The New Rich Are Building Bigger

Amid subprime woes, today's ultra-wealthy continue to build enormous trophy homes as testaments to their success

by Maya Roney

• View Slide Show

In 1998, industrialist Ira Rennert decided to build a 29-bedroom mansion on 110,000 square feet of Long Island waterfront and ended up in the middle of a lawsuit.

A compound of this proportion was surely meant to be a hotel or a religious retreat, which would create traffic, destroy the environment, and block the ocean view, Rennert's neighbors alleged. The neighbors sued the town of Southampton to stop the construction, but the lawsuit failed. The mansion—which is today the largest occupied residential compound in America—was judged to be a home, after all. A very, very big home.

It's no secret that billionaires—especially the self-made variety—like to enjoy and flaunt the fruits of their labor in the form of a sumptuous residence that may include dozens of spare bedrooms and tens of thousands of square feet of space. Such extreme displays of wealth often inspire outrage and jealousy, but they have nevertheless become increasingly common in recent years.

"We are seeing more and more properties coming to market in those [$10 million and over] price ranges," says Rick Goodwin, publisher of Unique Homes magazine. "There's an incredible amount of wealth right now. How can they express that success? Housing is one of the ways they often do it."

The Height of Luxury

As the rest of the housing market struggles, the very high end is thriving. The Dallas-based Institute for Luxury Home Marketing estimates that home sales at the $5 million-plus price range rose 11% in 2006, compared to a 8.4% decline in overall housing market sales. Between 1999 and 2005, the institute says, sales of homes for more than $1 million skyrocketed over 500%. Today, there are seven homes on the market priced at $100 million or more. In 2005, there was just one.

In the near future, there may even be a billion-dollar home. Almost a decade after the Rennert estate debate, Indian billionaire Mukesh Ambani is causing a stir in Mumbai, where he is building a 60-story, vertical palace that will include three floors of Babylon-inspired hanging gardens and three rooftop helipads. Ambani will reportedly spend $1 billion on the project, which is scheduled for completion in 2008. That's $1 for almost every citizen of his native India.

In Defense of Excess

Popular Indian newspaper columnist Praful Bidwai believes Ambani's tower just draws more attention to the stark contrast between India's haves and the have-nots. "Mr. Ambani is building an edifice to his own ego," he said. "It will not go down well with the public and there is a growing tide of anger about such absurd spending."

According to the Central Statistical Organization in Delhi, India's gross domestic product grew by 9.4% in the year ended Mar. 31, 2007, the fastest pace in 18 years. But 27.5% of the population lives below the poverty line, according to government estimates. Between 600,000 and 1 million people live in slum conditions in the Dharavi section of Mumbai.

But some believe Ambani's desire to express his success as chairman of Reliance Industries (RELI) with a 500-foot-tall home may be justifiable—and not just because he needs the room for his 168 cars and 600 servants.

"When you think about it, these people are spending far less on a percentage basis than the average person," says Goodwin. "Most people buying half-a-million dollar homes are lucky if their net worth is half a million dollars."