Three reasons why millennials are buying houses amid Covid-19

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When it comes to the economy, millennials have not had the best of luck. As the generation, that never quite healed from the great recession, has also been hit the hardest by the pandemic. It is no surprise that Covid-19 has affected these young adults in tangible ways which will take years to recover.

Despite the economic downturn, the pandemic has shifted attitudes. Millennials have now started worrying about whether their future will be as secure as they were for their parents and grandparents. Moreover, with the people working from home now, there has been an increase in the desire to own a house. This has made almost half of the millennial home buyers speed up the process.

According to a survey by CII-ANAROCK, 62% of the respondents are planning to buy homes right away, 24% of them have already booked houses, and 38% of them are waiting for new-launched projects. This data shows the largest generation in India is prepared to buy houses in this competitive market, the only need is to get the right assistance from financial institutions at the right interest rates. As the need to own a home becomes a priority, the demand for affordable housing will witness a strategic uptake.

Now, let’s discuss the trends that have noticeably taken place altering the consumption of residential realty:

Owning rather than renting

The pandemic has pushed people indoors creating a high need for stability and security that only comes from staying in an owned home. There is a major fluctuation in the pattern of home investment, especially among millennial buyers. This change in the buying patterns of home buyers is the sense of security linked with physical assets and lower interest rates. They have realised that money that they spend on paying rent every month can be used to pay the home loans which will give them the title of asset holder in the future. Let’s take two cases to understand it.

Case 1 (Living on rent) – Let us assume a couple lives in a 2-BHK rented home and pays a rental of Rs 20,000 a  month. The average rent appreciation per annum is 5% which means the expected rent after 20 years is Rs 40,000 per month and after 40 years it’s 80,000 per month. The total amount paid in 40 years is Rs 2.9 crore.

Case 2 – (Living in the owned house) – A couple buys an affordable 2-BHK flat for Rs 70 lakh on a home loan for a tenure of 20 years. Assuming that the interest rate is 7.5%, their monthly EMIs will be 56,000. The total amount payable will be 1.35 crore which is way less than Rs 2.9 crore.

This example shows that the cost of living in a rental property is much higher than living in one’s own house.

Solid investment

One year ago, millennials were reluctant to buy a home or invest in a property, because they were more drawn to the flexibility of changing jobs. But Covid-19 has brought about a change in their plans. Working from home made them realise to own a space that will cater to their needs and well as their family’s. Instead of moving around and shifting homes, it’s better to pay EMIs that will make you the owner of the house. It helps to save on your taxes and once you own a house, there are many ways to invest and secure your future.

Furthermore, buying an affordable home is often considered a wise choice when settling down for the long term and it has become much easier as it was in the past. As you don’t have to always save 20% for the down payment as many home lenders can even offer you at the small down payment. However, it depends on the borrower’s credit history and past records.

Availability of easy financing options

Times have changed. Banks along with other financial institutions are offering exciting schemes and relaxed payment options to make it more convenient for homebuyers. Post-Covid, a decrease in home loan interest rates has become a big trigger for millennials’ home buyers. In addition to that, the monetary policy decision to reduce repo rates by 0.75% to 4.4% by the Reserve Bank of India (RBI) earlier in march 2020 made home loans even less expensive. As a result of this, many young adults are now capitalising on the opportunity and investing in housing. This combination of easy financing options and lower interest rates will make it easy on pockets for prospective buyers.

(The writer is CEO and co-founder, BASIC Home Loan. Views expressed are personal)