India is reeling under the continued onslaught of inflation,petrol price hikes and generalised insecurity about where the economy is headed. Against all expectations,property prices in our metros have held firm and even show signs of upward movement. While the man on the street continues to wonder when he will be able to buy a modest home of his own,Indias super-rich are raising palatial homes at truly astronomical expense.
WHAT LIES BENEATH
On the surface,Indias super-rich appear to operate in an entirely separate dimension which has no overlap at all with the real world. There is certainly an element of truth in this – wealth tends to beget more wealth,and at some point a perpetual motion machine grinds into motion – a cycle of money generation which vibrates on a rather unique frequency. The question is,does this frequency broadcast an ever-widening social divide? Not quite.
There are more elements to these super-homes than meets the eye. The trend of Indias extremely high net worth individuals building palatial homes needs to be viewed from various angles. Of course,it is to a great extent a lifestyle statement that broadcasts the fact that the individual and his family have arrived and should be numbered among the countrys wealthiest and most influential people. This statement alone brings inalienable social benefits with it. Fundamentally,these palaces serve the same purpose that the homes of other affluent people do. At the same time,they also encompass a number of practical functions – they serve not only as residences but also as business centres and entertainment complexes. In other words,these residences have strategic importance to their owners and are not mere indulgences.
They also generate considerable employment and commerce in and around the localities they occupy. For instance,Mukesh Ambanis Antilla will provide jobs to no less than 600 people from all levels of the services industry. Many of the supplies that go into building such houses and keeping them operational must necessarily come from the local markets. Coupled with the employment-generation factor,they should be seen as economic dynamos in their own right.
EFFECT ON PROPERTY PRICES
Beyond doubt,the homes of the super-rich create a certain upward pressure on the price tags of luxury and premium homes in the immediate vicinity. However,it is also true that the real estate market in general is not affected,as these luxury developments represent a minuscule segment of the wider fabric.
It must be remembered that the Indian residential property sector operates on three distinct levels. The first is affordable or budget housing,for which the demand is constant and highest. Such housing does not occur anywhere near the prime areas where high net worth individuals tend to build their homes,and remains entirely unaffected by these developments.
The next is mid-income housing,which is most sensitive to price movements. Though certain mid-income housing projects do happen near the prime areas of our cities,buyers in this segment have very little tolerance for unnatural spiking of property prices. Builders of such projects have to keep the larger market in mind and can ill afford to price themselves out of the market. This segment is therefore also not significantly affected,either.
This leaves premium and luxury housing,which does happen in the neighbourhoods in which Indias mega rich build their homes. This rarefied segment caters to a class of buyers that tends to be,at least to a large extent,insulated from the usual financial concerns of home loan interest rates and percentile increases in property rates.
In the super-luxury housing segment,home buying is also a lifestyle-related undertaking. Increased property rates can and are often borne as long as there is a commensurate increase in the capital value and aspirational quotient of the property. Ironically,for this segment,a higher ticket size is sometimes valued more as it attaches an esteem value to the property and limits its accessibility to the masses.
Many tend to look at these super-luxury residential properties as irrational extravagances. However,the ground reality is that the homes of Indias super-rich play their own role in boosting commerce,even as the larger industry remains democratised and oriented to the needs of the masses. l
The author is chairman & country head,Jones Lang LaSalle India