Everyone now wants a piece of paradise GAINS FROM GETAWAYS
The vacation homes segment registered 57% growth in 2014 over 2013, but is it a good investment option for you?
Weekend homes, also called second homes or vacation homes, are currently seeing some market activity in India’s 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 among the middle classes.
What 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 congested, 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.
Because holiday spots by the beach or hill stations are associated with luxury housing, owners of such properties prefer to use them for quality family time away from their routine city lives. Such residences are also ideal for a peaceful post-retirement life.
The weekend homes segment exists in towns and cities that take two to three hours by road, rail or air travel from major metros. Better-known holiday destinations have for long been Shimla, Kasauli and Kerala. However, with i ncreasing demand, more and more places are being successfully marketed as weekend home destinations: Lavasa, Lonavala, Alibaug and Igatpuri near Mumbai are getting to be popular as weekend getaways. More and more people are buying such properties in vacation spots like Mussoorie, Ooty, Coorg and Goa, while the religiously inclined are heading to Haridwar etc. What attracts buyers in this segment are primarily serene locations with good weather, good infrastructure and potential for rental income.
Because weekend homes have caught on big time with the middle class, developers are now coming forward to cater to the demand. The primary reasons for the increased demand are the growth of the Indian economy, rise of 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 After the basic needs of shelter are met, most people have a desire to own properties for relaxation. Such homes need to be in more bracing and beauteous environs than cluttered, polluted cities The weekend homes segment exists in towns and cities that take two to three hours by road, rail or air travel from 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 for 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- user and investor categories.
Interested in one?
A weekend home is bought 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 makes perfect sense. major metros Better known weekend home destinations have for long been Shimla, Kasauli and Kerala With increasing demand for holiday homes, places like Lavasa, Lonavala, Alibaug and Igatpuri near Mumbai, Mussoorie, Ooty, Coorg, Goa, and Haridwar have seen an increase in investment
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 rent out the property, the costs would include the salary of a caretaker If the property is to be let out through the year, there are likely to be expenses on regular upgrades of basic amenities The average rental potential of such a property is 2-7% of its value. This may not cover expenses owners incur in paying of f mortgage, i f availed, and 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.