India’s growing young workforce with their steady income and an investment mindset is set to play a significant role in the residential real estate market, in the coming years.
India has undergone rampant urbanisation during the last one decade. As per the Census report (2011) around 38 crore or 32% of the entire population lives in the cities. A McKinsey report says that this figure will touch 59 crore by 2030. Experts do believe that the current urban population in India is higher than projected by census and is set to grow higher in the coming years. A very important segment of the urban population is the young workforce that is coming of age—it is more knowledgeable, less risk-averse and has a steady income. This demographic is set to play a key role in the economic growth of the country.
The impact of this young workforce in the residential real estate will be huge in the coming years. A large part of the urbanisation is driven by the young and millennial population from smaller towns and villages. There are two very specific needs that are pushing the young Indian demographic to the cities—education and career. Incidentally, India’s young workforce is nearing the home-buying age and stands to benefit from the economic boom of the country.
Let’s understand the ways in which this vibrant demographic will impact the residential real estate sector –
Higher Demand: Having been in the workforce anywhere between 3-7 years, this segment is poised to become an important part of residential real estate sector. With their stabilised incomes and focus on settling down, this demographic is eagerly vying for different home options. The residential segment will find greater demand in the coming years owing to a growing number of young professionals in cities and the flexible interest rates from banking sector will add to this demand.
Focus on Tier towns: It is also interesting to note that there will be a growing demand for residential homes in tier 1 and tier 2 towns as a percentage of the young workforce will be based out of these towns. State governments in India are pushing for the growth of these towns in a bid to reduce the burden on bigger cities. This, in turn, is leading companies to set up their bases and subsequently provide work opportunities to the young workforce.
The Smart City initiative by the government of India that covers 99 smaller cities and towns is likely to impact close to 10 crore people and create a huge opportunity for them in the coming years. This will also lead to a significant demand for residential homes through the young workforce based out of these towns.
“Indian domestic IT market offers strong prospects for industry growth even if global markets were to face challenges. India will create 25-30 Lakh Jobs in IT Sector By 2030.’’
– Ravi Shankar Prasad, Minister for IT and Technology
Affordable Homes: One area that will find immense growth is the affordable housing segment. The earnings of a large part of the young workforce, by virtue of their position in their careers, are likely to be on the lower side. So, developers will need to keep in mind the spending capacity of the workforce and come up with offerings that fall into their budgets. The young workforce combined with the large middle-income group of the population will lead the demand for affordable housing in India. As we speak, some of the top developers have already initiated few projects on the affordable homes.
Faster delivery: Another significant change will be the speed at which developers will deliver the offerings. With reforms in the sector through RERA, developers are required to adhere to guidelines and be transparent and the young workforce, with its vibrant nature and extensive knowledge will compel developers to be more accountable and responsible. The young workforce is more likely to question, validate and then decide on their home purchase – all of this, will bring in greater agility and responsibility in the residential real estate sector.
‘’If India can maintain its political and social stability and sustain real gross domestic product growth of 6.5%-7.5% over the next few years, it should generate strong employment and income growth, both of which could drive property sector demand.’’
– Sameer Baisiwala, Morgan Stanley
The combination of higher economic growth, job options across sectors and rapid urbanisation will boost the prospects of the residential real estate sector. Experts believe the sector will be redefined in the coming few years, thanks to initiatives such as RERA Act and government’s push for reforms and transparency.
As the country readies itself to embrace the burgeoning growth of the young workforce, the residential sector will find greater momentum and be poised for higher growths. One thing to keep in mind is that the sector will not exactly emulate itself of the past few decades as far as the offerings are concerned—it will reimagine itself to the requirements of the millennials and their preferences.
The young workforce is a blessing for the overall economy of the country and the real estate sector will be a direct beneficiary of this growing and vibrant demographic.
