Live in style: Prices of luxury homes down 25%

Prices of luxury apartments and penthouses in upscale areas have crashed across the country

The driveway lined with palm trees encircles a verdant garden and leads to the five-bedroom bungalow. There is a swimming pool and lawns large enough to set up a tennis court. Inside, there is ample space for an airy yoga room, meditation centre, private dining area for the family and another for guests.

This 2.5-acre farmhouse at Rajokri in Delhi is part of Westend Greens, a gated community of farmhouses, many of which are owned by the city’s leading business families: the Kanwars of Apollo Tyres, Shrirams of DCM, Singh brothers of Fortis, and Singhanias of JK. Top multinational honchos and senior diplomats too stay here.

The roads here are cleaned thrice a day, and 12 gunmen are on guard round the clock.

The road inside the gated community where the farmhouse is located.

The farmhouse is on the block and the news is that its price has cracked. “Before demonetisation, this would have cost Rs 80-100 crore,” says Deepak Singh, a real estate agent who deals in farmhouses at Westend Greens. “Today, the asking rate is 10 per cent less.” 

Others in the luxury real estate business estimate that farmhouse prices in Delhi are actually down 20 to 25 per cent. 

Likewise, prices of luxury apartments, penthouses and independent bungalows in upscale areas have crashed across the country. If you have dreams of living in one such home, now is the time to go for it. 

The 1,100-square-yard farmhouse at Ghitorni in Delhi has five bedrooms, a swimming pool and space to park eight cars. (GHITORNI FARMHOUSE: Then Rs 8-10 cr; Now Rs 6-7.5 cr). Photo: Courtesy Inner Circle Projects

If the price is still out of your reach, you could think of taking one on rent. Faced with excess supply and weak demand, rentals are down to 2 per cent of capital value, or even less, from 3 per cent two years ago. Rents of farmhouses in areas like Ghitorni, Kapashera and Mehrauli, for instance, have softened up to 40 per cent now from Rs 7-12 lakh a month two years ago. 

In the last real estate boom, most developers launched a string of high-end projects. Land prices had become astronomical and such projects were the best way to maximise returns on their investments. 

And then the market tanked. Builders were stuck with unsold inventory, which was increasingly becoming costly to hold on to. Prime Minister Narendra Modi’s crackdown on black money, through demonetisation of high-value notes, proved the final straw, sending prices on a southward sojourn.

Mumbai’s luxury residence segment is under stress. A premium apartment, with a carpet area of 2,200 square feet, in a sought-after address in South Mumbai sold for Rs 21 crore in January. The owner had put it on the market in July expecting Rs 24 crore. Chetan Narain, a consultant who specialises in high-end homes, convinced him to settle for Rs 22 crore. After demonetisation, another Rs 1 crore got shaved off.

Bengaluru, predominantly a “cheque market”, too has seen prices come off their peaks. “It’s possible to get good discounts in the luxury sector; builders are on board with this,” says Aakanksha Anand, senior manager (residential services), Colliers International, a global real estate consultancy. 

In the Yelahanka area, for instance, one of Anand’s clients is hoping to get a place priced at Rs 7 crore for Rs 5 crore — the deal currently stands at Rs 6.2 crore.   

While few luxury real estate companies admit they have dropped prices, many are ready to offer discounts, says the sales and marketing head of a Delhi-based developer on the condition of anonymity.

The CEO of a company in Bengaluru, who doesn’t want to be named, bought a luxury apartment on the Outer Ring Road, where a number of companies are located, for Rs 2.5 crore after he got the builder to reduce the price by Rs 30 lakh. With cash drying up after demonetisation, he was able to extract this discount from the builder. 

When Lodha World Towers in Worli were announced around 2010, the prices here were expected to be Rs 7.50 crore to over Rs 100 crore. (LODHA WORLD TOWERS: Then Rs 7.5 cr onwards; Now Rs 7.2 cr onwards). Photo: Suryakant Niwate

Lodha Developers, counted amongst the financially sound builders of Mumbai, was recently downgraded by Moody’s, saying, “the operating environment for the Indian real estate sector will remain weak post demonetisation”. 

