Management Development Institute

Group Project
Magic Bricks: A Report on Luxury housing

by

Group: 4 (MI)

Batch – NMP31

Group Members

Ankit -Roll No 11
Krishna – Roll no 27
Swardesh -Roll no 52

1
Executive Summary
 The real estate sector is the most recognized sector in India. It is the second largest employer in
India after agriculture and it is pegged to grow at 30% over the next 10 years. Hyderabad is
expected to be the most promising in investment destination from NRIs in the short and long run
followed by Ahmedabad, Pune, Goa, Chennai, Delhi

Source: Emerging trends in real estate Asia pacific

 The Market Size is expected to touch 180 billion USD by 2020. The housing sector of India
contributes to about 6-7% of India’s GDP. The absorption of office spaces in 2016 across the top
10 cities was estimated to be 35 million square feet with Bangalore at the top.
 IT and business process management sector took 52% of the total space uptake in 2016. Mumbai
was the best city for commercial real estate investment in India with returns to be 12-19 % likely
in the 10 years. Investments the Indian real estate market had witnessed high amount of growth in
the recent times with the increase in demand for residential and office spaces

Defining Luxury Housing

 True luxury means different things to different people, but for most consumers the term connotes
rarity, quality, and refinement. Once upon a time, luxury was the entitlement of the rich. Today
luxury is mass – aspiration, simply because luxury and excellence have, over time, become
synonymous.
 Looking at the changing face of luxury from the real estate perspective, the following trends have
changed over the time and redefined luxury.

Source: Live Mint.com 2017 report Source: assets.kpmg.com /2018 report

2
Brief on luxury property market in India
 With the reviving economy having infused a renewed sense of confidence among HNI (high net
worth income) home buyers, there has been a significant surge in demand for luxury homes asset
class in the metropolitan cities of India. Many more developers are now venturing into the
premium segment, which has resulted in a massive spurt of luxury projects. In fact, many of these
properties are being touted as so exclusive that sales are by invitations only.
 Those projects aside, there is no shortage of builders who are marketing their projects as
‘luxurious’ without any real justification for the term. Driven by the rising demand for luxury
apartments, many investors (and end-users) are actually buying sub-standard properties which
have been tagged as luxurious but do not actually meet the accepted norms of luxury properties.
 Such developers highlight and promote certain specifications and amenities in their marketing
collaterals, but invariably remain silent on much more important aspects. Luxury home buyers
should not be led astray by the perplexing parameters that such developers mention to qualify
their projects for the ‘luxury’ label.
 So, what kinds of apartments really qualify as luxury homes?

Great Location
A convenient location is one of the most important aspects that must be considered while choosing a
luxury apartment. A centrally-located apartment is preferable for HNIs who want to stay in close
proximity to important places like airports, business districts, railway stations, etc. At the same time, such
a location could also be marred by issues such as traffic congestion, noise and pollution. True luxury is
defined by a careful balance of connectivity.

Perfect View
The window view available from an apartment is also an important aspect. A project may be genuinely
luxurious in its specifications and amenities. However, if it overlooks a hyper-busy highway or anything
else that is not soothing to the eyes and sensibilities of the occupants (such as a slum, graveyard or even a
hospital) then both habitation value and rental/resale potential of the apartment may take a beating. The
availability of super-rich amenities such as a rooftop swimming pool and Jacuzzi in every bathroom will
not make a difference when the very basic ingredient of a luxurious living experience is absent.

Ultra-Modern Amenities
HNIs investing in a luxury apartment want the best that money can buy. Luxury homes are meticulously
designed to offer maximum comfort, with attractive interiors and cutting-edge facilities. Premium
residential projects must offer state-of-the-art facilities such as landscaped gardens, stylish living rooms
with LED televisions, sleek and fully-equipped kitchen, Wi-Fi, multiple parking, fast elevators, 24-hour
security and gymnasiums.

Top-Of-The-Line Quality
HNIs investing in luxury homes should ensure that the project is built with high-quality construction
materials and that it incorporates standards such as earthquake resistance, RCC frame structure, fire-
resistant aluminum sliding windows, imported or high-quality domestic modular kitchens, vitrified tiling
and floors, etc. Living in such homes must equal a high quality of life and a consistently joyful
experience.

