Informist, Thursday, Sep 16, 2021
By Janaki Krishnan
MUMBAI – The COVID-19 pandemic may have pulled the rug from under the realty market's feet, but not all segments are as shaken. At least not the luxury houses, if one were to go by tony residence broker India Sotheby's International Realty's average deal size that rose around 40% to 180-190 mln rupees since the pandemic.
"There has been a good bull run in the capital markets, which has led to people create more wealth and then park some of those gains in real estate," India Sotheby’s International Realty Chief Executive Officer Amit Goyal told Informist in an interview.
High net-worth individuals are also consolidating their real estate holdings and buying larger residences, he said.
In the last 12-15 months, the firm has concluded well over 50 transactions of million dollar-plus homes in India and Sri Lanka, and in 2021, expects to maintain or even better the last two years growth rate of 40%.
Globally, Sotheby’s International Realty saw transactions volume of $150 bln in 2020, and the figure for the first six months of 2021 has already doubled from a year ago.
Following are edited excerpts from the interview with Amit Goyal:
Q. What has been the demand trend in India for luxury homes, million dollar-plus residences in the last 15 months?
A. We've seen very robust demand for the last 15 months and this is primarily due to the pandemic teaching all of us the importance of home. Also, a good amount of money has been made in the equity markets - not only in the listed space but also in the unlisted space. Start-up promoters have sold their stakes, there have been IPOs (initial public offerings). There has been a good bull run in the capital markets, which has led to people creating more wealth and then parking some of those gains in real estate.
We are also seeing past supplies getting picked up by buyers, so there could also be a price increase going forward.
There are some trends emerging that we have not seen before. Earlier, it was very seldom that the offer or bid price would be taken up by the buyer. This has been the norm for many years, but of late we have seen with a rise in demand, we are seeing sellers not very flexible in reducing the price. We have seen multiple transactions of late where there has not been much negotiation between the buyer and seller on the listing price. There were also some transactions where we got multiple bids on the same listing, and we were able to command a higher price than what was listed ... because there was a sort of bidding war.
Q. How do you assess the supply of luxury housing?
A. Supply has been there for a while. You see, for the last few years this segment has not seen as many transactions as used to be the case as overall sentiments have been down. But now most of the inventory is seeing good demand, and there has been a pick-up in transactions, especially in the last 15 months.
Q. For India Sotheby’s Realty what is the kind of growth you have seen prior to the pandemic, during the pandemic and how do you see the growth going forward?
A. This year we intend to grow our business by 40-50%
Q. How about the average deal size, is that constant or increasing?
A. Pre-pandemic we were doing deals in the range of 130 to 140 mln rupees on an average and currently our average is 180 to 190 mln rupees. Our focus is more on increasing the number of transactions and keep our average ticket size the same ...we are quite happy with our current average deal size which is higher than what we saw before.
Q. Demand for luxury housing in India has been uncertain...some builders are finding it difficult to offload their luxury inventory. Is it a segment-wide phenomenon or something specific to those projects?
A. There are a couple of things I would like to mention. For under-construction projects potential buyers are very choosy who they are buying it from, when it comes to buying a 100-mln-plus rupees unit from a developer. So they look at the track record of the developer and the build quality. For most buyers, after burning their fingers over the past few years with a lot of developers and projects, today there is a lot of resistance and apprehension among them to pick up under-construction units.
That is one part of the question.
The second is that in many of these projects, when they were pre-launched and soft launched there was some inventory that got sold - about 50-60% of the project - and that inventory got sold at a particular price. It was picked up mostly by investors because at that time investors were buying up such inventory. That inventory is now available in the retail market and now when developers are pricing their products at 20-30% or even 40% higher than what they sold initially during pre-launch, those prices are available in the market through resale...so for buyers to pick up units at a much higher price from the developer becomes a tricky situation.
Q. Has there been any change in the motives to buy luxury residences? Is it an investment or are they primary homes?
A. This used to be the case where people would pick up real estate for investment purposes, then in the last seven to eight years we've hardly seen any investment demand. Most of the buyers today, more than 90% of them, are end-users.
Most HNI families, our clients, are looking to consolidate their portfolios over the last few years. Those who are sitting on multiple real estate assets, which they purchased for the purpose of investments, they are now looking to consolidate their overall portfolio and sell assets where they don’t intend to stay. The proceeds are being reinvested in larger primary homes.
End
US$1 = 73.44 rupees
Edited by Snigdha Kuttikat
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