Millennials driving the increasing demand of Real Estate in India

The sale of?residential real estate?in Mumbai is not only higher than pre-covid levels but stands at its highest in the last decade in July 2021. Going by the recent trends, a substantial push came from the millennials.

It shows yet another behavioural change induced by the COVID-19 pandemic as these millennials were once perceived to be more inclined to rent a home as opposed to buying one. There are over 400 million millennials in India, which is higher than the entire population of the US. At present, aged between 25-40 years, millennials in India comprise one-third of its total population and 46 % of the country’s total workforce, with a spending capacity of $3.6 billion.

The millennial generation is generally defined as people born between the mid-1990s to early 2000s, more specifically within the 1981 to 1996 period. In India, the millennials are considered to be reckless spenders and a generation that seeks instant gratification, not worrying or planning much about the future.

As proponents of the sharing economy, they would rather use ride-share apps like Ola and Uber than buy a car, look after its repair, fuel, and pay EMIs. The same logic applied to owning a house too. They would prefer to rent a house than buy one, pay maintenance and EMIs.

This behaviour by the millennials held true till early-2020 before the arrival of the COVID-19 pandemic. The same millennials have shown a serious change in their habits.?Two factors could be playing a part in this behavioural pattern change, one is the coming of age of the millennials and in many cases, they are the sole providers of their families.

Experts?believe that the second reason for the change in spending priorities is the pandemic induced lockdown which showed the non-sustainability of the ‘reckless’ spending and the advent of WFH with its wide acceptance.

There is a shift in the spending pattern of millennials from borrowing for lifestyle and recreational purposes to serious priorities like home repairs and medical emergencies in the family. Now, the millennials are the most inclined to conscientiously strive for their far-sighted monetary objectives. A study specifically shows that 48% of the Indian millennials are saving for a substantial buy like a car or a house whereas only 28% of the 45+ generation are doing the same.

This matured approach to financial matters also reflects in a recent study by 360 Realtors, wherein 3/4th of millennials expressed their desire to purchase a residential property in the next three years. For the city of Mumbai, the millennials buyers counted to 74% of all the buyers across all the age groups.

While the pandemic has largely been instrumental in the shift in millennials’ mindsets towards buying homes, there are other significant factors that are influencing this shift. The success of the WFH model means both employers and the millennial employees view a hybrid model of work wherein one does not have to go to an office every day as a sustainable framework of the future of work culture. This also means that the idea of career mobility and city-hopping for jobs is not at the forefront and a hybrid model of work.

The major constituent, which is fulfilling the millennial aspiration of buying a house of their own in Mumbai into a real possibility is the lowest ever interest regime prevailing in the current times. The easy availability of credit and having experienced the flexibility and travel-less remote work means that the millennial buyer can now fulfill his bigger home dreams to accommodate his/her remote WFH and their children’s online schooling in extended suburbs of Mumbai metropolitan region.

The combination of record-low interest rates that have limited scope to reduce further and incentives by government worked well for both the millennial buyers as an end-user and ones looking for second home investment.

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