Bengaluru Defies National Surge in Demand for Luxury Homes Over ₹4 Crore

Bengaluru’s Luxury Home Sales Slump in H1 2024: CBRE Report

In a surprising development, Bengaluru has diverged from the national trend of rising luxury home sales, recording a significant drop in the first half of 2024. According to a recent report by CBRE, Karnataka’s capital was the only major Indian city among the top seven to witness a year-on-year decline in sales of high-end properties priced at ₹4 crores and above. This shift marks Bengaluru as an outlier in the country’s luxury real estate market, which has otherwise seen robust growth.

A Sharp Decline in Luxury Sales

The CBRE report paints a stark picture of Bengaluru’s luxury housing market, revealing that only 10 luxury units were sold in the first six months of 2024. This figure is in stark contrast to the 200 units sold during the same period last year, representing a dramatic drop that has raised eyebrows across the industry. Ram Chandnani, Managing Director of Advisory and Transactions at CBRE India, attributes this sharp decline to a temporary dip in the availability of luxury homes. Chandnani suggests that the slowdown may be a short-term phenomenon, with potential for recovery in the latter half of the year. The reduction in supply could be a result of various factors, including delays in project completions or developers holding back on new launches, possibly due to market uncertainties. Additionally, the high cost of land in Bengaluru, coupled with regulatory challenges, might have contributed to this decline. However, Chandnani remains optimistic, indicating that the market is likely to rebound as new projects come online and demand picks up, particularly during the festive season.

Mid-Segment Housing: A Silver Lining

While the luxury segment has struggled, Bengaluru’s mid-segment housing market has shown remarkable resilience. A separate report by Knight Frank India indicates that homes priced between ₹50 lakh and ₹1 crore accounted for a significant 43% of the total 27,404 residential units sold in the city during the first half of 2024. This segment’s strong performance underscores its importance in driving Bengaluru’s real estate market amidst broader challenges.

The mid-segment market’s success can be attributed to several factors. Firstly, there is a growing demand among middle-class buyers for affordable yet well-located homes, especially in a city like Bengaluru, where IT professionals and young families are constantly seeking housing options that offer a balance between cost and convenience. Secondly, developers have been focusing on this segment by offering competitive pricing, flexible payment plans, and a range of amenities, making these homes attractive to a wider audience.

This resilience in the mid-segment also reflects a shift in consumer preferences. With rising interest rates and inflation, many potential luxury homebuyers might be opting for more affordable options, leading to a surge in mid-segment sales. Moreover, the mid-segment is less volatile compared to the luxury market, which can be more susceptible to economic fluctuations.

The Road to Recovery for Luxury Homes

Despite the current downturn in Bengaluru’s luxury home sales, industry experts remain hopeful about the future. Chandnani predicts a recovery in the luxury segment during the second half of 2024, driven by the upcoming festive season—a period traditionally associated with increased real estate activity in India. He notes that the overall luxury residential market in India remains strong, with approximately 8,510 luxury units sold across the country in H1 2024, marking a 27% increase from the 6,700 units sold during the same period in 2023.

This national growth in luxury home sales is largely driven by a shift in consumer behavior, with affluent buyers increasingly seeking homes that offer more space, privacy, and enhanced amenities. The pandemic has accelerated this trend, as more people now prioritize comfort and exclusivity in their living spaces. Consequently, the luxury segment, while currently sluggish in Bengaluru, is expected to regain momentum as these preferences continue to shape market dynamics.

National Trends and Top Performing Cities

While Bengaluru grapples with its unique challenges, other major cities in India have experienced a surge in luxury home sales. The National Capital Region (NCR) emerged as a top performer, recording a 13.8% year-on-year increase in luxury sales, with 3,300 units sold in the first half of 2024. Pune also saw an impressive growth trajectory, with luxury home sales increasing nearly six-fold to approximately 1,100 units, up from just 200 units in the same period last year.

Delhi-NCR, Mumbai, and Hyderabad together accounted for nearly 84% of the total luxury housing sales in India’s top seven cities, highlighting their dominance in the high-end real estate market. These cities have benefited from a combination of factors, including a steady influx of high-net-worth individuals (HNWIs), increased interest from NRIs, and a greater focus on developing luxury properties with world-class amenities.

Future Outlook: Cautious Optimism

Looking ahead, Anshuman Magazine, Chairman and CEO of CBRE for India, Southeast Asia, the Middle East, and Africa, remains cautiously optimistic about the luxury housing market’s prospects. He expects continued growth, particularly for properties priced at ₹4 crores and above, as buyers increasingly prioritize quality, location, and infrastructure. However, Magazine also anticipates a stabilization in capital value growth, suggesting that the market will become more discerning, with a greater emphasis on core project fundamentals.

A Broader Perspective on India’s Real Estate Landscape

On a broader scale, the Indian housing market has demonstrated resilience, with 1,56,000 units sold and over 1,53,000 new units launched across all categories in the first half of 2024. Mumbai, Pune, and Bengaluru led the way, accounting for 63% of the total residential sales in the country during this period. In terms of new supply, Mumbai, Pune, and Hyderabad captured a combined 64% share of new launches, indicating a robust pipeline of projects in these cities. While Bengaluru’s luxury home market faces temporary setbacks, the city’s overall residential sector remains dynamic, with strong performances in the mid-segment and ongoing developments that promise future growth. As the market continues to adapt to evolving consumer preferences and economic conditions, Bengaluru’s real estate landscape is likely to experience diverse trajectories, shaped by both challenges and opportunities.