Should You Invest
In A Second Homes Home?
by Mr. Ashwinder Raj
Singh,
JLL India
Weekend homes, also
called second homes or / vacation homes, are currently an oasis of market
activity in India's the otherwise lacklustre residential real estate sector.
In
earlier years, only the affluent could and would invest in them - today, these
properties are generating interest even from the country's middle class.
So what exactly are
weekend homes?
After the basic needs of
shelter are met, most people have an in-built desire to own properties to use
purely for relaxation.
Obviously, such properties need to be in the more
bracing and beauteous environs than the cluttered, polluted cities. Because
quality hotel rooms in most getaway cities are limited and also very expensive,
people like to invest in weekend homes there for short, hassle-free getaways.
With the basic luxury factor vested in such locations' mountains, lakes or
religious shrines, these homes provide their owners with quality family time
away from their routine city lives and often serve the extended purpose of
providing a peaceful post-retirement life.
Where are these weekend
homes..?
The weekend homes segment
exists in towns and cities that lie within 2-3 hours of road, train or even
plane travel.
The most famous weekend home destinations have been Shimla,
Kasauli and Kerala, with Wayanad in Kerala being the most sought-after in the
state. However, with increasing demand, more and more places are being
successfully marketed as weekend home destinations: Lavasa, Lonavala, Alibaug
and Igatpuri near Mumbai for weekend getaways, vacation spots like Mussourie,
Ooty, Coorg and Goa, and the likes of Haridwar for the religiously inclined.
What attracts buyers in this segment are primarily a serene location with good
weather, good infrastructure and potential for rental income.
Current trends..!
Because weekend homes
have caught on big time with the middle class, developers are now falling over
themselves to cater to the demand.
The primary reasons for the increased demand
are the growth of the Indian economy, rise in High Net-worth Individuals (HNIs)
and the steadily growing aspirational middle class.
In absolute terms, the
growth registered by the vacation home segment in year 2014 was 57% over the
year 2013.
The total number of properties sold was 1.3 million, and made up
almost 21% of all real estate transactions. On an average, the second homes
market is growing at a healthy rate of 10-12% per annum.
With the larger real
estate sector not showing any immediate signs of revival, the weekend /
vacation homes segment is showing attractive growth.
All major developers are
vying to get a slice of the pie with options priced from a few lakhs to a few
crores being launched quite regularly to cater to different end-users and
investors.
 |
| Ashwinder Raj Singh, JLL INDIA |
Are they good investment
options?
A weekend home is
generally purchased only after one's primary home is secured. If the first home
is debt-free and one has sufficient reserves, then investing in a weekend home
make perfect sense.
Nevertheless, it is good
to keep some operative facts in mind while considering this option:
·
One spends only a
limited amount of time per year in a weekend home. Nevertheless, there will be
regular expenses on maintaining the property. If one does not wish to put the
property on rent, the costs would include keeping a caretaker.
·
If the property is to be
put out on rent throughout the year, there would be expenses on regularly
upgrading the basic amenities
·
The average rental
potential of such a property is 2-7% of its value. This may not suffice to
cover one's expenses towards paying the mortgage, if one is availed of, and the
maintenance expenses.
·
In a majority of cases,
weekend homes attract higher rental revenue-generating tourist activity for
only about 10-15 weeks a year. From a rental perspective, the rest of the year
would be a slump.
·
Capital growth or
appreciation will only happen in case the town or city has round-the-year
tourist footfalls and additional activity of (and capabilities for) seminars,
conferences, corporate training events, spiritual workshops, etc.
Only such
kind of market fundamentals resulting in regular rental demand in the city
chosen for a weekend home can ensure appreciable capital value growth of a
property.
The future of the
weekend homes segment..!
Unlike America, where
almost 25% of the population has a second or a weekend home, India is just
waking up to the idea.
The potential of this segment is considerable and growth
is assured, given that a luxurious lifestyle ranks high among the priorities of
the current generation (rather than remaining just a dream, like the previous
generation.)
As a buyer, perform your
research diligently and only invest if your financial goals are in place. These
homes may not offer the best in terms of monetary returns on investments, but
they can certainly make you rich when it comes to peaceful living, even in
small spurts.
About the author..
Mr. Ashwinder Raj Singh is CEO (Residential Services) at JLL India
For Media Contact
Arun
Chitnis
Head
– Corporate Communications & Media Relations
JLL
India
Level
6, Amar Avinash Corporate Plaza
Bund
Garden Road,
Pune
411001.
Tel:
(020) 30930441 Fax: (020) 40196101
Mob:
+91 9657129999
Twitter: @JLLIndia
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