3
100% Safety & Security
Luxury homes are not only about living in comfort but also living in total security. When living in a
luxury home, the inhabitants should be safe from any kind of criminal intrusion. Simultaneously, they do
not expect to have to install security grilles over their windows or front door as these completely ruin the
aesthetics of their homes. The occupants expect to have the assurance that their families and property are
safe in all respects. A genuine luxury project has the best of security, both in terms of actual personnel
and also the latest electronic monitoring and surveillance. All conceivable safety measures should be
firmly in place.

Low Saturation of Neighbours

The exclusiveness of a luxury home also depends on the number of people residing in the building or
society. In an overpopulated building or complex, the amenities will be shared among a large number of
people and this compromise the overall luxury factor for every individual apartment. When investing in a
luxury home, buyers should expect –and get - exclusivity and privacy in every sense.

RERA impact on housing sector

 Key Concerns for The Home buyers before RERA Was Implemented –
1. Real estate developers sold properties based on super built up area resulting in home owners
spending more for a lesser useful space
2. The home owners were forced to pay a down payment and later pay in installments or lump sum,
an amount without any trace of where the money was spent/invested by the developers
3. No single point of contact for queries or concerns
4. There was no standard agency rating the developers and their reliability, making the home buyers’
investment very risky
5. Absence of a redressal mechanism for delays in possession or substandard quality of construction

 Key Benefits for Home Buyers after RERA –

1. Clearance Before Selling – Developers selling over 8 units of apartments are required to get
themselves registered with the regulator. All the apartments to be sold have to be registered prior to
the launch. This hedges the risk of selling a property to a buyer before getting the necessary
clearances. In order to get themselves registered, the developer is required to make all the
mandatory disclosures with respect to the project, bringing greater clarity and unambiguity.

2. Carpet Area – Sale of property based on Super Built up area is prohibited under RERA. The
developer is required to sell property based on carpet area only. Carpet area is defined as the net
usable floor area of an apartment, that includes area covered by the internal walls and excludes the
area covered by the external walls, areas under service shafts, exclusive balconies, verandahs or
open terrace areas. This ensures the buyers that they’re paying only for the usable space and not
any other overhead charges.

3. Mandatory Escrow Account to reduce the risk of Builder insolvency – Real estate developers
will be required to open an escrow account to deposit 70% of the monies received from investors.
As per Narendra Kumar, Advocate on Record, Supreme Court, at a recent conference on ‘Real
Estate Sector Post Remonetisation & RERA,’ organized by the PHDCCI, “This money will be
withdrawn as per the stages of construction, approved by engineers and chartered accountants of

4
 builders. This will prevent developers from using the money raised from one project for any other
project”.

4. Property Payments – Without a written agreement of sale, the developer is prohibited from taking
more than 10% advance from buyers. The developer is also liable to pay compensation to the home
buyer in case of wrong information shared with the buyer through advertisements, brochures or
prospectus of the property in question.

5. States Responsibility – This is the singular drawback of the RERA act. RERA is a law passed by
the Central govt., but its implementation rests in the hands of the state. The law mandates that no
edits can be made to the provisions made by the central govt., but the state is free to add more
provisions. The act also stated that RERA is applicable for both, under construction as well as new
projects. However, different states have approached the RERA act through different perspectives at
varying levels of compliance. These challenges the very claim of transparency that RERA so aims
to achieve.

6. 5 Years Warranty – The developer is liable to fix any structural defects in the building caused in
the 5 years post allotment of property to the buyer. The act also requires the developer to
accomplish the repair work within 30 days of receipt of the complaint.

7. Website – The developers now have a mandatory requirement to build and maintain an up-to-date
website with details of their RERA registration, quarterly updates on the development progress
(e.g. number/type of apartments or plots booked, current status of the project etc.). This provides a
documented evidence to the home buyers and improves transparency.

