What Millennials Want - Real Estate Developers Are Eager To Please

Guarab Ghosh, 30, has had a stable job at a multinational company in Hyderabad for the past seven years. With impending prospects of higher disposable income, he knows he doesn’t have to contend with financial worries. Yet, he isn’t keen on buying a house.That’s because he doesn’t consider buying property through a mortgage financially viable. Which is why he doesn’t mind renting an apartment for Rs 25,000 every month. “If I’m to purchase a 2-BHK apartment in Hyderabad by taking a loan, I’ll end up paying EMIs (equated monthly instalments) to the tune of Rs 65,000-75,000,” Ghosh, who hails from Tripura, said. “That’s much more than my rent.”Guarab is a millennial—or among those who were born between 1981 and 1996. This section presently drives over a third of sales in the real estate sector, according to the consultancy Anarock. The youth demographic is expected to swell further as India’s already the youngest nation in the world, with over 365 million people aged between 10 and 24 years, the United Nations said in a report..The Affordability Factor.Unlike their parents, millennials may have different financial priorities, shaped by changing financial circumstances, such as higher education costs, shorter job tenures, or different discretionary consumption options, such as travel. This is also prompting a change in approach to asset ownership—evident in the growth of the sharing economy that ranges from cars (Uber, Ola) to clothes (Wardrobe, Rent The Runway).This shift in financial priorities and consumption preferences is especially visible when it comes to buying a home. “For any young professional an EMI would be a significant amount of his/her take home salary. This doesn’t encourage people to commit themselves to EMIs,” Kiran Telang, certified financial planner and a SEBI-registered investment adviser, told BloombergQuint. “Besides, these days there’s no job security with layoffs happening across sectors.”“If home prices were reasonable and there was job security most of the people would have gone for buying a house over renting,” Telang said. “But this also depends on personal choice and family structure.”Indians are spending a larger proportion of their income on buying a home in 2019 than in 2015, according to the Reserve Bank of India. The house price-to-income ratio—a barometer of housing affordability—rose from 56.1 in March 2015 to 61.5 four years later, the central bank said. Mumbai and Bhubaneswar, according to the survey, were the least and most affordable cities for housing, respectively.To be clear, home finance is much easier to come by today than a decade or so ago.Pankaj Kapoor, founder and managing director of Liases Foras, a real estate consultancy, said that the millennial trend is driven more by economics than preferences. “In a good market, the ratio of rent to EMI should be 1:2. But today we find that it’s usually 1:4,” he said. “This makes renting much more feasible for young professionals. We have seen that in most of the exuberant geographies, with increase in prices affordability has gone down.”That’s forcing real estate developers—who have struggled in recent years amid a liquidity crunch among non-bank lenders, their primary creditors; an economic slowdown that stalled recovery in the sector; and disruption caused by the government’s note ban and introduction of a nation-wide sales tax—to explore different avenues to market their products. Especially as 6.56 lakh homes were lying unsold in top seven cities as of September 2019, according to Anarock. Mumbai’s Hiranandani Group, for instance, has started providing homes on lease or rent for tenants through a leasing desk, circumventing the more traditional route of investor buying an apartment to put on rent. Hiranandani aims to lease residential homes on direct long-term leases, once the Model Tenancy Act guidelines are enforced.“The working populace are prospects for demand in rental housing given that they don’t buy homes in every place they move to for work,” Niranjan Hiranandani, founder and managing director of Hiranandani Group, told BloombergQuint in emailed response. “We plan to come up with rental housing stock in Hiranandani Gardens, Powai, which is a well-established location in Mumbai.”.Goliaths of India Property Rise as Slowdown Swallows Small Firms.The “Walk To Work” Pitch.The other lure to get young clientele, to buy or rent, is to get the size-location dynamic right. Many builders are constructing smaller apartments, close to central business districts. The “walk-to-work” pitch they hope will attract new buyers wanting to avoid bumper-to-bumper traffic and crowded public transport. Indians spend at least two hours everyday in their work commutes—the highest in the world—the office commute platform MoveInSync said in its report for 2019.Agreed Paresh Karia, chief executive officer of Acquest Property and Hospitality Services Pvt. Ltd. “Many developers in Pune near Hinjewadi, a hub for information technology companies, are coming up with compact 1-BHK apartments,” he told BloombergQuint over the phone. “They are getting good demand from millennials because of affordability and convenience.”Sachin Jagtap, 29, an information technology professional from Nashik is one such person. Jagtap, who moved to Pune three years ago, recently bought a flat in Wakad, a locality closer to his office in Hinjewadi.