At a time when renting is becoming more attractive, the desire to own their own home still comes out on top with 69 percent of millennials calling it their top priority
Income demographics in India has changed over the last decade with the younger generation increasingly emerging as the chief wage earners, according to a report released by Deloitte in early 2018. In this scenario, one may wonder what millennials in India aspire for.
To find out what this generation between ages 25 and 35 aspires to, BankBazaar conducted a survey along with Kantar IMRB which has revealed that wealth is the topmost priority for Indian millennials followed by health and fame. Despite the regional variations, the core aspirations of the Indian millennials, both men and women, remained the same—a home of their own, sufficient bank balance and a chance to see the world.
At a time when renting is becoming more attractive, the desire to own their own home still comes out on top with 69 percent of millennials calling it their top priority. The study further revealed that more than 61 percent of the millennials are comfortable taking credit liabilities to fulfil these aspirations.
Home owning aspiration gap
Despite the clear aspiration to have their own home, the goal has one of the highest aspiration-readiness gap. This means that while millennials want to own a home their readiness in terms of saving and planning is the least in this area.
The survey also reflects that contrary to popular perception, millennials are big on saving and investing, spread across the spectrum from FDs to mutual funds, and on an average, tend to be one-third of their wallet share. However, the choice of investment vehicles, predominantly FDs and insurance as opposed to mutual funds, could be responsible in part for the gap between this aspiration and readiness.
How to be ready for buying a home
One can wait years to buy their own house, or plan better and invest wisely to buy it at a much earlier age. Millennials who aspire to own a home and yet find themselves not ready to buy it can make their life easier by methodical planning and diligence.
Here are the basic steps to follow to be ready to fulfil your aspiration of owning your own place:
Decide on a budget: It is very important to be realistic when planning to buy a house. While aspirations may be limitless, making a tangible purchase like a house has to be budgeted. Choose a budget and factor in inflation for the number of years you need to save for the down-payment and arrive at your initial budget. For instance, if your budget is Rs 30 lakh as of today and you need 5 years to save for your down payment, you will need nearly Rs 42 lakh after factoring in a seven percent inflation rate.
Add to this extra costs like stamp duty and interior costs and arrive at you final budget.
Saving to investment ratio: Once you have decided your final budget you can decide how much you want to save and how much you want to borrow to fulfil this goal. Invest as much possible so that you have to borrow less, but remember not to discount your necessary expenses when factoring in investments.
You can choose various instruments for savings depending on how soon you want to purchase the flat. Since this involves buying a house you may want to opt for more liquid options like short-term debt funds, liquid funds and FDs which will give you moderate returns but keep your funds safe. If you have three to five years to save, you can even opt for ELSS as these will help you save tax and carry moderate risk.
Opting for a home loan: Make sure to research well before finalising your home loan. You should have clear chat with your builders as to how much payment needs to be made to assess the final cost and decide how much you need to borrow.
Try opting for a longer tenure at first to give you enough time to invest and save so that you can pre-pay after some years and reduce the interest burden as much possible. Make sure to select a bank that does not charge for pre-payments.
Vetting legal documents: Always hire a professional if necessary to make sure all the sale documents are legal and authentic. While there are laws in place to safeguard you from being cheated, it could take years into litigation which you can avoid by taking precautions. Make sure to keep every receipt for payment made to builder in place, even for cash transfers.The writer is CEO at BankBazaar.com