Daybreak - Roti ✓ Kapda ✓ Makaan? Should young Indians still believe in the home ownership dream?

Episode Date: January 23, 2025

Property prices across Indian cities have gone through the roof, up by nearly 30% in the last two years. This along with ever increasing rent and general cost of living has made planning for the future quite challenging for those in their 20s and 30s. So has the idea of home ownership changed among the younger generations, like in many Western countries where more and more people are choosing to rent rather than buy?  Or are we still attached to the idea of owning a home?And what's behind these record-breaking property prices anyway?Tune in to find out.Daybreak is now on WhatsApp at [phone]. Text us and tell us what you thought of the episode!Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Tuesday was a super fun day here at the Ken's studio in Bangalore. Let's talk about the cost of living, how it's gone up,

like how we have to rents are going up. And salaries are not going up. You know, so let's talk about that. What is your experience? Yeah. If anyone from the Ken is hearing this place, give me a good appraisal, my rent has gone up. Now, if you're a regular listener of this podcast,

you will remember that we've spoken quite a few times about property prices going through the roof in India's metro cities, especially in the national capital. This, along with the ever-increasing rents, and general cost of living has made planning for the future quite challenging for those in their 20s and 30s. And this is something that we've seen play out across the world, the housing crisis especially.

But the India story is slightly different. I think, and I'm sure you'll agree, that there is a certain kind of romanticism attached to the idea of owning a home here. Think about your parents' generation and what a place that they could call their own men to them. And that idea has kind of passed on to us. I think most of us have grown up thinking about having our own homes

as the ultimate win in life. You know, I'm reminded of all those movies from the 70s and 80s where homeownership was such a common theme. If you're a Bollywood fan, I'm sure you'll remember this iconic, albeit melodramatic dialogue between Shashi Kapoor and Amita Batchan in the movie Diva. Today, my house buildings, property, bank balance, bunga, cari, what are you? I have

Myra's my. To say things have changed a lot ever since would be an understatement. Property prices across Indian cities shot up nearly 30% in the last two years. India's nominal GDP has grown by 80% and nominal income by nearly 130% in the period since, but still it hasn't been enough to keep up with the real estate price. state prices. So has the idea of home ownership changed among the younger generations, like in many Western countries where more and more people are choosing to rent rather than buy? So many of them are moving in with their siblings, their parents or even their friends?

Or are we still attached to the idea of owning a home? To find out, I thought why not invite some of my young colleagues from the Ken all in their 20s to the studio after lunch for a casual, open-ended chat about this. And also, to understand exactly what is going on with these record-breaking property prices and what young, aspiring homeowners are faced with in India right now, I was joined by my colleague, the brilliant Ronak Kumar Gunjan, who has been covering this subject for a while now.

Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Das Sharma, and I don't chase the new cycle. Instead, every day of the week, my colleague Rahal Philipose and I will come to you with one business story that is worth understanding and worth your time. Today is Friday the 24th of January. Definitely no buying house plan forever in my life. Never in your life. Pretty much no. So when you look at any kind of real estate prices that are there at the moment, I mean, like, so any kind of basic EMI for a home.

Like I saw my father paying off his dues and. whatever apartment that he had. You were like 30-year term loans where more than half of your salary goes in just paying the EMI. Not sustainable with the kind of life and expenses that I have. I would... Okay, I have to pay rent and that is pricey for me, but that is still something that I can find and downsize upon when rent goes high or something.

It's an effort. I won't say, no, it's not. But still a much lesser cost to pay than a, say, an EMI. And also, like, with the kind of job in life I have, it won't be as viable for me to buy one place in one city where I am very place agnostic and I would like to go around wherever opportunities are. Can't do that if I buy a home and half my paycheck is going for that EMI. Better to pay for the rent.

One, that plus, like even in terms of affordability, the kind of home that I'll end up buying on my paycheck right now. It would be so bad compared to the amount of EMI. It will be like one pansy, one BHK or one RK to end up buying, but I'll still be paying half my paycheck. check in terms of EMI for it. The price to utility ratio doesn't exist there. I'm also like very romantically attached to the idea of owning a home.

Yeah. Yeah. Especially like somewhere back home, which is not like going to be Bangalore prices definitely. So I was saying I also do agree with the fact that it might not make much sense to buy a house, especially in a metropolitan now. But I have to acknowledge that first of all, I am privileged to come from a family where we own the house that we live in. and those benefits, I think, definitely in the long run. Maybe not in our youth, but eventually it's going to be maybe a state where,

you know, if you're a tenant at the end of the day, if you're a person who's leasing out of space, things might change at any time. The landlord, whoever owns the property, anything can happen. There's a lot of unforeseen events that can occur. And if you do not have something that you can call your own in terms of property or something, you run the risk of being a nomad

who might be asked to vacate at any point legal terms and all aside. So, I mean, I personally look at real estate right now more as an investment opportunity than as a home-owning opportunity. But I do definitely see the merits of having a house that you can call your own. I think that comes a lot with circumstances as well.

