THE high-end luxury real estate market is facing a double whammy. The
demand from domestic buyers has already dried down and now even non-resident
Indians (NRIs), who constituted a significant market for luxury real
estate developers, are developing cold feet.
"With the US property market witnessing a correction due to subprime
crisis, the NRIs are expecting the same to happen in India and are holding
back on their purchases," says Delhi based real estate firm Omaxe
CMD Rohtas Goel, who recently launched a luxury project in the National
Capital Region (NCR).
Three-four years ago, there were only a few big developers into the
game of building luxury homes. But the higher margin in the business
prompted many others to join."The developers entered the luxury
segment without a proper assessment of the market. Now they are faced
with a major supply-demand mismatch. In Punjab, Delhi NCR and Mumbai
suburbs, the supply far outstrips demand," says real estate consultancy
firm Jones Lang LaSalle Meghraj India chairman Anuj Puri, adding that
the exit of speculators and investors has impacted these markets, where
the supply exceeds demand by 25-35%.
Adding to this is the near absence of NRI buyers, who constitute around
20% of the luxury home buyers, according to property consultants estimates,
"The price correction in the US has prompted NRIs to evaluate buying
properties in their local market, where they can easily control and
manage them, unlike in India, where managing property has been an issue
with them," says Cushman & Wakefield Director (residential)
Aditi Vijayakar. She also points out that Indian developers carry a
wrong notion that every NRI is a billionaire and can afford a Rs 2-3
crore property. Besides a demand problem, the competition among developers
has intensified as they are wooing the same segment of NRIs. Says Ansal
Properties and Infrastructure, president (marketing) Kunal Banerjee
says, "The NRI market is a bit too crowded these days. Therefore,
we are looking at attracting PIOs (person of Indian origin)."
PIOs are second or third generation people across the world, whose forefathers
had migrated from India during British Raj and settled abroad. There
is a good population of PIOs in Africa and Australia. The recent attempts
by the Indian government to renew ties with PIOs by hosting Pravasi
Bharatiya Divas may also have a positive push to the marketing efforts
of developers such as Ansals.
Besides targeting a new segment, developers are also offering freebies
to woo NRIs. "Firms are offering free tickets to potential NRI
home buyers to visit India and take a look at their property. This is
done in association with banks, which maintain a list of high net worth
individuals," says Knight Frank India chairman Pranay Vakil.