With the revival in Indian residential real estate well underway, it is pertinent to turn our attention to which formats are in highest demand at every given juncture. Such awareness is primarily useful from an investor’s point of view, but anyone who tracks Indian real estate out of pure academic interest cannot fail to be interested, either.

Despite a lot of ambiguity attached to the term, ‘affordable housing’ rules the roost. With the employment market opening up once again, the masses need homes as never before. Midincome housing, which comprises of the 2/3BHK formats in not-so-remote locations, is definitely selling much better this quarter – sales across metros have increased by upto 15-20% in the Rs.30-45 lakh categories.

That said, the latest development on Indian residential properties is rather noteworthy – luxury housing (in the Rs. 80 lakh to Rs. 1 crore plus bracket) which had taken an extreme back seat during the slowdown phase, is also making a convincing comeback. More interestingly, while many large developers are concentrating on getting volumes in this segment down in concrete, there is a category of builders who are cashing in on a rather specialized niche – the boutique homes category.

A UNIQUE BUSINESS MODEL

This is based on some sound reasoning. The fact is that luxury boutique homes are selling a lot better today than volume luxury properties, since there is a scarcity for them. Such properties are constructed in limited numbers in high-profiled locations that are in extremely high demand among the super-rich. The demand for such properties has definitely risen by 30-40% over the last year, ever since the prices bottomed out on the market.

Not surprisingly, there exists a class of builders who cater only to the particular market segment. They find this format a unique business proposition, since it is possible to construct and delver boutique luxury projects within six to eight months, while volume luxury projects take much longer to complete.

WHAT CONSTITUTES A BOUTIQUE HOME?

Developers of boutique luxury homes throw in every possible high-end amenity into such properties and factor in the personal specifications of individual buyers, as well. Unlike volume luxury projects, boutique homes are extremely unique residential propositions.

Moreover, unlike volume luxury projects, they circumvent the investor community entirely and focus exclusively on end users. Boutique properties are defined by extreme quality rather than volume. Demand for them comes from the HNI segment, is focused and extremely high and competitive. Typically, there will be no more than 5-10 units to a project, and each of these units will be fully embellished with ultra-luxurious specifications further customized to the individual buyer’s personal wishes.

Interiors, furnishings and lifestyle accessories will be uncompromisingly top of the line. In Mumbai, one the prominent players in the boutique homes segment is the Orbit Corporation Ltd. The Orbit Arya on Nepean Sea Road, where the rates range from Rs.45,000-50,000/sq.ft., is a prime example of their work. Uppals, one the major boutique homes developers in the North, are coming up with boutique luxury housing projects in South Delhi in areas such as Vasant Kunj and Shanti Niketan, where the rates for boutique luxury homes would be around 30,000-40,000/sq.ft.

A CONCLUDING NOTE

With such high potential in boutique homes, one could be pardoned for asking why more developers are not concentrating on this segment. However, the fact is that while such projects are definitely in high demand among HNIs, they still about a highly focused and exclusive niche clientele. The margins are high, but the volumes are negligible. Boutique home projects depend on availability of small land parcels or redevelopment opportunities in high profile areas. The developer’s expenses on each unit are also extremely high.

As such, these projects are not a suitable long-term business model for developers focused on largescale branding and expansion. For the majority of players, Indian residential real estate is still very much a game of numbers. The greater business potential lies in larger volumes, where the developer has a better cost arbitrage on the number game in terms of land and construction expenses by virtue of the economies of scale, and also a far larger client base. In other words, boutique home projects are best suited for developers who do not address the market as a whole, but rather market
micro-segments.

Raminder Grover, CEO – Homebay Residential, Jones Lang LaSalle Meghraj

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