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?

HT Estates - - HTESTATES - Ash­winder Raj Singh

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.

Lo­ca­tion?

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.

Cur­rent trends

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.

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