Why Millennials Are Spending Big Bucks On Their Dream Home Post COVID-19

Akshay Sinha, a 32-year-old sales professional never had any plans to buy a home. Like most millennials, he was happy living in a ¡®rented space¡¯ in the pre-pandemic era. But things took a turn, post coronavirus. In fact, he¡¯s now on a lookout to buy a home that fulfils both his and his family¡¯s needs. So, what has really changed from then to now?

¡°I have to admit that my perspective has majorly changed during the pandemic. Come to think of it, we¡¯ve never stayed at home as much as we have in the last few months, which makes it important to own a space that caters to my needs as well as my family¡¯s. It¡¯s not like I can¡¯t find a rented accommodation, but I feel now is the perfect time, since mortgage levels are at a multi-decade low. Moreover, even if we don¡¯t continue to completely work from home, it¡¯s going to be a hybrid model, so it still makes sense,¡± he adds.

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In the past, millennials didn¡¯t want to buy a home, because they were more drawn to the flexibility of changing jobs, and moving to other cities in search of better career opportunities.

With work from home being the norm today, owning a physical asset has become more crucial than ever. It¡¯s also about having a roof to live under for a safe and secure future.

¡°Truly, there has been a shift in the mindset of millennials post the pandemic. Instead of renting a house and frequently shifting homes, it is better to pay a monthly EMI that will make you the owner of the house. It further helps in income tax savings. And once you own a house, there are so many more ways to invest and secure your future, as the house can be rented out, thereby becoming a means of income for later years, and for the next generation,¡± says Mohammad Atif, Senior Technical Lead, Nucleus Software.

MILLENNIAL HOMES, MUCH MORE THAN A ROOF

According to a study conducted in 2020 by 360 Realtors, a renowned name in real estate advisory services, 75% of millennials want to buy a home in the next three years. The company surveyed 1,200 middle-income millennials, who have an annual income of over Rs 7 lakh. The study also sheds light on various other aspects pertaining to millennial home buying: their budget, financing options, and more.

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There are several possible reasons for this shift, ranging from a rise in disposable income, and greater access to home financing options. As per an article by Economic Times, millennials in India account for 46% of the total workforce, and have an average spending capacity of $3.6 billion.

Unlike previous generations, they are particular about their status and choose to spend big bucks on apparel and accessories, automobiles, and also real estate.

Ankit Kansal, Founder and MD, 360 Realtors believes that for millennials, a home is much more than a space to live in; it is an extension of their personalities.

¡°Millennials prefer comfortable and modern living with a lot of open spaces, a host of facilities, larger clubhouses (at least ~30,000 ¨C 40,000 sq. Ft), and on-campus shopping facilities, among other things. There is also growing demand for theme-based living and residential complexes. Millennials also prefer a lesser number of homes in a housing complex, so that they can enjoy a peaceful and serene atmosphere and live a hassle-free life,¡± he adds.

Also read: 8 Ways The Indian Millennial Can Manage Money Better

Dipika Jaikishan, Co-founder and COO of Basis, a first-of-its-kind platform that powers financial independence for women, agrees.

¡°Having gone through multiple recessions in their lifetime, millennials are extremely aware of what they want and need. Comparing them to the older generation may not be fair, only because they are a generation apart in income levels, infrastructure, responsibilities, and general consciousness of what fits our needs. With the flexibility of choosing where they want to purchase a house, the efforts to ensure those homes reflect their personalities have also become higher,¡± she says.

RIGHT TIME, RIGHT CHOICE

In 2020, mortgage rates fell to a record low at 2.88% with an average 0.8 point, according to data released by Freddie Mac. In November 2018, it was 4.94%, and has fallen more than two percentage points.

¡°Earlier, millennials preferred ? BHK units. However, post-Covid-19, there is an incremental demand for larger 3BHK spaces, as many individuals will continue doing WFH. However, the budget will remain a crucial parameter for millennials. Mostly, such clients allocate around ~ 30-50% of their aggregate monthly income as EMI, and plan things accordingly. So, the role of the budget can¡¯t be disputed,¡± adds Ankit.

