The housing market as it exists today has made it increasingly harder for first-time homebuyers to secure a viable home loan—and a majority of the homebuyers facing these challenges are millennials. In the recent years, more and more millennials are deciding against buying a home. The reasons for this trend are believed to be many—from the financial liquidity and viability offered by other investment options to skewed debt-to-income ratios and restricted career options.
A recent survey conducted by the Confederation of Real Estate Developers' Associations of India (CREDAI) Youth Wing in association with real estate consultancy CBRE reported that 68% of Indian millennials who don’t live with their parents choose to rent a place. Also known as are known as the “Generation Rent”, millennials have indicated a clear preference for renting homes. Here are some of the ways in which rentals are offering benefits to millennials:
1. Job & Career Flexibility: Most millennials today believe that they are overworked and underpaid. Moreover, the idea of finding one’s calling and following one’s passion has become the underlying force driving the career choices of millennials. This means that millennials are always on the lookout for better opportunities and are more willing than ever to relocate for this purpose. Not only do millennials not want to restrict their options by bogging themselves down with a home purchase, they’re also now taking to renting furniture (rather than buying it)! These options allow for unrestricted mobility.
2. No Unnecessary Expenses: At first glance, it may seem like buying a home is the best way to save on monthly rental expenses. But millennials realize that a home purchase comes with far too many additional expenses that may not be apparent right away. Property tax, insurance, maintenance and repairs, registration, parking fees, and much more, add up to more than 3.5 times what you would pay for the same property if you were renting it (as opposed to owning it).
3. No Investment Anxiety: Real estate investments may have seen the light of day with the older generations, but millennials don’t seem to want any of that ‘stability’ that comes with a home purchase. If you’re investing in an under-construction property, there’s always the risk of unprecedented delay in completion and delivery. Moreover, real estate investment offers no liquidity and poor returns. Millennials would much rather invest that money in more financially viable options, such as equity, fixed income or gold, for faster and better returns.
For millennials, renting a property comes with many other visible advantages.
No costs incurred for maintenance and repairs: When you’re renting a home, the homeowner (landlord) is responsible for overseeing the maintenance and repairs in the home. This saves the lessee a great deal of money.
No real estate taxes: Depending on the value of the house, homeowners have to pay a hefty property tax. However, tenants are exempt from paying any kind of real estate taxes.
No substantial down payment: Buying a home requires you to make a significant down payment. Millennials are typically unwilling to make such a major financial commitment that restricts many other options for them. Renting a home, on the other hand, usually requires tenants to pay up a few months’ rent in advance as a security deposit.
Access to luxury amenities: Millennials want to make the most of luxury amenities, both within the individual home and at the residential project. But when you choose to buy such a home, you have to pay significantly more than when you rent a luxury home with state-of-the-art amenities on offer.
Flexibility to upgrade or downsize: Renting a home allows you to upgrade or downsize in terms of size as your needs and preferences change. This flexibility is greatly restricted when you buy a home.
Lower utility and insurance costs: Renters’ insurance is much more affordable than homeowners’ insurance. At the same time, utility costs and overheads work out to be much more economical for millennials in rented apartments.
Rentals remain unaffected by housing market: The recent years have witnessed a depreciation of property values across the country. For that reason alone, millennials don’t want to risk making a major financial investment such as a home purchase. However, the rental market remains largely unaffected by the fluctuating property prices. So, even if the prices increase significantly, the rental will remain fixed for entire duration of the lease and will increase only marginally as per the agreement.
rnWhile the choice between renting a home and buying it is largely personal, millennials have cleared indicated their preference for living in rented accommodation. Given that millennials have become the trendsetters when it comes to life choices, rentals seem to be the future of the housing market.