Like, because similar to Abhari, even my parents, I've grown up abroad. So suddenly if like, you know, any circumstance changes there and like we have to move back. We need a place that we can call our own. So in those kind of situations, having a house of your own is something that is kind of unavoidable. Because if you have to move with everything that you already have, you cannot look for something after you reach your and then move into it. Right. So it only makes sense to already have something where you can move, which is the entire thought process behind my parents also like, you know, buying a house in India.

So I think it's totally circumstance-based, but I definitely agree with the whole EMI thing as well. First of all, like if you have to buy a house, invest in a house, it's a 30s decision. Like it's something where you can afford to pay it when you're in 30s, eventually if you can. But it definitely depends on all of these things. Because the rent prices won't go down any time soon. It will never go down, in fact. The prices of apartments keep pricing with what is the increment of rent every year? 10% I guess.

11% and that's just an agreement. You spike up whatever between 20 to 50% depending on the... It can be anything. Considering I have a tenant, I have given a small house

or 1BHK for a tenant. I know it's left to the landowner. So having a roof over your head which is yours and making a smart investment is always beneficial in the 25, 20 years run. Which people, I don't think in this generation of realising it.

Okay. Real estate is still the best investment you can make. That's... I have a slightly contrast. view. And I believe in the decades to come, we might actually see an emigration from cities, at least in certain, at least for certain strata or classes of society. There are a lot of conversations already happening and we have covered so many stories about how there's a housing crisis over here, how there's the crisis of traffic, of prices, of just the standard of living.

People in Delhi, NCR are seeing the firsthand effects of pollution. My friends are getting diagnosed with bronchitis and a lot of these other problems. So I think future generations, especially when we are parents, ourselves, and I think when our kids are going to grow up to, I think then we might see a reversal of the trend where at least the more affluent, which is not necessarily a good thing for the overall nation, but we might see people are coming to the city for brief periods for work or maybe for investments, but choosing to reside in more rural or more remote areas. I have a feeling that might happen. But I think we're still decades away from me. similar to how people move to Mysore as well. They spend most of their working life in Bangal and move to Mysore and stuff like that. And like I think the logical extension of this

is that you know more there should be like more infrastructure in these areas as well. Like obviously if you are going to move you're going to have a family you need schools, you need hospitals you need that kind of infrastructure on par with whatever is happening

in like cities and big cities so I think that is also maybe like a you know side effect of like what will happen if what you were saying does happen. I think the more short-term trigger for that would be the amount of flexibility your jobs will afford. Correct, correct.

Because we move places only for jobs, right? I can very well move to Woodpe and like that's where my parents are and it's like they're so serene every day to live there by the beach and everything. But can't quite do it because my job's here and if I can't move around from Woodpe everywhere that way. So it will be dependent on like where the job scenario has such. But if I can offer like a contrary point of view, like in terms of affordability of these buying of homes of sorts, it as a person who doesn't stand to inherit much. So I am pretty much

paycheck to paycheck person and I have to build up my savings and everything. There is nothing that I can bank on that is, you know, huge amount of money or property that is coming in my name. That way I say real estate to be a very expensive investment. in my end. I would rather put money in stocks and SIPs and like, you know, get more creative on how I can increase my returns over there. I am a risk-averse investor

so I'll put money into more safer, higher margin kind of stuff than something like a real estate which is super long term. It's a 30-year investment if I make one. If I put it now 30 years later, that's the only thing I'll have there. So in that way, I would rather

not put money into flats or a human. How do you? Okay, Rahil has some of the past. No? No, I just have... I think it depends from person to person. I think it depends from person to person because even I had an extended period of time

when I was staying home during the pandemic and I was like whatever earning a little bit of money. Ideally, best case scenario, I should have seen that as an opportunity to save tons of money. I saw that as an opportunity to blow up tons of money because everything else was paid for my parents. So I think it really does matter from person.

I mean, it varies from person to person and also varies from situation to situation. One point. So when we're talking about like buying home, buying and everything, we are viewing it very like individually because like we are of that demographic and all. But like let's say five years down the line when people want to settle and like all of that. So then you also, then it's not just your income. It's like probably double income. And so you make like your perspective on.

this may evolve, right? Like, okay, you know what, like, maybe not for myself necessarily just, but if there's someone else also, so perhaps, like, we may want a roof. Like, so, yeah, so, I mean, so perhaps, like, it's, we all end up, many of us ended up saying, like, not buying an year. But perhaps you have also been viewing it, like, a little more individualistically as of now. Sure, true.

