Millennials live differently, think different and invest differently from their parents. They have more faith in technology-driven investment than the traditional investment plans that their parents banked on. Armed with a global outlook and awareness of various options, millennials today have created a whole new line of investment options for themselves.
Traditionally Indians have opted for low-risk investments that are long term instruments. The pay-out is low in these investments but the factor of risk being low is the more attractive clause. Gold, fixed and recurring deposit schemes, mutual funds and stocks have been old time favourites. They do not look for investments with the mind set of long-term benefits, they in fact opt for investments that are high-risk and higher yields. Which is why many of them today are not opting to buy houses, instead they are choosing to put their money into commercial real estate.
The shift in the investment outlook is driven by the desire to create high return investments that are secure and yet more focussed on wealth creation and not simplistic future security. While mutual funds and stocks do give great returns in the long run, millennials are viewing commercial real estate as a safe bet in comparison. Residential investments have a low rental yield of 2% in India and this does not appeal to the newer generation. The commercial real estate market is estimated to be around $70 billion in India. With more foreign companies entering the country, there is higher demand for commercial spaces. As global MNCs show more interest in establishing their offices in India, the commercial real estate is also attracting the attention of a new investor breed of millennials.
Millennials invest a bit differently though. They don’t look into buying and managing the property by themselves. They look for schemes and investment share options. This allows them to invest only while others manage the property and generate rental from them. Through these schemes there is a possibility of rental yields of 8-10% and most investments are made into Grade A commercial properties. This format offers flexibility and risk mitigation and also offers higher returns.
In a nation with a large young population, the newer generation wants to have more lucrative options of investment. Real Estate should look at offering more schemes to bring in new investments from millennials as they are the ones who now have the income to invest and a change in attitude from real estate will bring in more money into the industry that is at a stagnant stage today.