by Anil Pharande, Chairman – Pharande Spaces & President – CREDAI Pune-Metro
Millennials are people born between 1981 and 1996 – and in a young country like India, that is a lot of people. Millennials constitute as much as 34% (or 440 million) of India’s overall population, making them the largest single generation in the country.
When a massive segment of the population suddenly decides to invest in housing – after abstaining from this investment category for several years – the property market takes notice. As has been amply written about, Indian millennials suddenly became homebuyers after the Covid-19 pandemic.
Initially, developers and brokers felt that this trend was only because of WFH and may go away again after the return to office work, but it is still very much a force to reckon with.
Millennials are not only an important market driver because of the sudden demand for housing – they are in their peak ‘buying years’, are invariably established in their jobs, and have ready access to home loans. Homebuying activity from millennials accounted for over 50% of house purchases in 2020. In short, this is a very important demographic, and their requirements are now directing the whole course of the housing market.
The pandemic was a major turning point. The lockdowns and overall worry about safety not only of health but also of investments caused millennials to turn to residential real estate as never before. These were also the main beneficiaries of the work-from-home culture that the pandemic brought about.
A large number of millennials in India are employed in the IT sector, which is now calling the shots on the employment front. While India Inc has been pushing hard to get employees back to the office, IT employees of the country’s largest software firms have countered this expectation with a demand for more flexibility than they had before.
Many IT firms have now given in, so remote and flexible work continue to be options for such millennials. This has resulted in entirely new markets opening up because the focus is now on property size rather than location. The previously desirable inner-city locations are no longer as attractive to millennials as they were before.
Many Indian millennials are looking to shift their households into the less costly peripheral locations, and in many cases, even to smaller cities which were not considered serious property markets till the pandemic. Meanwhile, developers have not remained unaware of this new demand and have been churning out housing supply aimed squarely at millennial demand.
What Millennials Want In Their Homes
In previous years, the minuscule segment of millennial homebuyers in India looked for compact homes as close as possible to their places of work. This caused a major spurt in small-format housing projects in and around the main IT hubs. Today, the demand for micro-homes in these locations is negligible – the highest demand is for larger-configuration homes like 1.5, 2, 2.5 and 3 BHKs. The ability to operate home offices is still a major draw for millennials who continue to work flexibly or entirely from home.
Another aspect that millennials look for is smart home features. Obviously tech-savvy, these buyers want the comfort and convenience of electronically and digitally-enabled homes. Highly attuned to the pressing sustainability imperatives of today, millennials have also caused a major revival in demand for green homes with lower environmental impact during construction and use.
While central locations are no longer in demand, Indian millennials are happy to live in peripheral areas, which must nevertheless be well-connected to the city. This is not only because the scenario about remote work and work from home may change in the future but also because millennials want the conveniences and entertainment options available in the main cities.
Health continues to be an important consideration for them. They look for properties in less polluted, greener areas where developers have taken care to retain the local flora and fauna. For all these reasons, millennials have been mainly focusing on large townships, which assure them all the features they seek.
Will Millennials Continue To Rule Indian Housing?
By now, we know that many of the changes in demand and perspective brought on by the pandemic are not temporary. If anything, the pandemic caused young Indians to look hard at the quality of their lives and the things that consumed their time and money in the past. In other words, long commutes will never become popular again. But that’s not all.
In the pre-pandemic world, it was an accepted fact that office work consumed most of the millennials’ time. A lot of time away from the family was a given before but is no longer acceptable. The values that the pandemic has brought about are permanent. Also, millennials are a constantly self-replenishing demographic – every year, more of them become part of the population.
So yes – millennials will continue to influence the property market, and they will remain the single-most-important homebuyer segment now and in the future. However, like any other buyer segment, millennials are concerned about affordability.
Interest rates and property prices are rising, which will affect the enthusiasm with which Indian millennials have been buying homes since the beginning of 2020. As a result, we may see some of the demand tapering off.
However, time and events have also proved that millennials’ previously favoured investment asset classes, such as stocks and mutual funds, are not as stable as they once thought. Only real estate has retained its value throughout the pandemic, followed by the Russia-Ukraine war and all the economic turmoil it brought.
Housing is evidently the stablest investment, and millennials will not stop buying homes because they are gradually becoming more expensive. For those whose budgets are stretched, further locations will become increasingly attractive as long as they have sufficient connectivity and the projects have enough comforts. Millennials will also look for the best value propositions that their money can buy and prefer properties with the best appreciation potential.
The next 2-3 years will see the Indian housing sector become fully aligned with and focused on millennials. All future residential supply will be geared toward meeting this important demographic’s needs and desires. In many cases, this means that developers will have to completely change their blueprints.
Nevertheless, the final fact of the housing market is that supply always follows supply. Millennial demand will call the shots for Indian real estate developers for quite some time to come.