MODUS OF OPERANDI
 As part of primary study, the group has conducted focused interviews with structured questionnaire
(Annexure -1) with the builders, property brokers and some of the HNI customers to realize the
perspective for Luxury housing projects in India.
 Total primary study was conducted on sample of
1. NRI - 12 no’s (Spread across USA, UAE, Germany, Australia predominantly software, consulting
professionals)
2. HNI (who’s liquid net worth is more than $1 million) – 10 No’s (Residents’ of India spread across
Delhi, Hyderabad, Ahmedabad, Pune, Bangalore)
3. Builders (from Hyderabad, Pune, Bangalore, Ahmedabad) - 6 No’s
4. Agents (From Pune, Ahmedabad, Hyderabad, Bangalore) - 8 No’s

 The flow of study follows as mentioned below:

1. Discovering prospective customers for luxury housing sector
2. Perspective of “luxury housing “in current scenario
3. Need analysis, why customers want to possess a luxury housing?
4. Analysis of Customers insights on luxury housing purchase pattern
5. Defining the selling prepositions for Luxury housing

5
Prospective customers for luxury housing sector
On extensive secondary research and primary study (focus group interview) with the property builders
and brokers following were emerged as prospective customers for luxury housing
 NRIs
 HNI (High net worth individuals) - Celebrities, Politicians, High end Business class people, TOP
executives of big firms, heftily paid Software employees residing in India.

Insights from the Primary, Secondary study analysis

 Luxury housing interpretation varies from region to region (In Hyderabad property worth 1.5
crore considered as luxury where as in Mumbai the same 1.5 crore property is falls under
affordable class).
 Based on the research results consideration ranking while choosing a Luxury housing is as
follows-
1. Location of property (top priority)
2. Builders Brand & Reputation
3. Social Status associated with Project
4. Quality of Fittings & Fixtures
5. Home Automation

 An overwhelming majority (75%) of the people who own a luxury home consider location as the
single most important factor while choosing the property. For prospective buyers to location is the
most important factor with 62% respondents choosing the option. Apart from location, builder’s
reputation, past price appreciation of the project and social status associated with the project were
ranked as the secondary parameters to choose a project.

 The research shows that the primary motivation and purpose of buying is to have a property that
complements the owner’s lifestyle. Other secondary factors influencing the decision are investment
and high rental income, but to a small extent.

 Mr. S. Sahay, EVP Deepak Fertilizers living in Trump Towers Pune states that he does not mind
spending extra money to live in a luxury property. He is willing to spend money on comfort and
luxury. He also feels living in Trump Towers elevates his status among her peers and this
improves her confidence and approach to life. Luxury buyers consider club facilities as an
important consideration for buying a property. Other secondary considerations are connectivity
to business hub, integrated school facility, and integrated shopping mall

 It has been noticed that luxury property owners as well as seekers consider Internet and newspaper
as top two sources for researching and find information. 92% of property seekers mentioned that
Internet is the primary mode of research, followed by newspaper. K.S. Bharath Kumar, 37 age, a
resident of Dilshuknagar, Hyderabad, Software engineer at Wipro technologies, who is looking to buy
a property says, “My primary source of information is internet and newspaper. I would like to do a
proper research of a project and then reach out directly to a buyer to get the best price. Why should I
involve a broker and pay him extra commission when I can do the research work myself.”

6
  Mr. Irfan Sayyed, a property broker from Pune believes that the key to winning the attention of these
HNIs is through a dedicated relationship manager. He believes that demonetization did not have any
major role to play in the long term as all the unaccounted money was flushed out of the system, soon
people were able to convert their money through various sources and invest it further into land.
“These people want to park their unaccounted money and thus look for the heavy deals in the market
which usually culminates into the luxury housing deals with builders making big bucks as he has multiple
ways to manage this money”. He also believes that a new set of customers has entered in the form of
young IT crowd who make quick bucks abroad while on site and wish to purchase a luxury property to
augment their lifestyle. “These people make informed decisions by referring to multiple sources
including internet and referrals along-with regular visits to the construction sites.” He believes that
these people will be the future of luxury housing segments as they will constitute a huge chunk of the
luxury property buyers and technology like three-dimensional site tour, augmented reality tours would
be beneficial in making informed decisions.

 More than 60% respondents felt that transparency will increase in the real estate dealings and RERA
will further aid the governments hold in the sector and lead to increased investments.

 Close to 50% of the respondents felt that lending options from lenders will improve and availing
finance will be easier. They also felt that RERA would be able to reduce litigations.

