Here's What Makes Affordable Luxury A Win-Win Concept
Financially approachable homes bundled with extravagant amenities is gaining popularity as ‘Affordable Luxury Homes’ in the real estate sector. Luxury homes are catered to High Net Worth Individuals (HNI) as it demands a premium for offering the taste of ultra-modern facilities and use of superlative finishing materials in a prominent locality which makes it unaffordable for mid-income buyers. The highest demand in the real estate sector is witnessed by mid-income buyers who seek luxury lifestyle at a reasonable price. Rapidly increasing demand from this segment cannot be ignored, hence developers are making an effort to reach out to a wider segment by constructing homes with luxury features at affordable rates. The prospect of enjoying high-end facilities without stretching the budget is the key attraction for such projects.
Developers have to compromise on high margins to get into this segment, however, it helps them sustain in the tough market as it is a fast-moving product increasing the client base and churning cash flow thus managing the negative impact of market risk due to dynamic policy changes in a developing country like India. On the other hand, buyers in this segment also have to compromise on certain aspects to own pocket-friendly homes with the experience of luxury living hence these projects are not necessarily built in the posh neighbourhood that offers extra spacious apartments with branded furniture and fixtures.
Developers in this segment ensure that they incorporate luxury amenities in the convenient location with minimal wastage of area. Buyers in this segment are mostly young couples, nuclear families or small business owners who prefer EMI over rent.
Developers have come up with various concepts like smart and compact homes, eco-friendly planning resulting in lower maintenance and energy cost etc to build luxury homes at a lower cost. As they cannot compromise on the décor and basic amenities, developers manage the cost by sourcing fixtures and building material of good quality at reasonable pricing, deciding on the choice of amenities.
Buyers are extremely happy with this unique concept of affordable luxury housing as they can achieve their aspirations of living in a luxury home without paying through their nose. At the same time, developers get the chance to cater to a broader segment rather than serving HNIs and the upper-middle-class segment which contributes not more than 10- 15 per cent in terms of demand for housing with their purchasing power highly co-related to the economic trends.
The many challenges
However, developing affordable apartments on a large scale is a challenge in urban India due to various reasons like the proliferation of slums, unavailability of land parcel, delay in permissions etc. The state has the responsibility to create an enabling environment for affordable housing developers, not necessarily through subsidies but fast-tracking approval processes, encouraging public-private partnerships, reconsidering floor space index (FSI) limits can also be a great support.
Government’s mission of ‘Housing for all by 2022” by Pradhan Mantri Awas Yojana scheme caters to the urban poor, on the other hand, developers in the niche category of luxury segment furnish the high-end demand of HNIs and the upper-middle-class segment. It is of utmost importance to service the middle-class segment which drives the major demand in the real estate sector. Though affordable luxury segment is not a new phenomenon in the market but its demand is rising exponentially. Developers have benefited with this concept gaining more traction alongside buyers who enjoy luxury amenities at a lower cost which is a win-win situation for both.
The author is Managing Director at Paradigm Realty. Views expressed are author's own.