Bangalore, often dubbed India’s Silicon Valley, is witnessing a significant shift among its younger population – Gen Z and millennials – toward home ownership over renting. The rising rental costs, coupled with increasing salaries and changing financial attitudes, are driving this trend. In the first half of 2024, Gen Z and millennials accounted for more than 60% of property purchases on the NoBroker platform. Moreover, the median age of first-time homebuyers has dropped from 42 to 34 in just the last three years. These figures are indicative of the growing preference for home ownership among the younger generation.
A closer look reveals how and why the city’s youth are keen on buying a house instead of renting like the previous generations. Let’s go!
Rental market: The ever-growing burden
Rental prices in Bangalore have skyrocketed, especially in high-demand areas such as Whitefield, Koramangala, and HSR Layout. At ₹40,000 to ₹50,000 per month, rents for a standard two-bedroom apartment have risen by 40-50% since 2020. Something that has indeed contributed to the prices is the city’s healthy tech industry and its resultant professional migration.
The rental yield in Bangalore hovers around 3-4%, higher than in most Indian metros, but it comes at the expense of tenants, who are increasingly finding their budgets strained.
Ownership: A New Financial Strategy
Faced with rocketing rents, most young professionals and families look at buying a home as a smart financial move rather than an impossible dream. In Bangalore, for instance, during the January to June 2024 period, millennials and Gen Z buyers accounted for 60% of the purchase of houses, as real estate data indicates. Most of the buyers make investments in properties in the range of ₹70 lakhs and ₹1.5 crores, which usually fall within areas such as Sarjapur Road and Devanahalli while promising better value and future appreciation.
Moreover, buying a home is seen as a new financial strategy due to the high rental yield seen in Bangalore, which is seen at ₹60,000 to ₹80,000 rental return per month. Therefore, most Bangalore youth are considering investing in a property and renting it out. Also, this is giving them an opportunity to capitalize on their investment when the prices appreciate by the time they turn 40.
What are the driving forces behind the shift?
- Rising Incomes: The tech-savvy Bangalore workforce is highly paid with ‘better-than-average salaries,’ mostly that support dual-income families. This gives them a regular source of income to service home loans and invest in homes. Kiran Kumar from Hanu Reddy Realty feels that salary growth is a major factor driving housing demands among Gen Z and millennials in the city, and in FY25, half of their 42 transactions have been facilitated by this demographic zone alone.
- Changing Mindsets: This generation takes real estate as an early-career investment while previous generations bought a home when they had reached their late 40s. The millennials and Gen Z consider a house more than a necessity; it acts as an inflationary hedge against any fluctuating rent. They hope to capitalize on their investment when prices appreciate.
- Flexible loan options: Easy loan facility and easy EMI options have attracted the young buyers to the home segment. In addition, schemes like PMAY (Pradhan Mantri Awas Yojana) for the first-time buyer make it more attractive. Millennials and Gen Z are leveraging these various loan options to buy houses instead of renting.
Exploring the new trends in home buying
- Ready-to-move-in Properties are in vogue: Younger buyers are interested only in home segments that take away the risk of delay from construction activities.
- Want to have a big house: After the pandemic, there is an increased demand for 3 BHK flats or even independent villas with a home office, reflecting the desire to live better. This desire is also propelled because of remote work and freelancing opportunities.
- Tech-Driven Purchases: Buyers are making more informed purchases using NoBroker or PropPulse apps and websites that compare value for property, rental yields, and location trends. There are also websites and apps making use of 3D imaging to give potential buyers a real-time idea of how their home would look and whether it is a good fit for their lifestyle.
What are the obstacles in this transition?
Despite this growth in interest, the decision to buy a home is not without challenges. Property prices in Bangalore have risen by 10-15% per annum over the last two years, mainly due to infrastructure like metro extensions and ring roads. For some, it has meant stretching financial limits.
Also, younger buyers are afraid of long-term commitment through loans. Uncertainties in economic factors and layoffs in the tech industries influence many to think twice about investing; instead, they settle for a smaller home or take up micro-markets at lower prices.
However, these challenges can be overcome by investing considerable time in research and using EMI calculators to understand their monthly financial burden if they get a home loan. Also, it would help to discuss with expert financial advisors.
Cultural and Social Shifts Fueled by Homebuying
This trend is reshaping the cultural fabric of Bangalore. Owning a home has traditionally been a milestone associated with stability and family. Today, younger generations are redefining this narrative, emphasizing investment value and independence. Female homebuyers, for instance, now account for 32% of purchases, reflecting broader shifts in societal roles and financial autonomy.
What does the future hold?
The trend of homeownership among young people in Bangalore is going to continue in the future. Developers are molding products according to this customer group, where affordability and modern amenities are paramount. In fact, the city’s growth with better connectivity and infrastructure makes newer areas like North Bangalore and Kanakapura Road trendy spots for young buyers.
Conclusion
Bangalore real estate is transforming due to the young mindsets in pursuit of its aspirations. Homeownership has now become a strategic decision rather than a long-term goal, marking greater economic, social, and cultural transformations. For many young professionals in the city, where rents are increasing by leaps and bounds, now is the time to buy rather than rent.