 Secondary market research suggests that with younger buyers, time taken to close a purchase is less
than what it takes for older buyers. For example, if it took 30 minutes for someone of the older
generation to make a purchase decision, a millennial would take only 10 minutes for the same ─ yes,
one-third of the time. While the study talks only about personal luxury goods, real estate cannot be
seen outside of this fold. Refer to Goldman Sachs Study on the Indian Consumer Close Up

 “With some unusual and instructive innovation in technology, Indian real estate industry is now
witnessing a greater than before usage of Virtual Reality trend. Now developers engage in a host of
marketing initiatives, apart from making a swanky show apartment at the site. They engage in
walkthroughs- 3D and 4D, drone shoots etc. This technology isn’t limited to the developer's office,
but can be done even at trade shows etc. this is an attempt to show the buyer the closest possible
finished product. These technological advancements surely suit the palate of young, dynamic and
evolved consumers," says Ashok Mohan ani, Chairman Ekta World, Vice President NAREDCO
(West).

 The number of HNIs (high net-worth individuals) in India is growing and will comprise of six per
cent of all billionaires in the next five years.

 The market size of the luxury sector in India is estimated to hit $100 billion in eight years. At
present, it is at $7-$8 billion.

 Global luxury real estate brand Sotheby's International Realty is set to expand its presence in
India through a 25-year-old exclusive franchise agreement.

 Luxury car brand Audi, whose parent company is Volkswagen, aims to scale up its position in
India and has launched its fifth product for the market. The carmaker will be launching special
offerings for the young customers. Similar launches are on cards by luxury car makers such as
Toyota, Jaguar Land Rover, Porsche, etc.

7
  The charm of luxury is intense and even the old are not unaffected. NuLife, India's first luxury
resort residence for senior citizens, is coming up at Lonavla and is designed by US-based
architects.

Proposed Demand stimulus for Luxury housing projects:

 Creating right awareness on Target group on benefits in investing in luxury projects like fixed
cash flows in form of rentals, tax benefits on house loans, capital gains etc.
 Bundling add-ons like free club memberships for on purchase of Luxury housing to
customers
 Providing referral bonus to existing luxury property owners
 Creating marketing campaigns & plans (like providing financial assistance options) focusing
on young consumer segment who are aspiring to possess Luxury properties.

Strategy to reach out to NRI investors

 Track online purchase intentions (through cookies, property search on websites etc.) of an NRI
investors for Luxury properties and approach them through video conference / meeting them in
person, offering best investment options which suits best suits them.
 Conducting Luxury Property expos for exclusively for NRI’s, using this forum creating the right
awareness on luxury housing investment benefits (like reverse mortgage option for NRI’s, steady
income from rentals, financial leverage by cheap housing loans, Tax benefits by availing) vis a vis
other investment options like stocks, gold etc by engaging Industry experts.

Marketing Strategy & Plan for our PWA site http://luxury.magicbricks.com/

1. Providing End to End property solutions starting from property locator, legal advices, financial
advices, renting solutions etc to Majority of investors like NRIs who are viewing Luxury housing as
an investment option, so that investor will get better returns.
2. Introducing “Relationship manager to deal with prospective HNI, NRI customers. The “Relationship
managers “will engage to specific HNI, NRI customers for knowing their exact requirements and
suggesting the best Luxury housing investment options to the customers.
3. More visual appeal of Website by incorporating Augmenting Reality (3D Videos)

8
 Annexure -1

Q1. What are the important aspects you look for in a Luxury Property?

a. Prime Location
b. Comfort –integrated facilities like school, gym, gold course etc.
c. Quality of Fittings & Fixtures
d. Builders Brand & Reputation
e. Social Status associated with Project

I am planning to purchase
75

I own a luxury property

62

58
54

52

51
43

41

40

33
PRIME LOCATION HOME AUTOMATION QUALITY OF BUILDERS BRAND & SOCIAL STATUS
FITTINGS & REPUTATION ASSOCIATED WITH
FIXTURES PROJECT

Q2. What is the prime reason you will buy a luxury property?

