Second Homes: First Option

Posted on September 20, 2007 by Rohan Rao

Written by me for Times Property India

Introduction: Apart from catering as weekend relaxation and prestige issue, second homes are considered prudent investment option.

There has been at least a 15-20% increase in the second home market
An investor can get up to 6 to 7 % annually on the value of the property
The second home industry contributes to around 30-35 per cent of the total real estate developments

“If you have made the investment in or around an emerging business district, the spiralling rentals will ensure you get sound returns.”

The concept of investing in a second home is being redefined. With the phenomenal opportunities that India now offers, more and more people are looking for a second home away from the stressful, hustle and bustle of city living. The concept is no longer restricted to the affluent individuals. It’s no more just the top entrepreneurs who are investing in the second home market; even middle and upper middle level management now see such homes as feasible getaway investments.

The primary second-home buyer segment is now the middle-to-top management and entrepreneurial class, usually in the age bracket of 35-45. They attribute this shift to a change in mindset. Tushar Sanklecha, Sanklecha’s says, “There has been a fundamental shift in the overall mentality. Second homes have emerged as an acceptable investment route for a lot of people now and owning a farmhouse, home in the hills or a beach cottage is certainly a matter of personal pride and prestige.”

Sandeep Thakur, MD, Shree Buildcon, Nashik, says, “Both the middle income groups and higher income groups are venturing in this zone. The percentage of NRI’s is considerable as well. People prefer to invest in flats more than plots and farm houses for the security that comes with it. And they usually keep it for their own use like weekend relaxation or to get a better value on resale.”

“There has been at least a 15-20% increase in the second home market. People see this as a good investment option and it is a growing market,” he adds.

With rising stocks booming market, real estate is the best place to do an investment in and around the metros. The primary reason for buying a second home is still lifestyle among Indians; however people have started realizing the investment potential. Thus investment consideration comes in a strong second place.

Naresh Karda of Karda Construction points out, “Nashik is one of the vertexes forming the golden quadrilateral of Maharashtra along with Mumbai and Pune. And with these two cities already scampering for space, Nashik offers the most viable option as a real estate investment. Also the developing infrastructure will see the prices soaring so investments in this area will definitely ensure good returns for the investors.”

The rising number of IT Parks coupled with the educational boom and Nashik having firmly established itself as the ‘Wine Capital’ of Maharashtra if not India, ensures that this growth story will continue with new chapters being added on a regular basis.

The price range for second homes can cost anything between Rs 15 lakh to even Rs 2 crore! Yet, their demand continues to soar. Developers on their part understand this inherent need in people to own holiday homes that are away from the city. Hence they are coming up with a number of projects to cater to this increasing demand.

Mr. Arvind Patel, MD, Madhur Buildwell, says, “We have been in the businees for 42 years now, but primary homes has been our domain. But considering that the demand for second homes is increasing so much, we have ventured in this zone as well. We have a new project specifically catering to second home buyers at Deolali camp. Also people prefer bungalows and row houses; we have designed our projects to suit the popular demands”

The second home industry contributes to around 30-35 per cent of the total real estate developments currently, which is a significant share. Mr. Patel feels that the second home industry can sustain as an independent segment in this sector.

Bindu Land Developers and Builders, Mr Amar Vasani, “Nashik is very popular with Mumbai as Pune has got saturated. Earlier people would invest in standalone farm houses which cost around 10 to 15 lakhs two years ago. Now the gated communities that offer greater security and amenities are in the range of 30 to 40 lakhs. These offer better returns, with less red tape. Our project Vini Park at Deolali has good infrastructure and is greener than Nashik.”

The demand for second homes is expected to grow fast in the coming years. There are special offers to further attract the buyers in which they can go for this option on a time sharing basis. They can thus use their property to rent out like a resort and fetch good return for their investment. They may retain their property till such time they get expected resale value.

Anant Rajegaonkar, Suyojit Infrastructure, says, “Nashik is the city of the future, still in a planning stage, with a metro in the pipeline. The corporation has made tax laws very owner friendly which enhances the scope of rental returns within the city. An investor can get up to 6 to 7 % annually on the value of the property. I also feel that Igatpuri is going to outstrip Lonavala in appeal very soon.”

Places such as Pune, Talegaon, Lonavala or Jodhpur are also seeing a lot of buyer interest.

Mr. Anuj Bhandari, partner, B.U. Bhandari Properties says, “With India Inc expanding into major metros, existing and upcoming business districts will be the main beneficiaries of this upward trend of rentals. This shall be due to a huge demand from top and middle level executives with transferable jobs. If you have made the investment in or around an emerging business district, the spiralling rentals will ensure you get sound returns.”

Goa is popular with holidaymakers from all over the world: Fabulous sandy beaches bordering the Arabian Sea, friendly and welcoming people and wonderful food are some of its attractions as a holiday destination. Dr John Britto Director Acron Developers, says, “Costs of ownership including property taxes, stamp duty, etc. are lower in Goa than in other parts of India. A safe, value-for-money destination attracts visitors from all over the world. Many decide to buy a home for their annual vacations.”

With sale values going sky high and home loan interest rates being revised upwards, experts feel that potential homebuyers may put off plans to buy homes. On the other hand, Landlords make the best use of this situation. So, in today’s property market, holding onto a second home you may have in, will certainly pay off.