Millennials don’t like buying real estate. It has been established by surveys and reports that many young millennials are reluctant to take on a huge EMI burden early on in their careers just to buy a home. “As the demands of modern-day careers keep people on the move, many have decided against being tied down to a particular city by buying property, and rental homes have become the norm across the metros," said Lovaii Navlakhi, managing director and CEO, International Money Matters Pvt. Ltd, a financial planning firm. Affordability and a change in the general attitude towards saving and investing have also played a part.
But if so many millennials are shying away from buying homes, which demographic is moving the real estate market in India? According to data from ANAROCK Property Consultants’s consumer sentiment survey, there has been a tectonic shift in the age demographic of Indians looking to buy homes over the past two decades. Conducted in the first quarter of 2019, the online survey saw nearly 2,797 participants (including NRIs) responding to it. It revealed that the age of the bulk of homebuyers was 45-55 years in the 1990s, but by 2000s it had dropped to include the age group of 35-45. In 2009-10, easy home loans boosted the share of homebuyers in the 25-35 age bracket.
In the late ’90s, the age demographic of homebuyers in India was 45-55 years because they preferred to pay for a home, at least partially, with their savings rather than taking on a loan. It was only close to retirement that people would accumulate enough to purchase a home, exacerbated by the fact that major banks were reluctant to lend large amounts at the time, a trend which has changed since.
In the 2000s, home loans started becoming readily available with banks targeting the younger demographic as the primary customer base, which meant that those aged between 35 and 45 years could also start buying homes even with sparser savings. “Home loans were readily available, and homebuyers warmed up significantly to the notion of using borrowed funds rather than depleting all their savings. The fact that home loans also carried attractive tax benefits certainly helped," said Prashant Thakur, director and head, research, ANAROCK.
In 2019, 36% of those looking to buy homes are still in the 35-45 age group because younger millennials are choosing not to buy homes.
Thakur said the ranks of the vital age demographic swelled steadily till about 2015-16. “However, since then, many millennials are rethinking the notion of buying homes at this relatively early age. The tendency now is to avoid large investments and instead invest in other asset classes. However, this is by no means the larger norm," he said.
According to Dilshad Billimoria, director, Dilzer Consultants, and a Sebi-registered adviser, millennials are still entering the real estate market, but they are doing it later in life and are ready to take on more “calculated" risks after an educated and informed analysis of the property (read more).
Also, there has been a shift in the way Indians, especially the younger generations, perceive assets and investments. For instance, mutual funds, which were considered a risky asset class by the earlier generation have been embraced by the younger ones. This is validated by a substantial and stable growth in assets under management by the mutual fund industry. Mutual funds’ asset base increased to ₹25.47 trillion in August 2019, with fund houses witnessing an overall inflow of ₹1.02 trillion, according to data from the Association of Mutual Funds in India (Amfi). “Campaigns like Mutual Funds Sahi Hai have brought in greater awareness about such financial assets and the advantages they offer. The shift from real estate to equity is slowly happening," said Navlakhi.
The ANAROCK survey shows that the trends vary from city to city. In the Mumbai Metropolitan Region, 37% home seekers are aged 35-45 years, 28% aged 45-55 years, whereas Delhi NCR shows a reverse trend with 37% home seekers aged 45-55 years and 26% in the 35-45 years bracket. In Bengaluru, 52% prospective homebuyers are aged between 35 and 45 years, while 18% are in the 45-55 years bracket, and a significant 21% are below 35. In Hyderabad, 39% of property seekers are aged between 25 and 35. Pune has the maximum number of prospective buyers in the in 35-45 years bracket at 46%, followed by 28% aged between 25 and 35.
Overall, the survey revealed that in 2019, 36% property seekers are in the 35-45 age bracket, followed by 25% in the 45-55 age bracket. A significant 20% of prospective homebuyers are in the 25-35 age bracket, which means that older millennials are still looking to buy homes, even though a significant number of prospective buyers are still from the previous generation.