Luxury Real Estate's Wishlist for the Union Budget 2024-25

The luxury real estate market in India exhibited remarkable resilience in 2023, navigating through global economic uncertainties with an impressive upswing in demand.

A breathtaking vista of Mumbai's Marine Drive, where the Arabian Sea shimmers like scattered sapphires, mirrored in the glass facades of opulent high-rises. Inside, residents unwind in expansive penthouse apartments, sipping vintage wine while enjoying panoramic cityscapes.

This is the world of India's luxury real estate, a domain where affluence waltzes with exclusivity, and every detail plays a concerto of extravagance.

But as the curtain rises on 2024, this symphony beckons a new conductor - the Union Budget. Its notes will determine the rhythm of the dance between aspiration and opportunity in this coveted domain.

The Indian luxury real estate market, estimated at USD 18 billion in 2023, pulsates with an inherent resilience. It weathered the pandemic storm and in 2023, witnessed a 25% YoY price surge in key metros like Delhi and Mumbai (Knight Frank Wealth Report 2023).

This can be attributed to a confluence of factors – rising HNIs, strong stock market performance, and a persistent appetite for trophy assets.

As we anticipate the Union Budget 2024, several key expectations emerge. Industry stakeholders eagerly await potential measures that could grant "industry status" to the real estate sector, facilitating easier access to finance, streamlined regulations, and enhanced tax benefits.

Additionally, there is a pressing need for GST rationalization, relaxation in FDI norms, and increased home loan interest deductions to stimulate demand and foster sustainable growth.

The upcoming budget holds the potential to shape the trajectory of India's luxury real estate in 2024, addressing industry concerns and providing the necessary impetus for continued success.

Current Market Scenario

The luxury real estate market in India exhibited remarkable resilience in 2023, navigating through global economic uncertainties with an impressive upswing in demand.

This was particularly evident in key metros such as Mumbai, Delhi, Bengaluru, and Hyderabad. The resilience can be quantified by the substantial 80% surge in luxury housing sales in Mumbai during Q3 2023, signaling a robust pent-up demand.

This positive momentum can be attributed to increased wealth generation and the prevailing "flight to quality" trend.

Unlike the volatile fluctuations witnessed in previous years, the luxury segment experienced price stabilization in 2023.

Developers, cognizant of the market dynamics, adopted a cautious approach, steering away from aggressive price hikes and concentrating on inventory management.

This prudent strategy has contributed to a more stable pricing environment, fostering a sense of confidence among potential buyers.

The evolving preferences of luxury real estate buyers have become a defining aspect of the current market landscape. Sustainability practices, integration of smart home technologies, and the inclusion of wellness amenities are gaining prominence.

Data from reputable sources such as Knight Frank India, PropTiger, and Anarock Property Consultants underscore the shift in buyer priorities and the industry's proactive response to these evolving demands.

Key Pre-Budget Expectations

Industry stakeholders are fervently advocating for the recognition of "industry status" for the real estate sector, and with good reason. This long-standing demand holds significant importance, promising a cascade of benefits.

Should this status be granted, it would streamline access to finance, untangle regulatory complexities, and offer enhanced tax benefits. The implications are vast, potentially catapulting the luxury real estate segment into a more favorable and growth-oriented environment.

A pivotal expectation centers around the rationalization of the Goods and Services Tax (GST) applicable to under-construction luxury properties.

The proposal to reduce the high GST rate of 12% on these properties is rooted in the desire to incentivize buyers and alleviate cost burdens for developers.

Additionally, the introduction of a tiered GST structure based on property value is being championed, aiming for a more nuanced and equitable tax framework.

Easing foreign direct investment (FDI) norms emerges as another key pre-budget expectation.

By facilitating a more conducive environment for international investors, the luxury real estate sector can potentially tap into global capital, fostering a robust funding ecosystem that fuels growth and innovation.

Addressing affordability concerns, a proposal to raise the income tax deduction limit under Section 24 is on the table. This initiative could have a profound impact on the luxury real estate market, making high-end properties more accessible and stimulating demand.

Finally, the focus on infrastructure development remains a steadfast expectation. Continued investment in infrastructure around luxury projects is deemed crucial, not only for enhancing connectivity but also for augmenting the overall value proposition of luxury properties.

City-Specific Insights

Mumbai, a stalwart in the luxury housing market, experienced a resurgence in 2023 with a notable 80% surge in luxury housing sales in Q3. Specific areas like Worli, Colaba, and Lower Parel witnessed heightened demand.

Looking ahead to the Union Budget 2024, pre-budget expectations hinge on the possibility of relaxation in floor space index (FSI) norms. This anticipation stems from the industry's call for regulatory measures that could pave the way for more expansive luxury apartment offerings in Mumbai.

Delhi NCR, characterized by steady demand for luxury villas and penthouses, showcases resilience in the luxury segment. High-demand areas such as Gurgaon and Noida have seen sustained interest.

The pre-budget outlook is optimistic, with an expectation of infrastructure development initiatives around major expressways. These initiatives are envisioned to further enhance the value proposition of luxury properties in the region, aligning with the evolving preferences of discerning buyers.

Bengaluru, known for its robust real estate market, witnessed strong demand in 2023, particularly for spacious apartments and integrated townships. The average price per sq ft ranged from Rs. 12,000-15,000.

Looking ahead to the Union Budget, industry stakeholders are hopeful for potential measures like single-window clearance systems.

Such measures could streamline processes, attracting more developers to cater to the increasing demand for luxury housing in Bengaluru.

Investment-Specific Trends

One notable trend is the rising prominence of Real Estate Investment Trusts (REITs) in the luxury segment.

In recent times, REITs have garnered increased popularity, offering investors an alternative avenue for indirect ownership of premium real estate assets.

The data indicates a growing traction, emphasizing the potential of this investment vehicle to play a pivotal role in the luxury real estate landscape.

Anticipation mounts for budgetary support for REITs, including potential tax breaks on dividends. Such support would likely serve as a significant catalyst, encouraging further growth and participation in the luxury real estate investment domain.

Simultaneously, the luxury real estate market is witnessing a surge in demand for second homes in scenic locations, exemplifying an evolving lifestyle choice among high-net-worth individuals.

Areas like Goa, Mahabaleshwar, and Coorg are becoming sought-after destinations for luxury second homes.

As industry stakeholders look toward the Union Budget 2024, pre-budget expectations revolve around the development of tourism infrastructure in these scenic locales.

Such initiatives would not only enhance the appeal of these destinations but also contribute to the overall value proposition of luxury second homes.

To Wrap up

The outlook for the luxury real estate market in 2024 is promising, backed by robust data. Despite global uncertainties, Mumbai witnessed an impressive 80% surge in luxury housing sales in Q3 2023 (source: Knight Frank India).

Stable prices, such as Delhi NCR's Lutyens zone averaging ?1.25 lakh per sq ft in 2023, reflect market resilience (source: PropEquity).

The forthcoming Union Budget holds significant weight, with industry expectations centered on achieving "industry status" for real estate, potential GST rate reductions, and increased home loan interest deductions.

These measures, supported by data trends, are crucial for sustaining the positive trajectory of the luxury real estate sector in India, emphasizing the pivotal role government policies play in shaping its growth and resilience.