Pune and MMR's Luxury Housing Market: A Deep Dive
The pursuit of comfortable, luxurious living is driving substantial demand for upscale real estate in cities like Mumbai and Pune. This article explores the factors behind this surge in the mid-range and luxury housing segments in these regions and examines potential market shifts in 2024.
Drivers of Demand
The shift to work-from-home arrangements has fueled investments in larger, amenity-rich homes, especially in desirable locations like Pune and the Mumbai Metropolitan Region (MMR). These areas witnessed significant growth in Q3 2023, at 42% and 8% respectively. The Union Budget 2023 also played a key role, introducing a ₹10 crore cap on tax deductions for long-term capital gains. This spurred high-end home sales as buyers aimed to capitalize on tax benefits before the changes took effect in April 2024.
Experts point to the desire for upgrades and the rush to optimize tax savings as major factors driving luxury housing demand.
Price Fluctuations and Affordability
Property values in Mumbai have consistently surpassed those in Delhi, Bangalore, and Hyderabad, with the pandemic further exacerbating the trend. Developers attribute this increase to higher material costs, rising loan interest rates, and the growing preference for spacious residences. Significant NRI investment, particularly from Gulf countries, also contributes to Mumbai and Pune's luxury housing demand.
Post-pandemic salary increases, notably an 18% rise in Mumbai compared to the 11% metro average, also inflate prices. Knight Frank’s 2023 Affordability Index highlights Mumbai as India's most expensive city, with an EMI-to-income ratio of 55%, meaning residents allocate over half their earnings towards home loan repayment.
Despite rising prices, residential sales remained robust. MMR recorded 1,53,870 unit sales in 2023, up from 1,09,730 in 2022, while Pune saw sales jump from 57,145 units in 2022 to 86,680 units in 2023.
Revenue and Market Trends in MMR
The burgeoning luxury housing sector in MMR has significantly impacted the Maharashtra state government's revenue collection. Between January and July 2023, 72,700 properties were registered, generating ₹6,500 crore. The average property value reached ₹1.9 crore, a 65% increase from February 2022's ₹1.18 crore.
This trend isn't isolated. Stamp duty revenue for the state rose 22% to ₹10,850 crore last year. CREDAI National President Boman Irani emphasized the post-pandemic shift in homebuyer sentiment as crucial for economic and sector growth. "Property registrations for units valued at ₹1 crore and above have sharply increased from 52% in 2020 to 57% in 2023 due to the demand for larger homes.”
A study by Sotheby’s International Realty and CRE Matrix showed sales of luxury residences doubling, propelled by demand for enhanced amenities, spacious layouts, and favorable loan rates.
Property Sizes and Configurations
While average flat sizes have decreased in MMR and Kolkata by 2% and 5% respectively, other major cities like Hyderabad and Delhi NCR experienced an increase. Space constraints in MMR, coupled with greater residential demand, result in more compact homes, with 2-BHK apartments dominating the market.
The average desired home size in Mumbai currently stands at 749 square feet, down from 840 square feet in 2022. Overall, MMR's average sizes have increased by just 1% between 2019 and 2023. Pune, however, witnessed a rise in average apartment size from 980 square feet in 2022 to 1,086 square feet in 2023.
Future Outlook
The Luxury Outlook Survey 2024 indicates that the 2023 surge in luxury home demand is expected to endure. Despite a 40% price increase in the past two years, 71% of respondents plan luxury home purchases in the coming year, with 56% anticipating RBI interest rate cuts in the 2024 Budget. Modern luxury residences now transcend mere opulence, encompassing unique experiences, premium amenities, and top-tier services, particularly attractive to individuals seeking a more lavish lifestyle in urban areas. Consequently, the demand for luxury and mid-income residences in MMR and Pune is projected to escalate further.