Better buy than pay hefty rent: Bengaluru sees a change as Gen Z, millennials turn homebuyers

After a major stagnancy in income levels post-Covid, the city saw a major uptick in salaries in the last two years.

Soaring rents in Bengaluru have spurred a dramatic shift in homebuying trends, with the median age of first-time home buyers dropping to 34 from 42 in just three years, as millennials and Gen Z prefer homeownership over renting, according to experts.

Data from online property listing platform NoBroker showed that tenants in key cities such as Bengaluru, Mumbai, Pune, Chennai, Hyderabad, and Delhi-NCR would typically rent nine times before purchasing a home about a decade back. Today, younger generations are opting to buy after renting only 4-5 times.

The trend is exemplified by young professionals such as Abhishek Sinha and Akshay Punjabi. Sinha, 32, an employee at a medical startup, recently purchased a home in Bengaluru’s Whitefield for Rs 1.9 crore after changing three apartments he took on rent. Punjabi also followed a similar path. The e-commerce employee invested over Rs 1 crore in a prime residential project by Sumadhura Group in Whitefield by the time he turned 32.

"Given the high rental yield we see in Bengaluru, with Rs 60,000-80,000 rental return per month, I decided to invest in a prime residential project in the eastern IT corridor," he said. "Given the high rentals in Bengaluru and also the home loan interest rates, I felt buying my own apartment will be a more stable financial decision than renting one. This also gives me the option to capitalise on my investments in future, when the prices will appreciate by the time I turn 40," said Akshay.

In the first half of 2024, millennials and Gen Z accounted for over 60 percent of property purchases on NoBroker’s platform in Bengaluru. Saurabh Garg, co-founder of NoBroker, noted that Gen Z alone made up 16 percent of these transactions, while millennials represented the rest.

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Gen Z refers to individuals aged 11-26, while millennials fall in the 27-42-year bracket.

Prime areas in Bengaluru have seen rent surging 45-50 percent over the past three years. A two-bedroom apartment in a desirable location now commands Rs 50,000-65,000 a month in rent, while that for a three-bedroom unit reaches Rs 80,000.

“We’ve closed several deals between Rs 1-2 crore, with buyers in the 28-40 age range. We recently sold apartments in Bellandur and Indiranagar for over Rs 1 crore each, where the tenants preferred buying, instead of paying hefty rents,” said Sunil Singh, director at Realty Corp.

Rising Income Fuels Housing Demand

A boost in income levels has further fuelled the trend of buying homes. According to the Karnataka Economic Survey 2023-24, per-capita income in the state has grown 5.8 percent between 2022 and 2023. Salaries in Bengaluru have seen a significant uptick after the pandemic.

“This salary growth has been a key factor driving housing demand among millennials and Gen Z in the city. In FY25, half of the 42 sale transactions we facilitated were from this demographic zone. Many are saving up for the 20 percent down payment required for these deals,” said Kiran Kumar from Hanu Reddy Realty.

Lucrative Rental Yields Attract Investors

Attractive rental yields too have been drawing young homebuyers into the market. Rental returns in Bengaluru have climbed to 4-5 percent in the eastern IT corridor of Whitefield, with pockets of Indiranagar and Koramangala offering over 5 percent.

“The majority of young buyers are looking for ready-to-move-in properties or are willing to wait for new inventory less than six months old. In Bengaluru, many prefer to invest under Rs 1 crore in 1BHK units for their rental potential. For end-users, the sweet spot is between Rs 1 crore and Rs 1.5 crore in prime areas like Indiranagar, Koramangala, and Whitefield,” Singh added.