Marcellus: Three Degrees of Disruption in Home Buying in India

Salil writes….Fast forward a decade and we will have a whole generation of people who’ve come to realise they don’t need to own an asset to use or enjoy it. And even if they were to think of buying an asset, is there room for another monthly instalment in their budgets, after having spent on an exotic vacation and for the latest iPhone? Buying a large ticket asset such as real estate then seems to be an impossible task, especially in the metro cities where property prices are unaffordable for most white-collar workers even today. A generation conditioned by the conveniences of a sharing economy, and the ubiquity of cheap credit that spurs consumption, will have a detached attitude towards home buying, a purchase/investment which once upon a time was seen as a milestone for Indian families. Millennials and Generation Z will see lesser merit in buying a home and greater sense in renting one, especially given the huge differential (4-5x) between rents and an EMI for a loan on the same house. They would rather spend the difference on consumer durables or holidays or even invest it. Other demographic changes, such as higher mobility (for jobs across cities) and late marriages will also increasingly shape the demand for residential property – owned or rented. Some of these trends, in varying degrees, have been seen in the US and China too,

That does not imply that the younger generations will forever stay in rented homes. Just that they will feel no pressing need to make that a priority i.e. they will postpone their home buying. And it doesn’t take long for such behavioural changes to impact share prices – we are seeing the effect that just 6 years of Uber’s operations in India have had on demand for cars in India.

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