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Luxury Real Estate Developers- opportunities and growth in GEN-Z investment
The biggest truth about money is that it does not lie in one hand for long. That is why a wise investor prefers to invest in the sectors and areas where it can further augment and pass it from one generation to another. Among various sectors and asset classes, one of the most preferred and sought-after areas is real estate. Since all the investment options are purely driven by demand and supply mechanisms, they experience value appreciation and growth. However, the supply of certain commodities, goods, and other things can be altered, which is why such securities remain volatile forever. Meanwhile, records and data from the records and data from the past several years validate that real estate is one of those promising sectors that has remained resilient, which is why it allures investors the most and remains the preferred option for investment. Nevertheless, the rising number . of HNI’s and UHNWIs propelled a new trend in this sector, which is why the surging demand for luxury real estate properties can be observed. This development does not only open the door for luxury properties but also offers great opportunities to luxury real estate developers. In this blog, we will try to analyze the trend of such properties and how it can be beneficial for property developers.
The rise of new Maharajas:- According to a startling report by global consultancy firm Knight Frank, the wealth report 2024, India is expected to experience 50% growth in UHNIs in the next five years. This will be the globally highest record till now. India witnessed a rise of 6.1% of UHNI’s in 2023 in comparison to the previous year.
Moreover, the global trend shows 28.1% growth by 2028. There has also been a significant rise in global UHNI’s of 4.2% in 2023 in comparison to its previous year record.
According to the attitude survey in the report, 32% of Indian UHNIs allocated their funds for residential real estate, whereas 14% of such a portfolio is allocated to foreign nations. Nearly 17% of investments by UHNIs are allocated as passion investments.
Investment Pattern:- According to the report, approximately 12% of UHNIs plan to buy a new home in 2024; similarly, the same percentage of wealthy people already purchased the same home in 2023. On average, an Indian UHNI owns nearly 2.57 homes, and 28% of the respondents have already rented out their second home in 2023. Moreover, nearly 22% of global UHNIs preferred to buy a new home in 2024.
Elevating lifestyle through investment:- The survey reveals that Indian UHNIs prefer to invest in luxury products such as costly watches, paintings, rare collections, and so on that can cater to their ambitions and needs for high-end living. Similarly, home is just the next addition to this list. Such UHNIs prefer prime-location homes blessed with high-quality modern amenities and opulence in space. Nearly 17% of UHNIs preferred to buy vintage cars, luxury watches, art pieces, and jewelry. However, the global UHNI investment trends show that they mostly prefer to invest in classic cars and luxury watches.
Investment pattern in luxury real estate:- Another report shows that UHNIs prefer to invest in real estate for various reasons, such as high potential returns, diversifying portfolios, tax benefits, and preserving their wealth. Various tax exceptions and incentives in real estate investment, such as deductions on home loan interest rates and capital gain tax, make it a preferable option for UHNI. Besides, reducing the overall risk exposure and hedging and preserving their wealth for future generations are also prominent reasons why UHNIs prefer investing in luxury real estate properties.
A great opportunity for luxury real estate developers:
Villas and Apartments:- The report further illustrates the changing requirements of UHNIs. The current investment pattern shows the surging demand for upscale, luxurious residential properties. Such properties are blessed with exquisite design, grand embellishment, opulence, and a panoramic view amid lush green surroundings. Prominent cities like Delhi, Mumbai, and Bangalore have witnessed a more consistent growth in demand for luxury properties than traditional residential properties. The average price growth of luxurious properties has been recorded at 4–7% p.a.
Integrated Townships:- Integrated Townships or mixed-use properties are also gaining importance and are preferred by UHNIs. Such properties present a perfect blend of commercial, entertainment, and residential services. Moreover, a low tenancy rate, great property appreciation, and recurring rental income are the factors that not only ensure wealth creation but also great lifestyle amenities.
Branded Homes:- Investment in branded homes ensures a dual benefit as they are managed and taken care of by certain specialized professionals in case they want to let them out. Such investment ensures high resale value, quality services, professionally managed services, and extended security. The investor has nothing to worry about as the property is managed and maintained by a professional group or team. Leasing, renting, and other such ways ensure guaranteed income for investors.
Holiday Homes:- Holiday homes and villas are yet another great property option for HUNIs, as they provide a great escape for people looking for quality time and solitude from their daily routine. Such property options are very popular from a tourism view. A blend of perfect serene views and amenities makes such properties a great destination for travelers and solitude seekers. Furthermore, the popularity of having a second home rose to USD 1.394 billion in 2021, which is 88.63% greater in growth since the pre-COVID sale.
Commercial Property Investments:- The inception of REITs in India has allowed retail investors to participate in the commercial real estate sector. Strong demand from e-commerce, retail, co-working spaces, and IT/ITES demand for various infrastrural supports paved the way for premium-quality office space, mixed-use properties, and retail properties. Long-term rental benefits, greater capital appreciation, and various other facilities ensure the prospect of such properties, as UHNI’s prefer to participate in this area. The record shows that over 60 million square feet of property leasing have been recorded in 2023.
Conclusion:- As per the Knight-Frank wealth report 2024, 90% of Indian UHNI expressed their views that they expect a great growth in their income in 2024, whereas 63% believe at least 10% growth in their wealth. This information can be very crucial for luxury real estate developers, as keeping a close look at the industry and investment patterns of HUNI’s presents a great opportunity for such properties. Robust economic growth and a stable government with a great vision for development work as a tailwind that propels the growth of real estate for longer.
