The pandemic has made Generation Rent, which used to shun immovable assets, rethink its priorities. With work from home the new norm, millennials are scouting for spacious homes built by well-known developers on the outskirts of cities. They’re looking for good resale value, local conveniences and good connectivity
Ashwin Sinha, 32, invested almost half of his salary in stocks and mutual funds until the pandemic struck. He had lived much of his life as an IT professional, literally out of a suitcase, moving from one paying guest accommodation to another. Zoom call meetings made him dash to the nearest park or the comfort of his car as his tiny room did not offer a conducive environment. Sinha moved into a 2 BHK last month in a gated society.
For Generation Rent, which is happiest sharing an apartment with friends to save on real estate costs and wary of taking on a massive EMI burden, Covid-19 came as a surprise. But with most companies focussing on work-from-home for the last seven months, this segment is now shuffling its priorities.
The pandemic has made them realise the importance of owning a home compared to renting one, or for that matter, due to social distancing norms, sharing one. Besides, affordability has certainly improved with interest rates at an all-time low and builders across the country doling out discounts.
Work from home impact
Frequently Asked Questions
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The number of millennial homebuyers has touched the 63 percent mark during Covid-19 from 49 percent earlier, according to data made available by NoBroker.com.
Nobroker.com observed a substantial surge in the number of young people looking to buy a property for end use during the pandemic as mortgage rates are low and work-from-home is the new reality. They saw a jump of as many as 66 percent homebuyers in the millennial segment compared to pre-pandemic times, said Saurabh Garg, Cofounder and Chief Business Officer of NoBroker.com.
“The 25-40 age bracket, who until now did not give much priority to buying a home as it gave them the flexibility to switch jobs and hop cities, is now more than ever serious about owning a physical asset. The millennial segment constituted almost half of homebuyers before the pandemic. This number has shot up to 63 percent during Covid-19 from 49 percent earlier,” he said.
The reason more millennials are keen on investing in property for self-use is because it is now much more affordable to buy a house and deals are available in the market. Discounts ranging from 10 to 15 percent are currently available across the country, he told Moneycontrol.
Playing out across India
There is an increase of almost 55 percent in millennial buyers in Bengaluru as compared to non-millennials, a segment that rose 28 percent from the pre-pandemic period. The preferred areas are Hebbal and Yashavantapura.
There is as much as a 78 percent jump in millennial buyers in Mumbai compared to a 42 percent jump in non-millennials in the pre-pandemic days. The areas preferred include Thane and Navi Mumbai, NoBroker.com data said.
In Delhi NCR, millennials buyers saw a jump of 68 percent and a 57 percent jump in non-millennial buyers. The areas preferred include Rohini, Dwarka and Vaishali, it said.
Projects located on the outskirts of cities have been receiving the most queries. The projects in these localities are more affordable and spacious. As far as formats go, 3 BHK and 2 BHK are the most preferred unit size. The cost is comparable to a 1 or 2 BHK in the surrounding IT hubs.
It has also been observed that demand for PG and shared properties has drastically fallen in the younger bachelor segment among those in the 18-25 age range during the pandemic, according to data made available by NoBroker.com.
According to Arvind Nandan, Managing Director – Research and Consulting, Savills India, millennials are increasingly accounting for most of the home purchases in the country, with the average age of homebuyers now falling below 40 years.
More than half of the loans disbursed in the first quarter of financial year 2020-2021 have been to first-time homebuyers. Similarly, mid-income groups are leading both in terms of the number of loan disbursements or home purchases as well as size of the loan value.
Changing buyer sentiment
In a survey conducted by Housing.com in collaboration with NAREDCO, 53 percent of the respondents said they have put their plans to buy a property on hold for six months and plan to return to the market after that. Nearly 33 percent of the respondents in the survey also said they would have to upgrade their homes in order to work from home.
Despite being in the doldrums over the past few years, sentiment has bounced back for the residential sector in the wake of Covid-19, with 35 percent of the respondents in the survey saying this was their preferred investment class.
The virus’s spread has made Generation Rent, which primarily has a no-strings-attached approach towards asset ownership, rethink its strategy as well. Currently, nearly 40 percent of India’s millennial workforce comprises migrants looking for affordable yet modern living spaces that provide them with an optimal mix of privacy and an opportunity to engage socially.
Since most of the respondents fall in the age cohort of 25–35 years, they preferred renting a house, primarily because their job profile did not make it viable to invest in a stationary asset.
In fact, 47 percent of the respondents in the survey said they would like to invest in property if it was priced right. Those renters who are not in a position to buy a house currently because of price issues or the nature of their jobs have also said they would buy a property within two years.
Real estate versus mutual funds
Some financial planners could not agree more. Pre-pandemic, millennials as a global breed did not necessarily view buying a home as the best of investment choices and chose to put their surplus cash into stocks and mutual funds instead.
There has been a 29 percent increase in customer queries from May onwards from millennials as the segment now spends more time at home, says Rishi Mehra, CEO at Wishfin.
For risk-averse millennials, too, investment in real estate is better than fixed deposits and stocks. “Our investment platform queries say that as many as 39 percent prefer investing in real estate followed by stock markets and mutual funds,” he said.
Also, with lower home-loan interest rates, the eligibility has increased for millennials. With reduced rates, 25 percent of millennials, who were earlier not eligible to buy property, can now purchase their dream home, he says.
What does the millennial consider before buying a house? Super-sized luxury homes are generally out, whereas compact homes with good potential resale value are in.
Snob-value addresses are out, local conveniences and connectivity are in. Projects by unknown developers are out, projects by well-known developers are in, according to data made available by Anarock Consultants.
But financial planners insist that millennials wanting to invest in real estate should carefully assess their job growth trajectory, actual requirements and family aspirations before taking the plunge.
Most people in their early 30s are at a stage where they would want to concentrate on pursuing their career and go wherever their jobs take them. In such a scenario, buying a property may not make sense as the person would have to be mobile. The second instance concerns people who may have decided to stay put in the city they currently work in.
“In this case, too, one should proceed with caution as currently we are in the middle of the pandemic and it is here to stay; one is not sure about how safe one’s job is. However, if you are certain about your job and the city where you want to reside in, this may actually be a great time to buy property as several deals are available,” says Suresh Sadagopan, Founder of Ladder7 Financial Advisories
The third aspect one needs to look at is family aspirations. “What if you take a loan and your wife later decides to drop out of an active worklife to take care of the children? In such a scenario, servicing a home loan may become a huge liability. So, think before you take the plunge,” he adds.