Beyond traditional homeownership : Exploring the evolving real estate landscape

The sentiment that “owning a house has become too expensive” is a common refrain, particularly among Millennials and Gen Z.

It’s an intriguing point to explore. What has changed over the years, and what opportunities do these changes create in the real estate industry? Let’s delve into some of the reasons people buy homes, recent shifts in city life and lifestyles, and the evolution of the real estate ecosystem.

Reasons for homeownership

People decide to buy homes for several reasons:

• Financial investment: For many, real estate is seen as a long-term investment that promises significant returns.
• Intangible benefits: Homeownership grants the freedom to make changes as you see fit, create a sense of belonging in a local community, and build lasting memories.
• Cost considerations: In the long run, owning a house might prove to be a more cost-effective option compared to renting.

Changing trends that affect real estate

• Nature of jobs: In the past, people often held the same job for years, leading to stability and long-term residence in a single city. Nowadays, Millennials and Gen Z change jobs every three years or less, fostering greater mobility.
• Urban congestion: While earlier people bought homes and moved to the outskirts of cities, the increasing traffic has made long-distance commutes less appealing.
• Remote work: One of the major contributor to expansion of cities and real estate has always been due to people migrating to cities to find work. With work from home it is no more a necessity.
• Centralized real estate: Earlier people used to own independent houses, small shops and office spaces. Today this is being replaced by apartments in high rise buildings, shopping complexes and IT parks. Increasing the size of real estate projects.

New business models

The real estate industry is adapting to these changes with innovative models:

• Managed offices: Customized office spaces, such as those offered by Novel Spaces and co-working options like WeWork, cater to evolving work preferences and remote work.
• Managed homes: Startups like NestAway and Colive provide co-living spaces, offering furnished rental homes with added benefits, eliminating some of the traditional overhead of homeownership.
• Managed Farms: An interesting and growing trend where you can buy a small plot (as small as a quarter acre) in a larger project (Hosachiguru) and they will manage it for you for 30% cut on agriculture income coming from your land. Further, you can use the shared living space in the project and have a farm house experience.
• Fractional Ownership: Embassy REIT is making fractional ownership of office spaces a reality, allowing retail investors to reap financial gain from the increasing adoption of managed work spaces.
• Discovery platforms: Platforms like NoBroker are disrupting the traditional real estate brokerage model, simplifying property discovery and rental processes.
• Integrated living and commercial spaces: Developers in tier 2 cities are combining residential and commercial elements within housing societies, creating self-contained communities. Draper startup house is a similar example that combines living and workspaces.
• Government initiatives: Projects like Gujarat’s gift city and Andhra Pradesh’s 3 capital plan aim to tackle expanding cities by creating dedicated ecosystems to specific use cases.
• Agro-tourism: Farm stays & estates are in demand instead of hotels. It is driven by people’s desire to get away from the overcrowded cities and living close to nature.

Gift City

Future opportunities

As the real estate landscape continues to shift, several intriguing possibilities emerge:

• Managed spaces and fractional ownership: Combining managed spaces with fractional ownership adds scalability to the business model and reduces risk. It also allows smaller investors to benefit from large real estate projects.
• Satellite cities: With remote work on the rise and industries shifting away from tier 1 cities, satellite towns offer opportunities for comprehensive ecosystems, echoing the success of Gurgaon, Noida, and Electronic City. The success though depends on ability to provide a lifestyle competitive to tier 1 cities with comparable living, commercial and work spaces.
• Agro-tourism: s possibilities of real estate investments shrink in cities, agriculture land as an investment opportunity is growing. Agriculture income though is not a huge opportunity. With increase in tourism and ease of discovery of small remote stays with platforms like Airbnb, a farm with a small living space can make up for a perfect real estate investment.
• Data, marketplaces, and services: Supporting this evolving real estate ecosystem will require data for informed decision-making, service tools for efficient management, and marketplaces for easy access to opportunities.

While the cost of homeownership is on the rise, the real estate sector is undergoing a significant transformation, opening doors to a multitude of billion-dollar opportunities. Personally, I’m particularly intrigued by the concept of managed spaces and fractional ownership, as it challenges traditional notions of home ownership and rental. These innovations can serve as a catalyst for the development of satellite cities and agro-tourism, ushering in fresh prospects in ancillary services.