NEWS

Convenience, connectivity continue to impress millennial

October 12, 2018

With snob value out of the equation, convenience and connectivity are factors that the younger generation seeks when investing in their first home this festive season.

Gone are the days when the location of your first home was limited to a five-km radius of your parents' home or the locality you grew up in. With improving infrastructure and a plethora of residential offerings in metros across the country combined with the increasing costs of owning a home, millennials are choosing better value deals in upcoming micro-markets rather than paying a premium for conventional addresses. According to a report released earlier this year by CREDAI Youth Wing and CBRE Research, about 82 percent of Indian millennials (those born between 1980 and 2000) prefer to live with their parents owing to traditional family values as well as increasing property prices. While many youth opt to live on rent due to migration to cities for jobs or entrepreneurial opportunities, the report also reveals considerable interest (about 35 percent) in property as an investment among this generation. This gives a ray of hope to the real estate industry, which is trying to tailor-make residential options according to millennials' preferences, all within affordable price points.

Rent vs Buy

Considering the rising costs of property, especially in metros, combined with increasing transaction costs such as 12 percent GST (on under construction projects) and other levies, younger professionals are surely taking their time to finalise the home purchase. This explains the strong market for residential rentals in metro cities. "At current market prices, where the rental yields are just one-two percent, renting is clearly better than buying. In India, particularly because of high-interest rates regime, the monthly EMI works out much higher than the monthly rental for the same property, which makes renting a favoured bet over buying," suggests Sovan Mandal, Senior Vice-President – Sales & Product, India Mortgage Guarantee Corporation (IMGC).-

Hence, the residential market is witnessing a real estate savvy millennial investor who chooses the best of both worlds — pay a small rent to live close to work while investing in affordable homes in emerging micro-markets. Reiterating the need for home ownership, Sudip Mullick, Partner, Khaitan & Co, says, "The preference for renting over buying property among millennials will continue to be a challenge during this particular phase. However, the demand for homes will always exist, unless people want to go back to caves and forests. Historically, as well as in future, the value of land and buildings as an investment instrument will never cease."

Digital nomads

Considerably more flexible and ready to adapt than preceding generations, millennials rely on the power of modern technology for work, life and play. Explaining this mindset, Anuj Puri, Chairman, ANAROCK Property Consultants, says, "For millennials, the boundaries between work and pleasure, business and leisure, as well as workplace and residence, are much less distinct. They are not as particular about the status value of their address as they are about the connectivity, conveniences and security of a neighbourhood. They want to be able to get to work and back home quickly and enjoy a decent number of social amenities in the area they live in. Therefore, while their global counterparts chose to rent their entire lives, many Indian millennials aspire towards home-ownership. In India, no single factor conveys a feeling of security and social integration as much as a self-owned home does. Thus, an Indian millennial is very apt to consider owning a home as an essential and fundamental basis from which to launch the rest of his or her other life plans."

Investment savvy

Personal finance experts over the years have emphasised on the benefits of diversifying one’s investment portfolio and starting young when doing so to hedge risks and maximise returns. There's no doubt that home ownership is the golden egg in most investors' baskets and investment-savvy millennials are keen to safeguard their interests over inflation through real estate. Amit Goenka, MD & CEO, Nisus Finance, advises, "Taking a home loan at a younger age means one has the advantage of time. Millennials who are entering a higher tax bracket can reduce their liability through home financing. Besides, apart from attractive offers from developers, homebuyers can look forward to the following from HFCs:

A loan of up to 90 percent of value in affordable housing and 80 percent in higher value purchases. Many hfcs include transaction costs like stamp duty, registration, gst as well as charges for possession, parking and soft furnishings in the value of the house, thereby reducing buyers’ contribution;

Nearly 70-80 percent of earning capacity can be given out as loans, thus increasing the overall loan value;

20-30 year tenures are being offered, reducing the EMI or preemi payable by the buyers."

With the great asset of time on their side, millennials are best served by the plethora of deals from developers and HFCs during the impending festive season. Start young and fly high towards financial security with your dream home.

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Source:magicbricks.com