Selling dreams. India’s diaspora is driving a property boom in the world’s fifth-largest economy. New luxury home launches by saleable area in the top seven cities reached 231 million square feet in the year to March, up 48% year-on-year, according to ICRA, a credit rating agency. Average luxury home prices in places like New Delhi, Bengaluru and Chennai rose 18% in the three months to the end of June. It’s a useful tailwind for GDP growth.
After a decade-long housing market decline until 2019, real estate is once again gaining traction as an investment option, even for very high net worth individuals. Since the pandemic, consumers are also preferring larger homes. In addition, the Prime Minister introduced a landmark regulation Narendra Modi The government is demanding timely delivery of the project and is restoring the confidence of ordinary buyers.
Non-resident Indians are emerging as an especially strong source of demand; they will be the source of 20% of total primary sales by 2025, up from 10% in 2019, according to NoBroker. The appetite of these buyers appears solid: they have a strong emotional connection to their homeland and plan to use the properties in the future, the leading technology-based real estate services firm notes.
The frenzy has sent shares of India’s top property developers into overdrive. Shares of DLF, India’s largest listed real estate company, valued at $24 billion, have soared 57% over the past year and those of Macrotech Developers, part of the Lodha group, have gained 53%. Over that period, the Nifty Realty index has outperformed the broader Nifty 50 benchmark by 47 percentage points. This week, investors have bid $39 billion for shares of DLF, India’s largest listed real estate company. initial public offering Bajaj Housing Finance, a mortgage lender that focuses on wealthy borrowers, said new launches of affordable properties are stagnating, as overall consumption in the economy remains subdued.
The luxury boom and non-resident Indian purchases are important because property is a major source of overall investment, which accounts for about a third of GDP Demand for private real estate, including housing, led the rise in investment, more than public capital spending, HSBC economist Pranjul Bhandari noted in a research note in March.
India’s breakneck economic expansion is beginning to moderate; GDP growth slowed down to 6.7% in the April-June quarter. Demand for luxury homes is also slowing at a less rapid pace: new launches are set to rise by around 27% year-on-year in the current financial year, according to ICRA. However, overseas Indians will remain important buyers. They send remittances back home and respond to official calls to buy diaspora bonds, issued by the government in times of crisis. They are now favouring investment too.
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