Millennials are people born between 1981 and 1996, which is a large number in a young country like India. Millennials account for up to 34% (or 440 million) of India’s total population, making them the country’s largest single generation.
When a large segment of the population decides to invest in housing after having avoided doing so for several years, the property market takes notice. As has been widely reported, after the COVID-19 pandemic, Indian millennials suddenly became homebuyers.
Initially, developers and brokers believed that this trend was solely due to working from home (WFH) and that it would fade once people returned to the office, but it is still a force to be reckoned with.
Millennials are not only a significant market driver due to the sudden demand for housing; they are also in their prime “buying years,” are invariably well-established in their jobs, and have easy access to home loans. In 2020, millennials will account for more than half of all home purchases. In short, this is a significant demographic, and their needs are now directing the entire housing market.
The pandemic was a watershed moment. The lockdowns and general concern about the safety of not only one’s health but also one’s investments prompted millennials to turn to residential real estate in unprecedented numbers. These were also the primary beneficiaries of the pandemic’s work-from-home culture.
A large number of millennials in India work in the IT sector, which is now in charge of job creation. While India Inc has been pushing hard to get employees back to work, IT employees at the country’s largest software firms have responded with a demand for greater flexibility than they had previously.
Many IT companies have now caved, so remote and flexible work remain viable options for such millennials. Because the emphasis is now on property size rather than location, entirely new markets have emerged. Formerly desirable inner-city locations are no longer as appealing to millennials as they once were. Many Indian millennials are looking to relocate their households to less expensive peripheral areas, and in many cases, to smaller cities that were not considered serious property markets prior to the pandemic. Meanwhile, developers have not been left in the dark about this new demand, and they have been churning out housing supply aimed squarely at millennial demand.
What they desire for their homes
Previously, a tiny segment of millennial homebuyers in India sought compact homes as close to their places of work as possible. This resulted in a significant increase in small-format housing projects in and around major IT hubs. The demand for micro-homes in these areas is currently negligible; the highest demand is for larger-configuration homes such as 1.5, 2, 2.5, and 3 BHKs. The ability to run home offices is still a big draw for millennials who work from home flexibly or entirely.
Smart home features are another feature that millennials seek. These buyers, who are clearly tech-savvy, want the comfort and convenience of electronically and digitally enabled homes. Millennials have caused a significant revival in demand for green homes with lower environmental impact during construction and use, as they are acutely aware of today’s pressing sustainability imperatives.
While central locations are no longer in high demand, Indian millennials are content to live in outlying areas that are still well connected to the city. This is due not only to the possibility of remote work and WFH changing in the future but also to millennials’ desire for the conveniences and entertainment options available in major cities.
Health is still an important consideration for them. They seek properties in less polluted, greener areas where developers have taken care to preserve native flora and fauna. For all of these reasons, millennials have primarily focused on large townships that provide all of the amenities they seek.
The standard of living
We now know that many of the changes in demand and perspective caused by the pandemic are not transient. If anything, the pandemic forced young Indians to reconsider the quality of their lives and the activities that had previously consumed their time and money. Long commutes, in other words, will never be popular again. But that isn’t all.
Prior to the pandemic, it was widely assumed that office work consumed the majority of millennials’ time. A lot of time away from the family used to be expected, but it is no longer acceptable. The pandemic’s effects on values are irreversible. Furthermore, millennials are a self-replenishing demographic, with more joining the population each year.
So, yes, millennials will continue to have an impact on the real estate market and will be the single most important homebuyer segment now and in the future. However, millennials, like any other buyer segment, are concerned about affordability.
The most secure investment
Rising interest rates and property prices will dampen the enthusiasm with which Indian millennials have been purchasing homes since the beginning of 2020. As a result, some of the demand may be reduced.
Time and events, however, have demonstrated that millennials’ previously preferred investment asset classes, such as stocks and mutual funds, are not as stable as they once believed. Only real estate has held its value during the pandemic, which was followed by the Russia-Ukraine war and all of the economic turmoil it caused.
Housing is clearly the most secure investment, and millennials will continue to purchase homes. Further locations will become increasingly appealing for those with limited budgets, as long as they have adequate connectivity and the projects provide adequate comfort. Millennials will also look for the best value propositions that their money can buy, as well as properties with the highest potential for appreciation.
The Indian housing sector will become fully aligned with and focused on millennials over the next two to three years. All future residential supply will be geared toward meeting the needs and desires of this important demographic. In many cases, this means that developers’ blueprints will have to be completely rewritten.
Nonetheless, the housing market’s final fact is that supply always follows demand. For the foreseeable future, millennial demand will be the driving force behind Indian real estate developers.