The cost of comfort

In June this year, industrialist Sandeep Jajodia bought a house in South Delhi’s posh Shanti Niketan area for Rs1.7bn (about Dh112mn), making it one of the highest prices ever paid for a family home in India. In the same month, Mumbai recorded India’s most expensive apartment deal ever when a 3,320 square feet home with a covered car park of 400 square feet on Nepean Sea Road, was sold for around Rs390mn or about Rs105,000 per square foot.

These are not isolated incidents.

Last year, cricketer Sachin Tendulkar built a five-storey bungalow in Mumbai’s Bandra at a reported Rs800mn. Two months later, he was in the news again for a home insurance cover worth a whopping Rs1bn, which quickly drew comparisons with Bollywood star Shah Rukh Khan’s cover of Rs1.1bn for his palatial home, Mannat, also in Bandra.

To borrow a term from investment banking, these transactions fall firmly into the Indian property market’s ‘bulge bracket’. Experts say that prices in this niche segment will continue to increase, even as rising interest rates and waning economic confidence signal a slowdown in the low and mid-tier segments.

Apart from the mind-boggling price tags, differentiation between the bulge bracket and budget buyers include a hodgepodge of factors — ranging from appealing views from all windows to personal views on what is attractive.

An April 2012 study by the Real Estate Intelligence Service at Jones Lang LaSalle India (REIS-JLL) says there are several reasons why the demand for premium residential spaces has shown no signs of weariness over the past two decades. While the opening up of the Indian economy post-liberalisation and the decision to allow foreign direct investment (FDI) in real estate in 2005 are key factors, there was a concurrent percolation of wealth, leading to the rise of a new affluent class — mostly chief executive officers, entrepreneurs and rich non-resident Indians (NRIs). This in turn gave rise to a new category of property developers who anticipated this demand and avoided a void at the top of the market, the study pointed.

While deciding the value of a particular apartment, common concerns include location, floor number, approach, amenities, and of course, exclusivity. If everything is the same, the only differentiator is the view, and it becomes the single most important parameter.

In Mumbai, if the market price for a sea-facing two bedroom apartment is Rs50mn, the owner can quote double the price, and still expect aspiring buyers, according to Amiesha Ved (name changed on request), a Mumbai-based freelance real estate consultant. “A sea view overrules all other price indicators here. Anywhere else, there is discussion — and haggling — over the prevalent price, perceived value, and standard terms such as super-built up area. But if you give them a sea view, buyers will quietly concede that it is worth every million it costs.”

In land-locked Delhi, wealthy home-buyers prefer golf course views. Prominent real estate developer Delhi Land & Finance (DLF) Universal offers many apartments overlooking golf courses, and managing director Rajeev Talwar explains that people like to own their ‘island of peace’. “There is so much stress in urban life that people are willing to pay a premium for green and serene views. Golf-facing apartments easily command a premium of ten to 15 per cent over others,” he explained in an interview with the Economic Times newspaper.

There is a different view for the discerning, in Gurgaon. Supertech Araville, billed as ‘an avant-garde premium residential project’, is located at the foothills of the Aravalli Range. Each unit is open on three sides with semi-circular balconies, giving a panoramic 360 degree view of lush green mountains.

The copycat syndrome also affects luxury home buying. While the nouveau riche would like to keep up with the Jogs, the Jadejas and the Jaffreys, just about everyone is susceptible to follow in a famous person’s footsteps.

Last year, actress Deepika Padukone bought a new Rs160mn apartment in Prabhadevi, in Central Mumbai. The actress was reported to have applied for a bank loan for her 2,800-square foot flat on the 26th floor of Beau Monde Towers. Apartments in the 33-storey tower come with a terrace, four-bedrooms, three parking lots and tennis and badminton courts. The irony of investments in the bulge bracket is highlighted by the fact that since her purchase, several buyers have shown keen interest in buying similar apartments in Beau Monde Towers. Clearly a bulging wallet is all it takes to live in the lap of luxury.