How luxury real estate fits into HNWI portfolios despite its lower liquidity is it a safe investment?

Luxury real estate has never been a liquid asset, and investors entering the segment are fully aware of that reality. What is driving renewed interest today is not the expectation of quicker exits, but a more nuanced understanding of the role luxury property plays within a long-term wealth strategy. For high-net-worth individuals (HNWIs), capital allocation is increasingly guided by preservation, diversification and utility, rather than transactional efficiency alone. Viewed through this lens, luxury real estate occupies a distinct position—one that becomes more relevant as portfolios expand and grow more complex. Nibhrant Shah, Managing Director and Co-CEO of Isprava Group, said the renewed appetite for luxury homes stems from a convergence of factors rather than a single trigger. “Portfolio resilience, experiential value, improving operating economics, clearer capital pathways and stronger market signalling are all contributing to this shift,” he said. “Luxury homes are inherently less liquid than financial assets—that is the premise investors begin with. But liquidity is only one attribute among many, not the sole determinant.” According to Shah, physical property also offers a form of capital preservation that financial instruments may not always provide. “Land and well-executed build quality are tangible stores of value that behave differently from equities or credit. For investors focused on protecting wealth across generations, that distinction is meaningful,” he added. Building dependable income Shah noted that luxury real estate is increasingly being structured to address long-standing investment frictions. Purpose-built communities, professionally managed rental programmes and integrated hospitality operations now allow owners to generate predictable income when properties are not in personal use. “This operating layer transforms what was once a consumption-driven purchase into an asset with multiple revenue streams, improving cash yields and making the illiquidity trade-off easier to accept,” he said. Market structure and demand signals Shah also pointed to a series of recent launches of limited, design-led villa communities in coastal and hill destinations as evidence of sustained demand at the top end of the market. These projects are supported not only by developer vision, but also by institutional capital and structured debt, which together help create more transparent exit pathways for future buyers. “The deepening of financing channels and structured investment into luxury developers is an important credibility signal for private investors,” he said. Investor preferences are evolving as well. “Younger wealth is more experience-driven and places greater emphasis on provenance, design and privacy,” Shah explained. “Second homes are no longer viewed merely as trophy assets. Buyers want spaces that support family life and social connection. This demand profile underpins premium pricing and contributes to a more stable resale environment for well-located, thoughtfully executed homes.” Institutional participation Shah added that growing institutional participation is reshaping how the sector is perceived. Recent funding rounds and structured debt activity across luxury housing platforms indicate that professional capital sees the underlying economics as scalable and viable. “When experienced investors participate, information asymmetry reduces and confidence in long-term market depth improves. That makes it easier for private wealth to justify allocating capital to real assets, even when liquidity is lower,” he said. What investors should evaluate Despite the renewed interest, Shah cautioned that fundamentals remain critical. “Every purchase should be tested against location-level liquidity, the developer’s track record, clarity around rental or management structures, and documented exit options. Pricing must reflect real demand, not aspiration,” he said. “Homes that combine strong design, professional oversight and transparent governance tend to deliver more consistent outcomes than speculative land-only plays.” In essence, wealthy investors are not ignoring liquidity constraints -- they are reassessing them. Lower liquidity becomes acceptable when a property preserves capital, offers optional income, supports lifestyle objectives and operates within a market backed by credible institutional and operational frameworks. When these elements align, luxury real estate moves beyond sentiment and earns its place as a deliberate allocation within a diversified wealth portfolio.