of capital

A more solid foundation charecterises the current real estate cycle. Endusers are a significant demand driver, with healthy investor interest complementing their presence. This renewed confidence has facilitated sustained capital inflows, enabling leading developers to access construction finance (CF) at a lower cost of capital, subject to project approvals. While banks remain the primary source of CF, alternative investment funds (AIFs) have also contributed to the financing landscape. However, a gap exists in early-stage funding despite the availability of construction finance, as central bank regulations have curtailed the participation of non-banking financial companies (NBFCs) and banks in land acquisition. The AIFs, through the creation of platforms or joint ventures, were initially positioned to bridge this gap. Nevertheless, a December 2023 Reserve Bank of India (RBI) notification restricting AIFs from raising funds from banks, poses a potential challenge to land acquisition funding.

Pressure on capital cost margins may ease only by H2 2024

Stimulus measures in 2020-2021 mitigated the pandemic's economic impact but also contributed to inflation. Central banks, thereafter, started raising rates to combat inflation, particularly in advanced economies. This led to a rise in the cost of capital, thereby exerting pressure on margins while often manifesting in delays in decision-making by investors. However, the global economy outperformed in 2023 on the back of easing recessionary fears and inflationary trends, boosting consumption demand. The Reserve Bank of India (RBI) has maintained the repo rate since February 2023, suggesting continued effects from the past adjustments. However, policy rate cuts are anticipated only in the latter half of 2024, which is when some reduction in the cost of capital is expected.

Challenges

What can be done?

To address these challenges, the sector requires wider avenues of funding The potential of structured debt options for residential funding, backed by nonbanking-led financing solutions, is promising Additionally, there is a need for flexibility in funding mechanisms, as AIFs are currently prohibited from accepting funds from banks Implementing regulations that enable non-banking funding would help address this issue.

Nevertheless, there is a silver lining in the form of Private Equity (PE) players PE firms, previously focused on commercial real estate, are now exploring opportunities in the residential segment Prominent developers are showing interest in equity shares, potentially becoming alternative sources of early-stage funding as other avenues dry-up Furthermore, as environmental concerns continue gaining prominence, businesses worldwide increasingly realise the urgent need to integrate sustainability into their fundamental operations. This growing emphasis on sustainable practices is evident through the adoption of various strategies by investors, occupiers, and developers.

To achieve these sustainability goals, companies are likely to turn to green financing options, such as green bonds and loans Currently, businesses can raise funds through green bonds or loans for various purposes, including greenfield development, green retrofitting, and refinancing existing debt

How developers can seek green financing

Green loan provisions

USAGE OF FUNDS

‣ Assessment of the intention of the fund utilization by the lender

‣ Details of environmental benefits of the project with metrics to be submitted by the borrower

PROJECT EVALUATION ➤

‣ Stating framework of measures to lender and ascertaining project study

➤ ➤

MANAGEMENT OF PROCEEDS REPORTING

‣ Green loans can be utilised for:

‣ a) Refinancing existing debt of green projects

‣ b) Existing projects that have regional / national / global green certifications

‣ c) Sustainable greenfield projects

Source: CBRE Research, Q4 2023, company announcements, International Capital Markets Association

‣ Creation of dedicated account for the green funds to ensure transparency

‣ Periodic tracking of fund utilization

‣ Ensure annual reporting of fund utilisation

‣ Provide information of all quantitative indicators along with project description, expected impact and progress update

Contacts

Research

Abhinav Joshi

Head of Research, India, Middle East and North Africa

abhinav.joshi@cbre.co.in

Vidhi Dheri

Head of India Research Operations vidhi.dheri@cbre.co.in

Uttara Nilawar

Associate Director, India Research uttara.nilawar@cbre.com

Rajorshi Sanyal

General Manager, India Research rajorshi.sanyal@cbre.com

Mohamed Atif Khan

Assistant General Manager, India Research

mohamedatif.khan@cbre.com

Mainak Karmakar

Senior Manager, India Research mainak.karmakar@cbre.com

Business Line

Vamshi Krishna

Senior Executive Director, Head – Valuation and Advisory Services, India & South East Asia

vamshi.krishna@cbre.co.in

Bimal Sharma

Executive Director, Head of Retail, India

bimal.sharma@cbre.co.in

Divya Goyal

Executive Director

Head - Investment Risk Monitoring, divya.goyal@cbre.co.in

Alok Kumar Puri

Associate Executive Director

Head of Business Development & Alternate Assets alok.puri@cbre.co.in

Sumit Arora

Associate Executive Director, Head - National Operations & Workplace Strategy, Consulting, India

sumit.arora@cbre.co.in

Business Line Contacts

Advisory & Transactions

Ram Chandnani

Managing Director, Advisory & Transaction Services, India ram.chandnani@cbre.co.in

Consulting & Valuation

Rami Kaushal

Managing Director, Consulting & Valuations, India, Middle East & Africa

rami.kaushal@cbre.co.in

Capital Markets

Gaurav Kumar

Managing Director & Co-Head, Capital Markets, India

gaurav.kumar@cbre.co.in

Capital Markets

Nikhil Bhatia

Managing Director & Co-Head, Capital Markets, India

nikhil.bhatia@cbre.co.in

Global Workplace Solutions

Rajesh Pandit

Managing Director, Global Workplace Solutions, India & Property Management, India, SE Asia, Middle East & North Africa

rajesh.pandit@cbre.co.in

Operations

Rajat Gupta

Managing Director, Operations, India

rajat.gupta@cbre.com

Project Management

Gurjot Bhatia

Managing Director, Project Management, India, SE Asia, Middle East & Africa

gurjot.bhatia@cbre.co.in