So that is decision, like, basically, when you are able to make the decision, eventually. Perhaps, yeah. Depends on when you can't think about it, basically. I think flip side to this is also that, you know, like Raul said parents, sorry, Raul said family, I say like for mine, this thing, it's more parents because I know my parents are going to retire at some point. So you see how more or less the attachment to the idea of owning a home is still going pretty strong among younger people. But to fully understand exactly what is happening to the property market in India's big cities and what this generation is faced with,

I went to my colleague Ronak. Stay tuned. Hi, Ronak. Thank you so much for joining us. So, to begin with, you know, I want to ask you, and it might come across as a very daft, you know, kind of a question. But like, why are things so hugely different when it comes to this generation, you know, compared to our parents?

I mean, at our age, most of them had already, you know, bought their homes, they were financially stable, you know, they kind of had their life together, right? Like at least the basic boxes were ticked. And I know that the cost of living has gone up drastically, but also, I mean, so has disposable income, right? And, you know, I remember in your story, you had mentioned, you gave this example of a person who earns about two lakh a month, two lakh rupees a month. And, you know, which is way, way more than what you his father earned back in the day. And you even considered the 6% average inflation.

And still, you know, his father managed to feed a family of six for over 30 years. He educated all these children. He bought two plots of land. He got his daughter married. Like, what has happened? Sure. Firstly, thanks, Snickta. It's an absolute pleasure.

You're right. We're a very different generation when it comes to owning a house. But the thing is that both generations somehow consider owning a house to be a societal ambition that they want to achieve, right? But the problem is that interest rates have been going up and living costs have been going up, inflation has been going up, and incomes aren't really going up in the same measure. And this has been happening across major countries like the UK, the US, in India as well. I was reading somewhere that almost 45% people aged between 19 to 29 are living with their parents and that has been the highest since the 1940s according to the survey.

This is from India, this data? No, this is for the US. Okay, okay. And similar numbers have been taken in the UK as well. So we're seeing this as a global trend where people want to buy houses but they're not able to because living costs are higher than the amount of money that they're able to make. Right. Yeah, it's been, I mean, it's just been so insane.

I remember that Magic Bricks report, I think that you also mentioned in your story, that average housing prices in Delhi and Bombay have gone up by Mumbai, sorry, have gone up by over 10 times the average annual household incomes. And yet, you know, still we are seeing just last month, I think this news came out where, you know, this penthouse was sold in good. Urga for nearly 200 crore rupees. Rents have gone up like never before.

But, okay, let's go back to, you know, the many people that you spoke to who, you know, have just put their dreams on hold for buying or renting a home and they have decided to move in with their parents or families. Like, I want to know what did they tell you.

So both for the newsletter and the stories we spoke to people who've moved back home from from, say, tire one cities or metro cities and move to tire two cities or, you know, their hometowns. Most of the people who I spoke to said that it was a financially wise decision because also we saw it in the stories where during our reporting that for almost every city in India, the property prices slash real estate prices have moved up faster than the growth in real incomes

for people. Yeah. Right. So incomes have lagged, which is why it is difficult for them to buy a house. It is also difficult for them to rent a house because rental incomes have also really moved up in the last post-pandemic, they've really gone sky high. So it's increasingly difficult for people to live in cities or to sort of manage by themselves through their own salaries. So they're moving in with their parents or their siblings. People are going back to their hometowns. A couple of reasons. is working, one, because even if the income is not really high for the child, the number of years that he'll be working maybe in the range of 25 to 30 years. While the income of their parents was pretty high, so the banks are slightly more comfortable

in giving out loans to them. So they're able to buy properties. And even if they're not buying, they're just moving inside the homes of the parents. So they're saving on rent, etc. as well. Right. So, Ronak, you know, you decided to move in with your parents. And I mean, I know that it was not just for the money part, but also to be closer to them and spend more time with them.

No, wait. Sorry. They moved to Delhi from Calcutta to your place of work, right? So you wrote about that experience, right? And what happened when you applied for a home loan? I would really appreciate it if you could tell our listeners that story. of your experience. Yeah, yeah.

So the property cost was much higher than, say, even 7x or 8x of my annual income. Personal finance experts say that the cost of property should not be more than 5x of the borrower's annual income. But it was way beyond that. And while banks do give out loans, which are slightly riskier in terms of annual income being less than, far less than the property cost. But in this case, the bank said that, you know, it'll be slightly risky to give out this loan because we don't know if you'll be able to furnish it or not.

