Indian millennials are setting foot into the global world with aspirations to reach heights by their mid thirties. So in a country where home ownership is conventionally pursued by an old age person, the scene is fast changing. The percentage of buyers between the ages of 27-38 has gone up from 35% in 2002-03 to 55-60% in 2014. Indian millennials spending for home has gone up to all time high.
Not a long while ago, the only people who could dream of buying a house were the ones nearing their retirement age. However, a lot has been changing with the introduction on the western culture in India. Our lifestyle has undergone a significant change over the past few years. With the Generation Y taking over, Indians seem to be carrying forward the ideologies of the west by introducing gradual changes in their routine. Therefore, it should not be shocking to know that while the age of a homebuyer ranged between 40-60 in the late 90’s, it touched as low as 27 in the year 2012-13. The current age of a home buyer in India ranges between 35-38 years.
So what caused such a dynamic change in the median age of home buyers in India? How did such a transition take place? Enlisted below are a few facts that approve to such a transition in the age group of homebuyers in India:
- The youth in India accounts for about 443 million Millennials and 393 million Gen Z(born after 2000) people who earn Rs. 2,14,000 (USD 3200) on an average according to a report titled ‘India Consumer Close-Up’. In 2012,the total annual disposable income of Indian millennials was $139 billion. The quality education being provided to the youth is one of the many factors involved in shaping a bright future for the millennials.
- With more people getting employed in high paying sectors like the IT industry or finance, the income of people is rising. This in turn raises the disposable income which in turn leads to better living standards. These high paying industries are always in search for younger, more creative minds to come up with new innovations. The IT industry is a piece of hot cake which lures the youth by paying them salaries of up to 3 crores per annum. Such a high rise in income of the millennials pushes them into spending it on the necessities of life.
- There has been a shift in the mindset of the youth. Most of us now would prefer paying EMI’s on home loan rather than paying monthly rents. Although the EMI’s might require a larger amount, but with the rising living standards of youth in India, it has become way more affordable than what it was two decades ago. The aspirations and needs of a millennial have risen to a high standard.
- The interest rates on home loans have come down significantly with the current rate lying anywhere around 9% in the major banks like SBI, PNB etc. This has urged people to invest in assets like property.
- Various tax benefits are provided to first time home buyers on their home loans. While taking a home loan via EMI, the interest component of the EMI can be easily claimed under deduction. The principal paid on EMI can also be claimed under legal acts (section 80C). Under the same act, registration, loan processing and stamp duty can be deducted from the loan. The new Union budget of 2016 also increased the deadline for possession from 3 to 5 years. This means that if you take possession within 5 years of the loan, you could claim upto Rs. 2 lacs per annum. Such tax benefits promote home loans among all age groups.
- With lower interest rates for women, the gender bias prevailing in the society is ebbing away. Women are adding on to the youth population investing in property. A panel of experts have found out that around 30 percent of the property buyers in the urban areas are women.
In simpler words, all these factors have somehow contributed to better jobs and income for the millennials.
Higher income raises the disposable income which in turn raises the living standards of the people.
If we look back to the 90’s, we find that a lot has changed in the home buying patterns in India. Analysing the data, one could easily come to the conclusion that there have been various factors that have affected home buying over the years.
In 2016, these factors have had a lot of influence over the aspiring homebuyers in India:
The Introduction of GST bill
The much debated bill of the Parliament, the Goods and Service tax bill was passed earlier this year with a view of reducing the number of taxes to a single, combined tax. The bill will in itself affect a variety of factors playing in the Indian economy. However, the effect of the bill on the developers and homebuyers in India can be summed up in one word: beneficial.
- The abatement scheme would prove to be a boon for the aspiring homebuyers by providing a standard abatement of 70% for the houses which are under construction.
- This would further set the effective service tax rate to 4.35%.
- A zero service tax policy was announced for the developers constructing houses of less than 30 square kilometres in Tier I cities and less than 60 square kilometres in Tier II cities.
The reduced tax rates were announced to create a more affordable housing environment for aspiring homebuyers. This has opened up yet another opportunity for the Gen Y to invest in a house that belongs to them.
The restriction of culture
The values upheld in India could pose a threat to home buying patterns of the millennials. India has long been a country dominated by the elders. The joint family nature is still embedded in most of the rural and some urban areas of the country. Leaving the parent’s house is only considered appropriate for women once she is married off. For men, they are expected to live with the parents and serve to their old age needs.
Though these values preach humanity above all, they have also bound the youth of the country to the traditional lifestyle of India. They have put a restraint onto the freedom of an individual to seek a separate and independent living.
However, with changing times, this ideology of values is fast changing in the urban areas. As mentioned above, the introduction of western culture has somehow set ‘home ownership’ as a goal for the millennials.
Independent decisions and living
Living in a separate house not only allows you privacy but also makes you capable of making your own decisions independent of other people’s views. According to the Vice President of HDFC, one of the reasons why young people do not want to buy their own house is because they are attached to their families.
But, unlike the 90’s, independent living has also emerged as a value of consideration by the youth while buying a house. What caused such a change can only be described a change in ‘mindset’, as mentioned in the facts presented earlier in this article.
Appreciation in values
A house is a huge investment. The value of a well located house appreciates between 15-20% every year. So, the earlier a person buys a house, the more the value of the house appreciates. The asset value increases by a large margin resulting in a better value of the house. This point must be considered by every millennial aspiring to buy a house. It is much better to spend your money on an asset which offers returns rather than paying rentals every month.
Then and Now
This comparison is purely based on the study material which I analysed. The table will sort a lot of things out for you by comparing various data of the homebuyers in the early 2000 vs. the homebuyers now.
With so much competition around the world, it is best to stay independent and prepared for what may come next. For a wise person once said, “Life’s a ride and you got to enjoy it”.Emerging new trends point towards the fact that Indian millennials are now considering home buying as a step towards success. The demands of the kind of house are changing dynamically in reference to the youth’s need. We find flats with swimming pools, gymnasiums, clubhouses etc. emerging so as to lure the young homebuyers. The developers have started moulding the houses into something more desirable for the Generation Y. The changes in patterns conclude to the fact that the age of homebuyer has and will continue to go down for a significant time in the future. The Gen Y is a firm believer of starting at a very young age. This is what differentiates them from the previous generations.