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Changing landscape of real estate in India – The rise of millennials

By January 12, 2022June 17th, 2024Blog6 min read
Valuation Service

More than 400 million millennials currently reside in India, a figure more extensive than the entire population of America! Millennials aged between 25-40 years in our country have an estimated spending capacity of $3.6 billion and make up one-third of the total population and almost half of the entire workforce.

According to the latest market trends, real estate sales in July 2021 stood at its highest in the last decade in India. Due to a substantial push from the millennials induced by the COVID-19 pandemic, a change in the spending behaviour was observed where those who preferred to rent became more inclined to buy a home.

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Future Scope Of The Indian Real Estate Market

The real estate market in India shows a projected growth of Rs. 65,000 crore (US$ 9.30 billion) by 2040, marking a substantial increase from Rs. 12,000 crore (US$ 1.72 billion) in 2019.

The Indian real estate sector is expected to achieve market equity of US$ 1 trillion by 2030, which stood at US$ 120 billion in 2017, contributing almost 13% to the country’s GDP by 2025.

A rapidly growing retail, hospitality, and commercial real estate sectors are also responsible for providing the much-needed modern infrastructure for India’s ever-growing needs.

Although Indian firms have only raised funds worth US$ 29 billion till now, they have been predicted to collect more than Rs. 3.5 trillion (US$ 48 billion) from infrastructure development and real estate investment funds in 2022, according to the ICRA estimates.

New housing project launches in late 2020 were calculated to be around 86,139 units across the top eight cities in India. However, the home sales volume that stood at 33,403 units in the third quarter of 2020 almost doubled to 61,593 units in the last quarter, signifying a healthy recovery of the real estate industry in India after the strict COVID-19 lockdown.

Conclusive data from the Economic Times Housing Finance Summit estimates that around three houses are constructed per 1,000 people in a year, less than the required construction rate of five homes per 1,000 population.

Hence, the current shortage of housing options in the urban areas is expected to be at approximately ten million units. So an additional twenty-five million affordable housing units will be required by 2030 to meet the growing demands of our country’s urban population.

Prevalent Patterns In Millennial Spending Behavior

Indian millennials were generally considered prolific spenders; a generation focused on instant gratification rather than future planning. Hence, they would usually prefer ride-sharing apps like Ola and Uber to buying a car and hassling with maintenance, repair, fuel, and EMIs. They applied the same logic to owning a house as well by renting properties rather than buying one.

Although such millennial spending persisted until early 2020, before the COVID-19 pandemic engulfed the world, they have registered a considerable change in the last year. Some reports even suggested that millennials’ most significant spending cohort was now getting serious with their money.

However, the sudden behavioural change can be chalked up to three significant factors:

  • The millennials are coming of age to realise their role as the sole providers for their families.
  • The pandemic induced lockdown revealing the non-sustainability of reckless spending behaviour.
  • The rise of work from home (WFH) culture and its widespread global acceptance.

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Evidence Of Change In Millennial Spending Behaviour

Recently, a significant shift in millennial spending behaviour was highlighted in a news report. It stated that the millennials who were used to borrowing for recreation and lifestyle maintenance now prioritise their home and familial responsibilities.

The Standard Chartered Bank also undertook several studies to conclude that millennials are most inclined to strategic planning for their futuristic financial goals. The data stated that 48% of Indian millennials save up for a substantial purchase like a home or car.

A similar approach to fulfilling financial responsibilities was also reflected in a recent study conducted by 360 Realtors. Almost 75% of the millennial population showed interest in becoming homeowners shortly.

Anarock Property Consultants also researched the real estate market to reveal identical figures wherein 55% of all prospective homebuyers belonged to the millennial age group compared to 42% in the last year. Additionally, 68% of the millennials in the study were interested in buying residential properties for personal use.

Another leading real estate platform known as nobroker.com suggested that their entire client base earlier was 42% millennials which rose to 63% in the post-COVID era. The numbers increased even further to 74% for Mumbai city.

Impact Of COVID-19 On Millennial Spending Behaviour

The COVID-19 outbreak has played a significant role in the recent shift in millennial spending towards investing in residential properties. Still, some other pandemic-induced factors are also responsible for influencing such a mindset change.

The worldwide success of the WFH culture has encouraged both companies and millennial workers to settle into a hybrid work model. The modern work culture does not view daily presence in the office as a sustainable future framework. It also ensures that career mobility and city-hopping for jobs is not a priority.

The ease of credit availability and the flexibility of commute-less remote work has allowed millennial buyers to fulfil their dreams of a home away from the hustle and bustle of the city. It also helps them accommodate their job responsibilities from home along with their familial needs.

The ideal combination of various government incentives and record-breaking low-interest rates that can’t possibly go down any further have also helped change the mindset of first-time millennial homebuyers and the ones looking to invest in a second home.

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