a. Home to match my Lifestyle

b. Purely for investment, not self-use
c. High Rental Return

High Rental Return

8% 0%

The reason you

bought the luxury
property
0%

Purely for Home to match my

investment, not self Lifestyle
use 70%
22%

9
Q3. What are the top most mediums of researching about luxury homes?

a. Internet
b. Newspaper
c. Agents
d. Referral by Friends & relatives

Referrals through friends & family 20 32

Agents 22 26

Newspaper 30 81

Internet 92 67

0 20 40 60 80 100 120 140 160 180

I am planning to purchase I own a luxury property

Q4. Which communication channel you prefer to choose to know further best deals for Luxury housing
though online platforms?

a. Emails
b. Relationship managers
c. Weekly Newsletters
d. Live chatting / video chatting

Live chatting / video chatting

11

Weekly Newsletters
43

Relationship managers
68

Emails
15

10
Q5. Which options will be more useful for the decision making for purchase of Luxury housing though
online platform like magic bricks, sulekha,99 acres?

a. In-depth expert analysis

b. Real time Photos
c. Virtual video tour
d. Neighborhood information
e. Testimonials
f. Builders track record
g. Technologies like Augmented Realities

Technologies like Augmented Realities 52

Builders track record 64

Testimonials 61

Neighbourhood information 38

Virtual video tour 56

Real time Photos 44

In-depth expert analysis 39

0 20 40 60 80 100 120

Q6. If Luxury housing is for investment, how much you are expecting appreciation for luxury property
/annum?

a. Below 10%
b. 10% - 20%
c. 20% - 30%
d. Above 30%

Above 30%
Below 10%
32%
34%

20% - 30% 10% - 20%

15% 19%
11
RERA, demonetization Effect on Luxury pattern

Q7. Post implementation of RERA, what are the major changes you have seen while making real estate
dealings?
a. Same as before
b. Longer process time
c. Transparency & Authority

Same as before

Longer process time

Transparency &
Authority

Q8. Post RERA implementation, what changes do you observe in lending options from
Banker’s/institutions?

a. Same as earlier
b. More stringent approach from lenders
c. Increased ease of availability of finance option

Same as earlier
21%

Increased ease of
availability of
finance option
50%

More stringent
approach from
lenders
29%

12
Q9. The Act provides for lot of transparency to be maintained by the developers. Do you think
these practices will reduce litigation going forward?
a. Yes
b. no
c. Can’t say

TRANSPARENCY & REDUCTION IN LITIGATION IN FUTURE

Can’t say

Yes
No

Q10. What is your opinion on the rule of depositing 70% of sales proceeds in a separate account? (can
choose any two)
a. It will help in getting timely delivery of the project
b. This will lock the cash and force the builders to rely on further borrowings, which will
eventually lead to higher project cost
c. It will help in eliminating the fly-by-night operators in the real estate
d. No major change

a
8% a b
b&c
b
22%
11%
c
5% c d
d
3%

a&b
12% a&b a&c
a&c
39%

b&c

13
Q11. Was demonetization effect a deterrent in your process of buying a luxury property?
a. yes
b. no
c. Can’t say

Can’t say Yes

30%
Yes
42%
No

Can’t say
No
28%

14
References

https://www.zricks.com/Update-

https://www.slideshare.net/amanahuja3766/effect-of-demonetization-on-real-estate

https://www.forbes.com/sites/forbesrealestatecouncil/2018/07/26/eight-things-you-need-to-know-
before-buying-your-first-investment-property/#d14614f5a931

www.colliers.com/-/media/files/apac/india/market%20insights/2017-india-rpmo.pdf?la=en-GB
ficci.in/spdocument/23008/Improving-transparency-in-secondary-real-estate-market.pdf

https://www.ey.com/Publication/vwLUAssets/EY-Brave-new-world-for-India-real-estate/$File/EY-Brave-
new-world-for-India-real-estate.pdf

https://content.magicbricks.com/property-news/industry-buzz/delhi-ncr-industry-buzz/magicbricks-to-
launch-indias-biggest-online-property-festival/82099.html

https://housing.com/news/important-rules-nris-investing-indian-real-estate/

https://www.charteredclub.com/nri-investment-india/

https://www.thehindu.com/real-estate/must-know-rules-for-nris-for-real-estate-investment-in-
india/article19203443.ece

Livemint.com

assets.kpmg.com /2018 report

15