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Saurabh Garg, co-founder of real estate platform NoBroker.com shares that millennials today prefer society accommodation, due to the many conveniences that they offer, including 24x7 power back-up, security, society apps, and much more.

¡°They also want spacious homes that have spaces that can be used for multiple purposes. For instance, a large balcony that can double up as a recreational zone, a mini garden, and a yoga studio. As work from home and study from home are becoming mainstream, they are looking for accommodations that have smart interiors and have two workstations, a study, and an open kitchen. All in all, they are looking for interesting concepts as they are spending most of their time at home now,¡± he adds.

WILL LUXURY HOUSING WITNESS A SURGE IN THE YEARS TO COME?

There could be a surge, especially in the case of double-income households, affirms Dipika.

¡°Millennials choose luxury and expensive housing, once there is a certainty of the size of the family they aspire for, and the facilities and conveniences they want to live around. Affinity of luxury is a strong assumption to make. While there are millennial families who can and want to live a luxurious life, 2020 also brought with it a whole movement of minimalism, which several millenials are choosing to follow. It is expected that 2021 is going to see a huge spike in residential real estate, and there are reports of housing purchases of luxury properties rising in cities such as Delhi- NCR, Hyderabad and more,¡± she adds.

Also read: Smart Money Moves To Make In Your 20s & Invest In Your Future

On the other hand, NoBroker.com¡¯s annual survey has revealed that the budget of homebuyers has increased considerably in the last year. ¡°The 25-40 demographic constituted for about 49% of buyers until last year. This percentage has now rocketed to a whopping 63%," the survey mentions.

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That¡¯s not all - 58% of the buyers plan to buy a flat within Rs 60 lakh, while 13% want to buy a property between Rs 60-80 lakh. Around 19% of the respondents say that they want to get a property in the range of Rs 80 lakh to one crore.

"Last year only 10% contributed to that budget bracket," according to the survey. At least 11% respondents are looking to purchase a property over Rs 1 crore. "This is also up from last year's 7%," the survey says.

There are several reasons for a spike in millennial home buyers, according to Garg, and the trend is likely to witness a surge in the times to come.

¡°One is that prices of residential properties have not increased. Second, expenditure on travel, movies, and eating out was almost nil for several months. The first two reasons combined with attractive builder discounts and low interest rates gave luxury housing a push. After realising that home is a necessity, one is not far from realising that it is not an everyday expenditure and therefore, since it is a single shot for most people, they want to be intelligent in choosing the locality, size, and other aspects. One doesn¡¯t want to regret such decisions as they involve decades of savings. The post-covid era is already seeing a surge in demand for houses above one crore,¡± explains Saurabh.

Also read: Simple Ways To Start Investing At An Early Age & Build A Secure Future

EXPERT ADVICE

So what is it that millennials need to keep in mind while buying homes? Our experts have some solid advice.

¡°Millennial buyers need to think about essential parameters such as credibility of the developer, stage of construction, the past track record of the developer, etc. They should also examine the location carefully and look at the nearby social infrastructure including retail, commercial centers, healthcare, and educational facilities. Similarly, it is advisable to scrutinise the future growth potential of the property and the location. A home is not just a place to live but also an investment for the future."

"Hence, a rough calculation of the estimated property appreciation is advisable,¡± adds Ankit.

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Apart from these factors, Dipika feels one needs to work on their cash flow, and understand it better to attain clarity on affordability regarding paying off loans in the next few years.

¡°Also, real-estate purchase decisions are often hard to reverse, and thorough scenarios should be analysed before buying property. Last but not the least, in order to get loans with good rates and favourable tenures, you¡¯ll need to have a solid credit history and credit score. Start building this as early in your adult life as possible,¡± she says, signing off.