The Indian stock market's historic milestone of the Sensex crossing the 80,000 mark has sparked a significant shift in investment strategies among high-net-worth individuals (HNIs). As the benchmark index reaches unprecedented heights, a growing number of affluent investors are opting to book profits and redirect their capital into the luxury real estate segment.
The Sensex's remarkable rally, driven by factors like economic growth, urbanization, and favorable government policies, has presented HNIs with an opportune moment to capitalize on their stock market gains. According to a recent report by Knight Frank, nearly 40% of HNIs in India have booked profits from their stock market investments in the past year, with the average profit booking standing at around 25%.
With the proceeds from their stock market divestments, HNIs are increasingly turning to the luxury real estate market as a preferred investment destination. The allure of tangible assets, coupled with the potential for long-term capital appreciation, has made luxury apartments an attractive hedge against economic uncertainty. Data from PropEquity shows that the sales of luxury apartments (priced above ₹1.5 crore) in the top seven Indian cities increased by 24% year-on-year in the first half of 2024.
The surge in demand for premium properties is not solely driven by investment considerations. The growing preference for luxury living, fueled by the rise of the affluent class and the desire for exclusive experiences, has also contributed to the resurgence of the luxury real estate market. According to a survey by ANAROCK, over 60% of HNIs in India now prioritize lifestyle and amenities over just investment returns when purchasing luxury properties.
The Indian government's efforts to improve infrastructure and create a conducive business environment have further bolstered the appeal of the luxury real estate segment. The relaxation of foreign direct investment (FDI) norms has facilitated the influx of global capital, with data from the Department of Promotion of Industry and Internal Trade (DPIIT) showing a 32% increase in FDI inflows into the Indian real estate sector in the last fiscal year.
The luxury real estate market has demonstrated remarkable resilience, even in the face of broader market fluctuations. Affluent buyers, less sensitive to short-term market movements, view premium properties as a stable and long-term investment option, providing a sense of security during times of economic uncertainty. Industry data suggests that the luxury segment has outperformed the broader real estate market by nearly 200 basis points over the past three years.
While the Sensex's record-breaking performance has undoubtedly created wealth for investors, experts advise caution in the face of potential market corrections. Diversification across asset classes, including luxury real estate, can help mitigate risk and ensure a more balanced and resilient investment portfolio.
As the Sensex continues to reach new heights, the luxury real estate market is poised to emerge as a preferred investment destination for HNIs seeking to capitalize on the country's economic prosperity and the evolving preferences of the affluent consumer base.
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