“When I was renting a 1-BHK (flat), I used to pay Rs 17,000-20,000. Today, I pay an EMI to the tune of Rs 28,000,” Jagtap, who is now father to a two-month-old boy, told BloombergQuint over the phone. “My rent would have kept increasing every few years. Also, it feels good to have your own house.”The preference for homes in well-connected localities is leading to a reduction in their size, according to Anarock. The top 7 Indian cities collectively saw average apartment sizes shrink by nearly 27 percent between 2014 and 2019, it said in its real estate consumer sentiment index.Although developers claim to be marketing smaller flats to meet demand from millennials, analysts say the change has other underlying reasons.Sandeep Sadh, founder of MumbaiPropertyExchange.com., believes the millennial tag is “nothing but a marketing strategy”. “The real estate industry is going through a churn... (but) It will be incorrect to say these changes are driven by the millennial factor alone,” he told BloombergQuint.“For instance, many developers have now started reducing the sizes of their apartments backed by change in culture, PMAY (Pradhan Mantri Awas Yojana) benefits and income tax deductions under Section 80IBA. Most people find prices beyond their reach,” he said. “Instead of reducing ticket size, developers have now started reducing sizes of the units.”Liases Foras’ Kapoor said that preferences in real estate are often straitjacketed, leading to discontent. “To quote Micheal Storper, ‘In real estate people don’t have preference, they have frustrated preferences’. This essentially means people are forced to compromise and settle down for something much below their expectations in terms of square foot,” he said. “No matter how well they are marketed, one can’t live in homes which are just 180 sq. ft. Eventually these people will move to bigger houses once they start their family.”Cue Sanjeev Mehera, 30, a software engineer from Panvel, who recently purchased 1-BHK apartment in the Mumbai’s eastern suburb, for end use as well as for investment. “I’ll be moving to different cities so I have no plans of settling down,” he said. “Instead, I will prefer renting an apartment.”But he intends to ask his parents to stay in his flat and let their house out for rent. “I’m hoping that the property’s price would appreciate in the next 5-6 years. This will help me to sell this house and use proceeds from it to buy a larger apartment.”.Consolidation Saved A Few Real Estate Projects, But Hasn’t Driven Sales.What, No Gym?.Given the capricious nature of millennial consumption – buy, rent, buy, rent… - many builders are adding amenities that suit both types of consumers.In Mumbai—where per square feet rates can go as high as Rs 70,000 in select localities, according to the property portal 99acres.com—that can be furnishing. “This (fully furnished 1-BHK apartments) works well with millennials because most of them have no time to get their homes furnished.”.Privacy is also a selling point, especially in this co-sharing world. “Most of our buyers are young professionals in the age group of 35-40 years. Building upon the feedback received from our previous projects, we have realised millennials give a lot of importance to privacy,” said Rajesh Prajapati, managing director of Navi Mumbai’s Prajapati Constructions. “That’s why even in our 1-BHK apartments (in their new project in Panvel) we’re providing two toilets and one of them is attached to the master bedroom.”.How Real Estate Developers Are Tiding Over Liquidity Crisis.For Pirojsha Godrej, executive chairman of Godrej Properties Ltd., their project at Hinjewadi in Pune, which largely targets millennials and IT employees who work odd hours, is focused on providing amenities such as gymnasium round the clock. “I think that was very well appreciated,” he said. The emphasis for an upcoming project in Delhi, he said, is air purification. “Nobody wants to live in a place where you have to wear a gas mask.”Meanwhile, Ghosh who’s currently renting hasn’t ruled out buying. But .... he hasn’t fully ruled it in either.“I want to move to a tier-2 city after retirement to realise better value for a residential property. I see more growth potential in tier-2 cities and believe they’ll be more habitable in the future,” he said. “If the current interest rates and inflated rates of real estate persist, I am open to renting even after retirement.”

What Millennials Want - Real Estate Developers Are Eager To Please

Rent, buy, location, privacy, amenities and price - real estate developers are pulling out all the stops to woo millennials.

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