But when they had a co-applicant, somebody who obviously earned far more and combined with the fact that I would be working for another, say, 30, 35 years, then they became slightly more comfortable. That even if he is not earning enough, there's another co-applicant that he, that who's, you know, who will be able to furnish the loan in case he won't be able to. So that became a comforting factor for the bank and they were able to give out the loan. Got it. Okay.

You know, you also met so many people who are looking for their forever home and they have managed to save, you know, money through savings or, you know, taking loans. And it's a lot of money. I mean, you mentioned in your stories, it's like minimum two crores for a decent or flat apartment, right? what is the process of house hunting like for these people right now? Yeah, so their search begins with a lot of hope because even they think that, you know, the two-craw coppers should be enough to get them a decent house. But very soon that changes into surprise because the kind of properties that are shown to them

within their budget, they sort of, you know, don't meet the bar in terms of quality, in terms of ambience maybe or in terms of just the fact that they wanted a more posh looking society, etc. But it's sad that people from Gurgao, Central Delhi, parts of Noida, Greater Noida are not able to buy houses within that budget. Also, if you speak to real estate agents or even if you speak to on-ground staff of the bank, etc., They would tell you that to be able to buy even a decent flat, 3BHK flat in Delhi, NCR, Gurdgaon, you will have to shell out anywhere between 2 to 2.2 and 1 half crores if you want a decent flat. Otherwise, there are builders who are building low quality flats, etc.

You could get your hands on it, but there's no point living in those houses. So the hunt for these people begin with a lot of hope. I mean, that's understandable, right? They're looking for homes. but with the kind of inventory that is shown to them within that budget, they usually come back with a lot of despair. And then, you know, sort of they look for houses where there's a resale available or somebody who's selling it off in a hurry, etc.

So, and these are all one-off cases. It's not possible for everybody to find such homes. So most of the people who are looking for homes are sort of putting off their plans because almost every property they reach is out of budget for them. Right. Can you also explain to us why exactly this is happening, you know? Like, let's take the example of Delhi NCR itself. You said in your story about how, you know, it has something to do with these crazy prices,

have something to do with, you know, outside builders coming in and local builders not being able to catch up with them and spend that kind of money, right? Can you give us some more details of what exactly is going down here? Sure, sure. So, what happened basically in NCR after the pandemic and during the pandemic as well, was that there were a lot of problems in terms of real estate. And most of these problems were from local developers who had run bankrupt. That's because they spread themselves too thin.

They would start a project here, take up money. Without even completing one project, they would put their hands into another, and then move to a third and a fourth. And that actually brought a lot of problems to them in terms of the fact that even if, say, there were some payment problems in the second project, they couldn't have waited for the money to come from the second project because they had already invested in a third project

and then in a fourth project. So eventually, within a couple of years, there was news after news that there is one after another developer slash builder from the NCR area going bust. So what happened was people started sort of moving away from local builders in the NCR because they knew that this can be a risky project. Also people put in their entire lifetime savings into buying home. So they want to be very, very careful about it. And there have been horror stories across NCR where people have lost money and their entire lifetime savings was at stake.

So people didn't want to make that mistake again. They didn't want to associate their home buying dreams with a local builder. And most of the local builders were anyway going bust. So there was a sort of opportunity that got created for national builders, builders with a lot of social repute, etc. And then the goadrises of the world came in and then they bought land at whatever price they could. Because they knew that people are not going to go for the local builders. Also the fact that local builders had taken a lot of hit in the last two, three years and did not have the kind of financial. wherewithal to be able to buy land at that price.

So these guys came in and then they basically what they were selling was trust because there was a lot of trust deficit in the NCR when it came to real estate. So they said that we will give you your flat within this possible deadline. We will give you the best possible say clubhouse. We'll give you the best possible gardens in front of your house. But we are going to charge you a proper premium for it because we're not one of your local builders who's going to go bust. Initially it worked. People did book flats and all of that, but the prices kept going up.

So when we spoke to a lot of real estate experts based out of the NCR, they said the only way for these prices to sort of normalize is when the stronger local builders come into the system, where they are also able to sell trust to the customers, but they said that, you know, not at a kind of premium that the national players are selling it at. So that's the missing part in this puzzle that, you know, strong local players are not able to come up. Right. Okay.

You know, before this, Ronak, I told you, I was talking to all our young colleagues in the studio, right, in the Bangalore studio. And most of them, they are, most of them are quite attached, I would say, to the idea of owning a home. But then there was also somebody, you know, Shristi, it was, who said, you know, that she's not going to inherit any property from her family. So, and so putting in that kind of money for paying EMI's for like next 25 years, 30 years, it just doesn't make sense to her, you know?

