_Chennai millennials think asset light is asset right

In India, for generations, ‘settling down’ has been equivalent to buying a house and a car for oneself. Ownership of a house not only ticked off the basic need for shelter, but it also offered a great investment opportunity. The predominant thinking was that there is a much higher scope for capital appreciation as property prices keep growing as demand remains inelastic.

Further, the norm was to have one stable job for life, which meant staying in one location, making it convenient to have a permanent residence. Accordingly, people actively spent on houses. However, lately, these societal notions have been undergoing a change, especially amongst the younger generations. 

In the past decade or so, millennials have been steering a shift in mindset where the preference is to be asset light. These youngsters don't want to be tied down by the financial obligations of a house they might temporarily use or of a car they seldom drive. Consequently, they increasingly prefer to rent an asset instead of buying one.

For the longest time, owning a house has been a matter of pride but this sentiment is losing its grip on the Chennai home-buyer’s psyche. Emphasis is now shifting towards the experience of dwelling rather than its ownership. The younger generation does not shy away from switching jobs or moving cities and even countries for better career opportunities and standard of living. Having a house only creates hurdles to such free will. Therefore, millennials choose to invest in experiences rather than the asset itself. 

This way there is flexibility of exploring new places, new cultures and broader professional options. On account of these mindset shifts, demand for residential real estate is taking a hit.

Many other reasons contribute to the declining interest in residential property. The returns from real estate investments aren’t as significant as they used to be 10 years ago. High property prices have negatively impacted demand for residential real estate. Rental yields are at a meagre 1–2%, indicative of low profit margins after subtracting the loan EMIs. Additionally, there is a growing aversion to being tied down by financial obligations like home loans that span over 15–20 years. 

At the same time, inclination to invest in more liquid asset classes like mutual funds is growing. Emerging trends, like co-living, also play their part in reducing the emphasis laid on ownership of residential real estate. On the whole, change in priorities of millennials is driving a change in societal norms and in the perception towards residential real estate.