Residential real estate demand has been dismal across key markets this year, and luxury housing is no exception. Across major markets - Delhi, Mumbai and Bengaluru, developers have found it hard to sell luxury homes, as is evident from the decline in prices in Delhi and Bengaluru, and only a marginal increase in Mumbai, a new study shows.
Between September 2016 and September 2017, luxury home prices in Delhi declined 3.1 per cent, while those in Bengaluru went down by 0.8 per cent. Even in Mumbai, the increase was marginal at 0.6 per cent, according to global property consultants Knight Frank.
Home sales across segments have been lacklustre for some time now, and the demand only worsened after the government's move to ban high value currency notes in November 2016.
"Prime residential markets have been under immense pressure particularly since the event of demonetisation. While the move had an adverse impact on the overall residential market, luxury homes sales were worst hit," noted Samantak Das, chief economist and national director at Knight Frank.
As demand in residential real estate market has declined, savvy investors have turned their back on the sector and are now seeking better returns on their investments in other areas like stocks, which have touched record highs and equity mutual funds which have seen a surge in inflows this year.
"The quintessential wealthy investors known to take interests in such (luxury) projects are missing courtesy due to better returns from other investment avenues. Among the top three cities in India the growth in price in this genre has been slowly tapering," added Das.
He expects the overall declining trend in the market to continue over the next one year, at least.
The Knight Frank study tracks movement of luxury residential prices across 41 cities around the world. The Prime Global Cities index rose 4.2 per cent in the year to September 2017.
The top performers included Guangzhou, China, where prices jumped 36.3 per cent, Shanghai luxury home prices climbed 14.9 per cent and prices in Cape Town, South Africa increased 14.5 per cent. Other cities like Madrid, Toronto, Paris, Soul and Sydney also recorded double-digit rise in prices.
However, prices fell sharply in London (down 4.6 per cent), Taipei (down 5.9 per cent), St Petersburg (down 7.0 per cent) and Moscow (down 9.8 per cent).