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Over the last few years, the real estate market has witnessed a series of drastic changes. One such development, has been the active involvement of millennials in housing investment. Their outlook and approach towards life, is slightly different from the preceding generations and they have come up with creative ways to save for a down payment. This shift in demographics is affecting the market.
Indian real estate industry to become third-largest, globally
The real estate sector holds considerable significance in the Indian economy. It contributed about 6%-7% to the Indian economy gross domestic product (GDP) in 2017 and is expected to contribute about 13% by 2025. According to a report by KPMG, by 2030 the Indian real estate industry is expected to touch USD 1 trillion, becoming the third-largest, globally. It is also the third-largest employer (after agriculture and manufacturing) in the country and presently employs over 50 million people.
As per the National Skill Development Council (NSDC), the real estate and construction sector is expected to necessitate demand for over 66 million people by 2022. The sector is estimated to grow to USD 650 billion by 2025 and surpass USD 850 billion by 2028. The value increased from USD 174 billion in Q4 2012 to USD 243 billion in Q2 2018. India has also consistently improved its ranking, vis-à-vis global real estate since 2014, which has instilled confidence in investors. Residential, commercial and retail are the three key asset classes, which have primarily been contributing to the sector’s growth.
Young generation to have greater purchasing power
With younger generations moving up the career ladder faster than ever before, this segment is rapidly gaining purchasing power. According to a report by Deloitte India and the Retailers Association India, millennials are India’s predominant wage earners, comprising 47% of the working population. The report also observes that this generation is characterised by digital savviness and high disposable incomes, meaning that they are an integral and large part of the consumer market.
However, considering that the spending habits observed in this population highlight the importance of saving and concrete investment before expenditure, there is increasing home-buying competition.
Here, it is important to recognise the different needs of the ‘Gen-Y’ home buyer. For them, what matters is convenience, ease-of-access, proximity to commercial and business hubs, as well as the availability of various amenities. In such a context, real estate developers need to either build projects that separately cater to different age demographics, or they need to find the common points of demand and market housing projects that possess characters that will appeal to people across the age spectrum.
New-age living for the new-age population
With heavy stress on work-life integration, mental well-being and holistic living, Gen-Y loves open spaces that allow them to socialise, without feeling confined and at the same time feel a sense of spaciousness without the inconvenience and stress of maintaining a sprawling mansion. Hence, they prefer multi-functional rooms.
In addition to building smarter homes, smart technology needs to be installed, as this will attract young buyers. State-of-the-art security systems, sustainable living through smart power-saving ACs and lighting that consumes minimal electricity, as well as uncluttered spaces that are easy to clean – these are some of the modern living considerations that builders need to incorporate in projects, in order to attract the average buyer in this age bracket.
Millennials who already possess their own homes, have a different outlook on the housing market, as compared to their parents.
A BankBazaar study from 2018 found that 91% of this age demographic preferred to make their own financial decisions but relied heavily on social media to gain insights and perspectives that help in decision-making. Data from Computer Age Management Services also showed that FY18-19 saw a much larger quantum of this generation investing in mutual funds than before. When this generation buys assets, they believe in either selling it, only after significant capital appreciation, or reaping the continuous benefits by renting out their property.
Millennials today are entering the housing market, armed with smart technology, which often guides them seamlessly in aspects ranging from design and functionality, to documentation and financial assistance. It is time now for agents to familiarise themselves with aware and market-savvy clients. As long as they are a chunk of the market, they will create major trends in the home-buying sector.
(The writer is business head, north zone, Godrej Properties Ltd)