The aggressive investment by middle-class millennials and Gen-Z in real estate is seen as one of the key drivers of growth in the realty sector in India. The sudden loss of millions of jobs across the world due to the Covid-19 pandemic has provoked the middle class to look for alternate regular income and long-term investment. Investment in real estate, particularly residential segment, has emerged as the preferred choice since most of these millennials and Gen-Z are looking for accommodation either for self-occupancy or for regular rental income.
Many reports also suggest that the demand for 3BHK homes stood at 44% in the first half of 2022 as against 38% for 2BHK homes. The demand for 3BHKs was the highest in Bengaluru and Chennai at 51% and 48%, respectively.
As per SBI research, households in India saved a massive Rs 7.1 lakh crore during FY21. The rate of growth has been so rapid that Indian household savings have gone up from Rs 15 lakh crore in 2015 to Rs 31 lakh crores in 2021. As per the World Economic Forum, there is a definite increase in spending also by the middle class. No doubt, the total consumer spending in India is expected to more than double to $3.1 trillion by 2030 from $1.4 trillion in 2017. The new middle class will account for nearly 60%, or $1 trillion, of the $1.7 trillion increase anticipated in India by 2030.
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Commenting on the same, Pankaj Bansal of M3M India says, “Savings is synonymous with the middle-class ranks as they save and in turn invest, thereby creating ripple effects on the economy. The aspirational middle-class millennials and Gen-Z are emerging as one of the key drivers of the realty economy, which is now expected to grow by 12-15% CAGR in the next five years. There is also a paradigm shift to 3 BHK from earlier 2 BHK. This shift is being seen in the majority of cities, including NCR. Keeping this in view, a majority of residential projects conceived and delivered by M3M have extra .5 accommodations, which are being used as study-room, puja-room and for other multiple purposes by the customers.”
“There will also be a significant shift by the middle -class from mid-segment home in 2023, ranging from Rs 40-80 lakh to high-end luxury residential units, priced between Rs 80 lakh and Rs 1.50 crore – which is attributing jointly to about 62% of demand. This might be the reason that more of the real estate developers are also keeping their focus on growing segments. Though it is also true that the luxury and ultra-luxury segments too comprised a steadily rising share of new launches at 12% and 6%, respectively,” he adds.
Latest ANAROCK Research indicates that housing sales in the top 7 cities have created a new peak in 2022, breaching the previous high of 2014. Close to 3,64,900 units were sold in 2022 as against 2,36,500 units in 2021 across the top 7 cities – including MMR and NCR — rising by 54% Y-o-Y. In terms of cities, MMR witnessed the highest sales of approx. 1,09,700 units in 2022, followed by NCR with approx. 63,700 units.
Anuj Puri, Chairman, ANAROCK Group, says, “2022 has been a phenomenal year for residential real estate despite all headwinds, including rising property prices, interest rate hikes and all geopolitical tensions etc. Housing sales in top 7 cities breached the previous highs of 2014 while new launches in comparison remained restricted. While it was widely anticipated that the rise in property costs and interest rates towards the second half of 2022 would have a cascading impact on the residential sales, Q4 2022 remained quite robust with as many as 92,160 units sold in the period.”
Strangely, despite several hikes in the repo rate, which has made home loans costlier, many people are still willing to invest in real estate for a variety of reasons.
“Post increase in the repo rate by RBI, many reports suggested that nearly 50% of real estate customers believed that residential accommodation prices are now set to increase, but a majority of them still preferred to invest in real estate for long-term benefits. The customers & investors are also convinced that the rise in residential accommodation prices will also fetch them higher rentals. This has also proved right, since the rentals have already increased by almost 15% in the last two years in top cities, including NCR, thus bringing value for investment in real estate. This is applying to retail as well,” Bansal says.