WATCH | Gen-Z prefers short-term rentals over traditional home buying or renting

Buying vs Renting: In the ongoing debate about whether to buy or rent a house, a fresh perspective is emerging amongst the Gen-Z demographic. While celebrities and influencers have shared polarising views on homeownership—some labelling it a liability, while others argue that renting merely pays someone else’s EMI—many young individuals are quietly adopting a third approach to real estate investment that deserves attention.

Short-term rentals: A new real estate strategy

Instead of adhering to the traditional paradigms of homeownership or long-term renting, Gen-Z is increasingly investing in properties for short-term rentals. This strategy encompasses platforms like Airbnb, holiday homes, and staycation properties, which have gained notable traction. Even in remote villages of Himachal Pradesh, where hotel options are scarce, short rental homes are becoming popular among travellers.

Unlike previous generations, Gen-Z does not view owning a house as the ultimate financial goal. While the security of homeownership remains important, many young individuals are reluctant to lock their money into slowly appreciating assets, especially when these investments can become challenging to liquidate during emergencies. As a result, they are exploring alternatives that offer both financial returns and flexibility.

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Financial advantages of short-term rentals

Traditional rental yields in India typically hover around 2-3 per cent, which can be disappointing for property owners. For instance, a property valued at Rs 1 crore generating a monthly rent of Rs 20,000 results in an annual income of just Rs 2.4 lakh—yielding a mere 2.4 per cent return.

In contrast, if the same property is transformed into a holiday rental, the potential income can be significantly higher. Charging Rs 3,000 per day for short-term stays and managing to book it for just 10 days a month can lead to a monthly income of Rs 30,000, translating to an annual income of Rs 3.6 lakh—50 per cent more than traditional rentals without the hassles of long-term tenants.

Short-term rentals also afford property owners greater control. Unlike the challenges of dealing with long-term tenants, such as eviction issues or repair demands, short-term rentals allow for a revolving door of guests, minimising the stress associated with property management. Owners can also enjoy the property themselves during off-peak seasons, further enhancing its value.

Limitations of the holiday home concept

However, this holiday home model may not be suitable for everyone. Its success largely depends on location, as properties situated in tourist hotspots such as Goa, Udaipur, or Manali are more likely to attract short-term guests. Young investors can mitigate this limitation by exploring properties in different states or cities.

Additionally, maintaining high standards for frequent guests can lead to increased upkeep costs. Quality cleaning and amenities are crucial to achieving positive ratings on platforms like Airbnb. Moreover, property owners must acknowledge that short-term rentals may only yield bookings for 15-20 days a month, stressing the importance of realistic expectations.