When the Lodha World Towers in Worli were announced in 2010, reports said the flats here were expected to claim prices from Rs 7.50 crore to upwards of Rs 100 crore. A call to a local sales representative this week revealed that the prices in one of the towers, which will be completed by 2020, are currently at Rs 7.20 crore for a three-bedroom apartment and Rs 8.40 crore for a four-bedroom apartment.

In the newspaper classified sections, properties in well-to-do neighbourhoods are being advertised with catchy messages: “Huge correction after demonetisation” or “rates slashed heavily”.

And top-end properties are being advertised in mass-circulating general newspapers. Ads for such premium homes are also being SMSed at large. Cold calls are no longer uncommon either. 

Real estate consultants say they are receiving multiple requests from builders who need help to sell flats in luxury projects. 

Five- and six-bedroom penthouses spread across 6,000 sq ft at Tata Raisina Residency in Gurugram have seen prices fall by 20-25%. (GURUGRAM PENTHOUSE: Then Rs 6.5 cr; Now Rs 5 cr). Photo: Sanjay K Sharma

Much before upscale condominiums like DLF Aralias and Magnolias entered Gurugram, the king of this segment was ITC’s The Laburnum. “A 5,000-square-feet, four-bedroom villa used to cost Rs 8 crore,” says Arvind Mehtani of Settlersindia.com, a real estate company. “Now it goes for Rs 6.75-7 crore.” 

And the rent, which was upward of Rs 2 lakh a month (with an additional Rs 15,000-odd for maintenance), is down to Rs 1.25 lakh. “The rent for a four-bedroom penthouse is also down from Rs 2.50 lakh to 1.70 lakh, maybe even lower,” says Mehtani.

In Delhi’s premium residential areas like Golf Links and Jor Bagh, prices have fallen 15 to 18 per cent. A 375-square-yard bungalow in Golf Links that cost Rs 85 crore is today pegged at Rs 70 crore.

“Rents too have been hit, by 40 per cent,” says Amrit Lal who deals in bungalows in these opulent areas. “After demonetisation, several tenants vacated the bungalows.” With inventory up and demand down, home owners have no choice but to settle for lower rents.

A doctor couple that had been scouting for a place on rent in central Delhi suddenly found one for Rs 3 lakh a month. “The last time we had checked, the asking price was Rs 5 lakh,” says the husband.

“It is always wise to buy when there is panic in the market,” advises Om Ahuja, CEO (residential) of Bengaluru-based Brigade Enterprises. He cites the example of the “so-called real estate meltdown” of 1996. “People who got scared then and didn’t take a decision had to pay a higher price in 2001.”

A similar scare happened in the market in 2008, and people expected prices to come down. “But those who brought property then made a lot of money,” he adds.

There is another factor driving down prices. A lot of people had bought high-end flats as investments. With a decline in their capital value and rental income down to 2 per cent (of the capita value), it has become the worst performer amongst all asset classes: equity, bullion and fixed deposits. Many investors are, therefore, desperate to exit, even at a discount. 

Take the recent case involving a deal between the managing directors of two companies: the one based in Mumbai was interested in the bespoke villa stretching over three levels in Whitefield, Bengaluru. 

The negotiations started at Rs 8 crore in July, and soon settled at Rs 7 crore. The token money was given and legal papers were drawn up. The buyer planned to put the villa on rent and a tenant had also been found. The registration was slotted for the second half of November. Now, the negotiations have been re-opened because the buyer feels he can strike a better deal, especially after he got the indication that the seller wanted some payment in cash.

Bargaining power has swung firmly to the buyers’ side. So, if a luxury home is what you’ve been aspiring for, this might just be the time to strike a deal.