But the real question is—does luxury real estate offer more than just a lavish lifestyle? Evidence suggests it does. It’s one of the few asset classes that delivers a rare trifecta: elevated living, long-term capital appreciation, and multi-generational legacy potential. As Mark Twain famously said, “Buy land; they’re not making it anymore.” This holds especially true for luxury properties, where prime locations are scarce—making them all the more desirable and resilient as investments.
India Sotheby’s surveys over the past three years show that lifestyle remains the top motivator for HNIs buying marquee assets. But in the past year, 55% also cited capital appreciation, signalling renewed investor interest and a shift of equity gains into real estate. Luxury homes remain a proven portfolio diversifier, both in India and globally. But does all luxury real estate appreciate the same way? Just like stocks, picking a “blue-chip” real estate asset requires careful evaluation.
Location, location, location
First and foremost is the location. The highest appreciation potential lies in luxury apartments and villas in India’s top cities— think Worli, Malabar Hill, and Bandra in Mumbai; Jor Bagh and Lutyens in Delhi; and Koramangala, Indiranagar, and Hebbal in Bengaluru. Low-density areas with large plots, green spaces, and well-connected condominiums near business hubs are consistently in demand and best positioned for long-term price appreciation.
The reputation of the development, the developer, and your neighbors matters a whole lot. In luxury real estate, it matters to many who your neighbors are. High-end amenities, an elite neighborhood, and a certain wow factor, be it a golf course, low-density living, vast open spaces, or seamless connectivity—all of these enhance desirability and long-term value.
Price volatility?
Prime properties not only command high values but also resist market swings, offering stronger long-term appreciation. Historically, top-tier city assets have delivered annualised returns of 9-14%, with rare, unique properties reaching 18-20%—a clear scarcity premium Luxury real estate, like other housing assets, generates modest rental yields—typically 2–3% of capital value—even with high-profile tenants like CXOs, diplomats, and tech founders. The affluent mainly buy these properties for personal use, prioritising lifestyle and long-term appreciation over rental income.
Second home buyers
Another litmus test: think if the next generation would like to live in that home. That brings us to another sought-after asset class in luxury real estate—second homes. Think North Goa, Alibaug, Dehradun, Kasauli, and Coorg. Post-Covid-19, with remote work becoming the norm rather than the exception, demand for these retreats has surged. HNIs and UHNIs love owning trophy assets in India’s picturesque destinations. When managed by professional rental companies, these assets can offer higher yields—often 5–7% annually with the right pick. Bottom line: HNIs and UHNIs turn to real estate for stability, diversification, and wealth preservation. Unlike volatile stocks and bonds, it offers a more reliable hedge—especially during downturns.
Mind the risks
If you’re buying luxury real estate purely as an investment, weigh the risks carefully. High entry costs, illiquidity, and market volatility make it a complex asset class. Beyond the hefty purchase price, expenses like down payments, taxes, legal fees, and closing costs add up fast. If you plan to rent it out, ongoing costs— maintenance, renovations, and management fees—must be considered. And here’s the key risk: if the property sits vacant, it earns nothing while expenses like upkeep, security, and property taxes continue to mount.
Selling luxury property isn’t easy—it has a niche buyer base and low liquidity, unlike stocks or bonds. Finding the right buyer can take months, and market shifts, downturns, or policy changes can impact both value and rental demand. Smart investors track market trends and economic signals closely before making a move.
The Author is MANAGING DIRECTOR, INDIA SOTHEBY’S INTERNATIONAL REALTY