The Indian real estate sector has undergone a significant transformation in recent years, with a spotlight on the flourishing luxury housing segment. Among the major cities, Mumbai has emerged as one of India’s fastest-growing luxury real estate markets. It has witnessed a remarkable surge in sales of luxury apartments priced at Rs 10 crores and above.
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According to the Forbes India Rich List 2023, the city houses 33 billionaires out of the top 100 richest people in the country. Hence, this has slated the demand for luxury properties in the city even more. Among the several pockets in the city, the central and south areas have witnessed an unprecedented surge in demand for these luxury projects. In the first half of 2023, Mumbai’s luxury property market showcased a robust surge in sales, boasting an impressive growth rate of almost 60% than that in 2022.
Remarkably, this surge represents nearly three times the sales growth, achieving its best-ever inventory overhang in the last 15 years. H12023 saw around a 24% decline in unsold inventory of luxury properties in the Mumbai Metropolitan Region (MMR). The financial capital’s luxury real estate market is not merely evolving; it is setting new benchmarks and rewriting the narrative of opulent living.
The following are a few drivers that have contributed to the growth of luxury housing in Mumbai and India at large:
Infrastructure Development and Connectivity- The surge in demand for luxury properties in Mumbai in 2023 is propelled by robust infrastructure development and enhanced connectivity. Several projects such as the Mumbai Metro corridors, the Coastal Road initiative, and the Mumbai Trans Harbor Link have not only transformed the city’s skyline but have also significantly improved accessibility. As these infrastructural developments seamlessly link Central Mumbai, Bandra, and South Mumbai, they are acting as catalysts for increased sales momentum in high-value property transactions.
Difference in Definition of Luxury in Mumbai v/s Other Cities- The definition of affordability and luxury housing in every city is unique in its way. The Housing Affordability Index measures whether a typical family earns enough income to qualify for a mortgage loan on a typical home. Among all other cities, Mumbai’s Affordability Index in 2023 is the highest at 51%, beyond the affordability threshold.
It is worth mentioning that an EMI-to-income ratio exceeding 50 per cent is considered unaffordable, as this is a threshold beyond which banks are generally hesitant to grant mortgages. Due to this, luxury properties are becoming even more costlier for the buyers.
Another notable factor is that the population density of Mumbai is approximately 73,000 per square mile, which makes Mumbai one of the most densely populated cities in the world. This has made real estate a very costly affair in Mumbai. Given that, luxury real estate prices vis-à-vis other cities are beyond believable. However, this has not deterred the bullish attitude of the luxury property buyers.
Capital Gains Cap- Demand for premium homes has shot through the roof during the first eight months of this year, with luxury properties registering a staggering 130% growth and developers increasingly working to cater to this significant surge. The government’s announcement in the Union Budget to cap capital gains at Rs10 crore, effective from April 01, 2023, could be another reason for high sales in this segment. To save tax on capital gains, a lot of luxury property owners rushed in to close their housing deals before the financial year ended in March.
Evolving Lifestyle Preferences- The pandemic has not only made homebuyers realise the importance of owning a home, but it has also increased their aspirations. Potential homebuyers, particularly high-net-worth individuals, are placing an increasing emphasis on properties that not only exude luxury but also seamlessly integrate with their modern and dynamic lifestyles. Buyers in these areas of Mumbai are increasingly preferring bigger-size luxury apartments and duplexes, offering a host of exclusive amenities.
Foreign Direct Investment and NRI Investments- Some of the most notable factors contributing to this surging demand for luxury properties are Foreign Direct Investment (FDI) and investments from Non-Resident Indians (NRIs). The relaxation of foreign investment norms, favourable government policies, and high rental yield have attracted global investors and aroused significant interest among NRIs to purchase properties for self-use or investment purposes.
The luxury segment has particularly benefited from these investments, as these High Net Worth (HNI) individuals seek premium properties that provide long-term value appreciation and good rental income.
Mumbai’s status as an international business hub, combined with its rich cultural heritage and vibrant lifestyle, makes it a compelling choice for NRIs looking for premium real estate.
Over the years, Mumbai has positioned itself as a lucrative destination for real estate investment, due to its potential to offer high capital appreciation and excellent return on investment. Globally, the city ranks among the top choices for investors seeking substantial growth, trailing behind Dubai, Tokyo, and Singapore.
According to NoBroker Annual Real Estate Survey 2023, 24% of the surveyed NRIs have chosen Mumbai as the most preferred destination for investment. The city’s appeal is underpinned by an attractive value proposition, robust GDP figures, and significant infrastructure investments, all of which collectively contribute to the imminent surge in luxury housing prices.
2024 Outlook
2024 is poised to be a landmark year for Mumbai’s luxury property market, fueled by burgeoning demand for homes that epitomise sophistication and taste. Additionally, the growing population of High-Net-Worth Individuals (HNIs) in India, coupled with Mumbai’s increasing allure as a global travel destination, amplifies the demand for opulent living spaces. In response to this trend, Mumbai’s luxury real estate developers are strategically capitalising.
-The author is Co-founder & Chief Product & Technology Officer, NoBroker. Views expressed are personal.
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