What Young India Wants?

02 May 2017

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“Roti, Kapda aur Makaan” (Food, Clothing and Housing) the age old adage is very relevant in today’s times as well. This particular post reflects the aspirations of a young India which is constantly looking to establish itself, much unlike the previous generations. To arrive in life, particularly in the Indian society, an individual is supposed to get settled at the earliest. The definition of settling down in life of an individual starts with an ‘owned home’.

Recent rapid economic growth, which has been led by service industries such as finance and information technology, has transformed Indian metro cities. We all know the reason for India being the fastest developing major economy is its vast young population belonging to the working class or about to enter it soon (known as the demographic dividend). The pace of migration from rural areas to the cities remains high and continues to fuel demand in the cities.

The erstwhile agrarian economy of India is gradually gaining prowess as a services hub of the world, while the current Indian government is making efforts to also make the country a large manufacturing hub. Add to it the numerous start ups which are run by young individuals and their employees. All this has thus created massive housing demand in all the metro cities particularly the six major markets of Bangalore, Mumbai, Delhi NCR, Pune, Hyderabad and Chennai that are major contributors to India’s GDP.

With increasing levels of education, the youth are taking up jobs and careers which are more remunerative than ever and hence, have higher disposable/ investable incomes. While real estate has seen an upswing in demand and supply in the last few years, developers laid more focus on constructing larger homes, in order to serve affluent Indians. Undoubtedly, there is a substantial demand for large spacious homes by the upper class sections of the society which developers are catering to, but the need for affordable and budget housing still remains unattended.

Why demand for 2BHK homes is robust? 

• Economy of space: The young work force today largely comprises of nuclear families having 3-4 members. For such people, 2BHK apartments are best suited to their needs. A 1 BHK apartment is insufficient for a couple planning for kids or looking to get their parents to stay with them in the future. Subsequently the maintenance compared to large 3BHK homes is lesser which makes 2BHK homes easy and cost effective for maintenance.
• Convenient for tenants: In metro cities where the rents are high, 2 BHK homes are convenient for tenants as well. A general observation is that, bachelors/singletons prefer staying near workplaces, as it is convenient for them to commute to workplaces and it helps save their time and expenditure on transport. A number of tenants share one apartment, as it proves more affordable due to distribution of rent. For 2 or more tenants, 2 BHK apartments provide a balance between comfort and affordability.
• In addition, tenants with families also have a strong preference for 2BHK apartments. A 2BHK home provides a healthy balance between their primary expectations from a home in terms of space and budget availability. A 2BHK is a lot more spacious and comfortable compared to a 1 BHK apartment and a lot more affordable as compared to a 3 BHK.
• Age suitability: Today, the concept of retirement homes has emerged in the Indian real estate market. Even here, it has been seen that old age couples (senior citizens) prefer 2BHK homes after retirement as these prove to be economical in terms of space as well as affordability.
• Investment criteria: When there is a choice between what is more preferable between 1BHK and 2BHK, 2BHK is more preferable as it works on simple market principle, “easy to buy, easy to sell”. Thus, 2BHK homes create an appropriate investment option as the demand and supply cycle in market currently supports 2BHK. For those who have temporary jobs overseas, it is thus easy for them to rent a 2BHK rather than to go in for a 3BHK or smaller than 2 BHK unit size.
• Amenities: When talking about amenities, the townships that are coming up in cities predominantly consist of 2BHK towers and provide amenities accordingly. Amenities like Community hall, central Patio, swimming pools and high end gyms often are part of these.

A number of builders are taking proactive measures in order to address this heavy demand. As can be seen from the below graph (Information Source: Citibank Property Insights for Q1, 2016), an overwhelming majority of the estimated 4500 units launched during the first quarter of 2016 were targeted at the affordable and mid-level segment of home buyers.

If one looks at the distribution of units in the below graph, one can see that 1 BHK and 2 BHK units together account for a whopping 87% of the new units launched. Keeping in mind the heavy demand, it can be safely assumed that a large percentage of these homes are 2 BHK.

Conclusion:   Thus, after reviewing various aspects of heavy demand for 2BHK apartments, which is being given a further push by societal and economic changes, one can say that the demand and need for 2BHK is going to rule the market. Clearly, it makes sense for developers to continue providing most home buyers what they want.

For example, Rohan Builders’ new projects in Baner and Bavdhan, Pune called as Rohan Leher 3 and Rohan Madhuban 2, which will contain majority 2 BHK residences, aims to target the home buyers in the middle income brackets.