Millennial Demand to Drive Housing Investment Value in 2023
by Anil Pharande, Chairman - Pharande Spaces & President - CREDAI Pune-Metro
If there is one thing that 2022 proved to the real estate investor, it is that housing is the most enduring and viable asset class in India. After several years of taking a back seat, residential property became the best possible investment opportunity in the past year.
The viability of housing as an asset class was never in question. The desire to own homes rather than stay on rent is one of Indians’ most fundamental instincts. After all, financial independence and having to pay rent are incompatible concepts, and no rental home can provide the psychological security that living in one’s own home.
But still, the overall sentiment was ambivalent. Even if buying a home was on a family’s radar, they postponed the decision due to a lack of real urgency. The Great Indian Homeownership dream remained submerged under other concerns, investment options, and the various diversions of a normally-functioning society.
How 2022 changed the game for housing investors
When everyday life gave way to an actual emergency – namely, the Covid-19 pandemic – the bubble of hesitation broke. The pandemic brought the underlying demand for housing to the surface. The value of any asset emerges when demand for it increases. In 2022, we saw housing demand increase beyond anything witnessed in the last 2-3 decades.
In 2021, the increased housing demand still appeared to be a temporary glitch – an interesting side-effect of the pandemic which would pass eventually. Instead, the desire to buy homes only increased even when the immediate danger was over. Something had fundamentally changed in Indians’ attitude to homeownership.
The most significant change to the demand scenario was an influential new buyer segment, namely millennials. These young people who never thought about owning homes in earlier years became the most important homebuyer population in 2022.
While 2022 was a year of the emergence of millennial homebuyers, 2023 already has it firmly established and snowballed to even greater heights. Rental demand, which also resurged by over 40% in 2022, will also cause investable homes to sell rapidly. The fact that property prices are climbing quickly now will add another level of urgency to seal good deals in 2023.
2023 – where and what to invest in
Housing demand will reach new peaks in the coming ahead. Millennials are giving the most significant impetus to this demand, and knowing what they want is the key to success for residential real estate investment in 2023.
– Ideal home sizes – Various studies have confirmed that Gen Y has completely changed the face of Indian housing demand. This generation single-handedly introduced and established the hybrid work system in a country where office work had stayed the same since market liberalisation after 1991. Obviously, hybrid work and working from home require bigger residential spaces.
In 2023, real estate investors need to focus on homes with a minimum of two bedrooms and preferably three. 1 BHK and studio apartments are increasingly redundant for millennials – so whether for capital appreciation or rental income, residential property investors should give smaller apartments a miss.
– Ideal locations – While millennials have been driving the demand for bigger homes in 2022, their purchasing power has, in most cases, stayed the same. Also, living close to the office is less relevant than it used to be. As a result, millennial homebuyers are looking for bigger apartments in areas where they are still affordable.
However, when it comes to the cheaper suburban areas, not all are created equal for millennials. They are looking for more than just big flats at lower prices – they also expect quick access to shopping and entertainment. Therefore, investors should choose suburban areas that ensure a great social life and overall convenience.
– Ideal housing projects – In terms of which projects to choose, investors should again keep in mind the mindset and requirements of millennials. While their parents may have been satisfied with four walls in a good neighbourhood, young homebuyers are essentially active. This is a critical factor to remember while considering investment-grade residential properties.
Millennials are more active, health-conscious, and environmentally aware and concerned than any of the preceding generations. Also, hybrid work and working from home equal less time wasted on commuting and more time for leisure activities. There are three must-haves in the homes they buy:
- A jogging track, a properly equipped gymnasium, a swimming pool and clubhouse, and facilities for other sports activities.
- Adequate and well-maintained green open areas to soothe the senses and provide ‘lung space’ to replenish the surrounding air quality.
- Modern sustainability features like waste water treatment, waste collection and recycling, solar panels as an alternate energy source for powering common areas, rainwater harvesting, and ready access to public transport to reduce reliance on personal vehicles.
Finding projects with all these features in non-core areas, keeping in mind the price tags millennials find attractive, can take time and effort. Choosing homes in modern integrated townships which offer all these and more within the project can eliminate much of the guesswork.
Millennial demand drives many other industries, from electronics and fashion to domestic and international hospitality. It is a perennially young, ambitious and aspirational buyer segment constantly being replenished by more people entering this critical age group of empowered, successful decision-makers.
This was the missing link in the Indian housing equation. With millennials eager to become homeowners in 2022, the housing market cleared the last and steepest hurdle. According to the magazine People Matters, there are currently 440 million Indian millennials. Gen Y is a huge market segment whose support or lack of it can make or break any industry.
Residential real estate investors need to rethink many of the older preconceptions that influenced investment decisions before the Covid-19 pandemic. This is literally a new marketplace now, with a new breed of homebuyers having radically different priorities – and making very different homebuying decisions. Today’s housing investors must look at their investment options through younger, more aspirational, and smarter eyes.