DELHI: The richer middle class too is feeling the impact of the slowdown and isn't buying homes like before, badly impacting sales of luxury homes.
In Mumbai, sales of luxury homes - anything above Rs 5 crore - in the last three quarters have dropped 35% while Gurgaon has witnessed a 40% drop in sales of apartments above Rs 3 crore. In Bangalore, sales are down at least 20% in the Rs 2.5 crore and above segment, says real estate research firm Liases Foras.
"When the economy is down and spending is cut, this is the segment that's hit first," says Lalit Kumar Jain, chairman of the Confederation of Real Estate Developers Associations of India.
Property brokers and advisory firms say home sales in this segment have tapered in the last few months. "It's now getting increasingly difficult to sell luxury homes across major markets like Gurgaon, Mumbai and Bangalore," says Mudassir Zaidi, regional director for global property consultant Knight Frank.
Many businessmen, who usually invest their surplus funds in real estate, have seen their cash flows getting tightened because of a slowing economy and the rupee touching 60. "These buyers, who made a majority of buyers in the city, are today out of the market. In fact, even end-users in this segment are today sitting on the fence," says Abhay Khemka of Khemka Investments & Properties, a realty brokerage firm in Gurgaon.
Areas like Golf Course Road Extension and the Gurgaon-Faridabad Road have seen a number of luxury projects being launched in the past year. "It is now taking longer to sell apartments here," says Khemka.
In Gurgaon, many investors who are stuck with apartments they bought earlier are no longer buying fresh ones.
There are some investors who are offering discounts of up to 20% to sell their apartments in under-construction projects compared to what a developer is offering in the same project. On the Golf Course Road Extension, for instance, an investor is selling an apartment for Rs 3.5 crore while the developer is selling a similar apartment in the same project for Rs 4.5 crore.
Prices of apartments in the luxury segment have risen too much in Mumbai, says Pankaj Kapoor, managing director of Liases Foras.
"Luxury housing is driven by increase in prices and developers launched projects in recent months without realising that the market for this segment of apartments is very small," he says.
In Mumbai, areas like Mahalaxmi, Lower Parel, Worli, Lokhandwala, Juhu and Bandra saw a number of such projects being launched. While the supply of homes in this segment in Mumbai has increased by over 30% in the past year, sales have dropped because of a slowing economy and high prices, says Kapoor.
Bangalore is another market where supply has overtaken demand when it comes to the luxury-housing segment. According to Liases Foras, Bangalore has seen supply in this segment increase by 35% in the last three quarters, and this along with high prices and a slowdown in the IT sector has brought down sales. A number of luxury projects have been launched in areas like Bellary Road, Devanhalli, Outer Ring Road, Doddaballapur in north Bangalore and Whitefield.
Bangalore-based developer Puravankara group, for instance, has all approvals in place for a luxury housing project in Bangalore where apartments would be in the Rs 2.5 crore and above range, but the company has decided not to launch the project, for now.
"We have consciously taken a call to launch at a more suitable time as we see a supply-demand mismatch in this segment currently," says Jack Bastian Nazareth, group chief executive officer at Puravankara group.
Brokers in Bangalore say local demand for apartments in this segment has dropped in recent times.