Luxury housing was one of the major losers, post demonetisation and has now taken the backseat. However, there is a niche segment which still holds its own to a big extent. While most developers of luxury housing were concentrating on generating volumes in the luxury segment, there is a category of builders who are cashing in on a rather specialised niche – the boutique luxury homes category. They are also known as ‘limited-edition’ residences, and for good reason.
A unique business model
Anuj Puri, Chairman, Anarock Property Consultants tells us, “The boutique luxury homes segment is based on a sound business premise, and such homes continue to sell well even as volume luxury properties lag far behind. This is because there is a distinct quotient of scarcity attached to them. Such properties are constructed with a limited number of units in high-profile locations and are in consistently high demand among the super-rich. In fact, the demand for such properties has risen visibly over the last couple of years, as land availability in our larger cities’ core areas reduced.” He remarks that many of the builders who create boutique luxury homes are specialised and cater only to this market segment. They find this format a unique business proposition, since it is possible to construct and deliver boutique luxury projects within six to eight months, while volume luxury projects take much longer to complete. Other players deploy boutique homes as a lucrative sideline while they continue to focus on high-volume mid-income housing.
What constitutes a boutique home?
As per experts, developers of boutique luxury homes throw in every possible high-end amenity into such properties and even factor in the personal specifications of individual buyers wherever possible. Unlike volume luxury housing projects, boutique homes are unique residential propositions. Marketing of such properties tends to circumvent the larger investor community entirely and focuses on small ‘inner-circle’ investor groups and end-users.
“Such properties are defined by a focus on quality rather than volume. Demand for them comes from the HNI segment, and is focused and competitive because of the small number of units involved. 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 top-of-the-line. Private lifts, in-house Jacuzzis, saunas and swimming pools, sun decks and multi-car parking are the norms,” explains Puri.
Not a game for every builder
With the consistently high demand for boutique luxury homes, it makes sense to ask why more developers are not concentrating on this segment. However, the fact is that while such projects are in high demand among HNIs, they still about a highly-focused and exclusive niche clientele. The margins are high, but the volumes are negligible. Puri says, “A developer also needs to understand the concept of luxury living at a very basic level, must be able to source the relevant raw materials and machines, have the right kind of architects, contractors and labour at hand, and obviously needs to be highly capitalised.” Boutique home projects depend on the availability of small land parcels or redevelopment opportunities in high-profile areas. The developer’s expenses on each unit are extremely high. As such, these projects are not a suitable long-term business model for developers focused on large-scale branding and expansion.
For a 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,” sums up Puri.