And paying rent is just way more easier for her. So in your experience, you know, through reporting, do you think there's some kind of a change in how the younger generation feels about owning their homes, like, you know, with all these crazy prices and the income levels, not matching, is it like still a feasible idea? So talking strictly in terms of finances, it does make more sense to rent a house vis-a-vis buying a new house because the ROI, etc., usually does not add up. If you're paying, say, even if you're paying 20% less than your EMI in terms of rental

and investing that 20%, you will be at a better position financially in, say, the next 10, 12 years. but the thing is that people don't buy a house keeping finances in mind, especially in India. People buy a house for their mental peace because they're conditioned in a way that I don't want to continuously move places. Second, I want to feel as if this is my property, this is my own home. I want to design it a certain way. I don't want to live with somebody's restrictions. I don't want an owner coming into my house every day checking whether I've made

sort of whether I've tarnished the house in some way or the other or whether I'm keeping the house properly or not or maybe I don't want calls at two in the morning when I'm partying with my friends in the house to lower the volume. So they basically are looking for mental freedom when they're buying a house. So financially it's a better decision to rent but in terms of mental peace

a lot of people consider buying a house to be better and paying extra EMI for it as well. So those basically, that's how we sort of differentiate between the two. But as our younger reporters pointed out that it's obviously a hassle in terms of finances. You're basically, you're not just buying a house then you're doing the interiors of it,

you're setting it up, etc, etc., etc. All of those things are really a hassle in terms of finances while that's not really the case if you're moving into a fully furnished rental apartment. But the reasons for both are completely, are not very inclusive of each other. People rent for financial reasons, but people buy for more mental peace sort of reasons. Right. Okay. So tell us what happens if prices keep going up in this manner, you know, like is, is the housing? market at some point just going to implode, you know, in the future? Not exactly implode, Snigda.

So it's almost a seven to eight year cycle that real estate goes through, where for about four to seven to eight years, prices keep going up. Then there is sort of a correction that happens, which we saw after 2020, that correction started happening. How does that happen? So what happens is the number of builders in a particular state or group of states go up. The availability of land goes up. The specific authorities which sanction that land, they start, you know, I mean, sort of sanctioning lands slightly faster.

So the supply side of it basically starts to become more robust. And because demand is nearly constant in terms of housing, once the supply becomes, becomes slightly more robust and the prices get corrected. What's happening right now is again, the supply side has become a problem, which is why there are sky high prices. And then there are additional reasons like people going for luxury and all of those things as well. So eventually what will happen is these prices will also start to correct because newer builders will enter the system, better land, more land will start getting sanctioned off.

So the price of every unit, average unit will start slowly coming down because not every property will be a Godrich property or a Shobha property. There will be other builders who will be coming in with lower cost of construction as well. So once that starts happening, then we will see small corrections in terms of prices.

We did see some sort of a correction happening after 2020. after 2014 as well. So similar correction is expected again after, say, maybe one, one and a half years, two years. Because it cannot always keep going up. There will be some sort of a market dynamic that will come to play where developers start to realize that all right, people cannot buy. Not everybody can buy, say, a 10-curo house or 15-curo house. Right. Okay.

Ronak, last question. You know, our colleague, Taman, you know, he brought up this very interesting point towards the end of our chat or studio chat. And, you know, he said he thinks that, you know, if things continue this way and prices keep going up and, you know, the housing market remains the same. This sort of intramigration will happen, you know, where he said people will probably start just, they'll just leave big cities and they'll start moving to smaller towns and villages and cities.

Do you think that's like, do you think that's really going to happen? I really want to know your thoughts on this. He's absolutely right. It started during the lockdown itself where people realise that there's no point paying rent and staying in a city where I can just, you know, move back. Especially once work from home, etc. became so profound and popular.

People did. So there's a study as well where people, so many people in India have moved back home post the pandemic. Which is why we see the larger brands having outlets in absolutely tired three towns as well, tie two cities as well. That's because people were used to staying, say, in the Mumbai's of the world. Post-lockdown, they moved into, say, howda.

And they did not find the sort of same eateries that they could find in Mumbai. So brands were forced to open their outlets in these towns as well. So reverse migration has been happening. But he's right. If housing prices keep becoming as unaffordable as they are right now, there will be no other choice but to move out of those places. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings.

A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the Ken website. Today's episode was hosted and produced by Rai Snih Nita Sharma and it was edited by Rajiv Sien.