71% ultra-rich wish to invest in luxury real estate for capital appreciation

India’s affluent population seems to be growing at an unprecedented rate and is expected to swell by 58% in the next five years. Their rise also contributes to an optimistic trend being witnessed in the real estate sector. Despite an almost 40% rise in property prices over the last 24 months and increase in mortgage rates, a vast majority of Indians (71% of respondents) expressed an intent to buy real estate in the next 12-24 months, demonstrating significant confidence in the market,  according to a survey report by India Sotheby’s International Realty (ISIR).

The annual Luxury Outlook Survey 2024 by ISIR revealed a robust economic optimism among High-Net-Worth Individuals (HNIs) and Ultra High-Net-Worth Individuals (UHNIs), with a staggering 79% expressing confidence in the Indian economy's positive trajectory for 2023-24, compared to 59% last year.

The main reason people buy in real estate now (44%) has emerged to be capital appreciation rather than lifestyle modifications, indicating that investors are returning to the market with an eye toward long-term appreciation.

"India is shaping its destiny far more confidently than ever before. The world’s fifth-largest economy is poised to become the third-largest by 2027, according to the International Monetary Fund. The country’s central bank, RBI, pegs a GDP growth guidance of 7% in 2024,” says Amit Goyal, managing director, ISIR.

He further highlights that the rising economic momentum is reflected in record breaking housing sales numbers in Indian real estate in 2023 and an all-time high stock market and expects the top end of the real estate market to benefit the most in the next 12-24 months. While noting that the affluent class is expected to nearly double to 100 million people within three years, according to Goldman Sachs Group Inc, he says, “India’s ultra wealthy are growing. The robust start-up ecosystems and a growing number of unicorns have added to the swelling ranks of the super-rich.”

Regarding house loan interest rates, the Reserve Bank of India (RBI) is expected to begin lowering rates in 2024, according to 56% of HNIs and UHNIs, signaling a promising future for mortgages and financing.

A startling 83% of wealthy Indians, according to the survey, own several luxury homes, indicating a trend of diverse real estate portfolios among the affluent.

Apart from primary dwellings, respondents displayed a varied array of real estate holdings, with 34% owning commercial real estate, 25% holiday homes, 21% agricultural land, and 20% farmhouses.

"We are witnessing a remarkable shift in economic sentiment, reflecting the resilience and potential of the Indian economy. We are not surprised that there’s been a substantial increase in the launches of new luxury projects across the top seven cities in 2023,” shares Ashwin Chaddha, CEO, ISIR.

He further says that there’s also a shift in sentiments that aligns with a broader acknowledgment of real estate's enduring value and potential for sustained financial growth while noting that investors are strategically positioning themselves for wealth accumulation and creating multi-generational wealth through real estate investments.

Among other findings, Goa was the favored destination for 35% of holiday house buyers, indicating the long-lasting appeal of Goa's lifestyle to India's affluent. The desire to purchase real estate properties abroad was steady at 12%, with Dubai, UAE, and USA, continuing to be the top choices.

A desire to consolidate their portfolios and concentrate on higher-quality properties and assets that generate rent was indicated by 43% of UHNI and HNI respondents. Underscoring the influence of digital transformation even at the top of the luxury housing market, the report suggests that 34% of UHNIs and HNIs are now researching and viewing properties using digital channels, such as 3-D virtual reality and walkthroughs.