The second home market is attracting everyone’s interest

From end-users to potential investors, second home market appeals to everyone, says Anurag Mathur

From end-users to potential investors, second home market appeals to everyone, says Anurag Mathur

The pandemic and subsequent shifts in work patterns have led many people to re-evaluate their lifestyle choices and investments. The combination of remote working becoming the new normal, increased affordability, the need to diversify investments and the easing of mortgage interest rates creates an ideal environment for Indians to invest in second homes.

The market that was initially driven by the desire to have a home in a vacation destination to relax and rejuvenate, is now gaining popularity among the working population.

As many ambitious buyers evaluate alternative and additional homes, the market seems to be responding effectively to demand with a variety of options. Consequently, second homes are seeing strong growth in demand as the economy emerges from the pandemic.

Our recent research reveals that 70% of consumers would like to invest in a second home within two years. It also reveals that around 70% of the overall demand is for properties priced below ₹2 crore. As part of the research, we analyzed customer responses on the critical parameters they consider when buying a second home. These include the desire to have a spacious and comfortable second home in a vacation destination that serves as the perfect place to relax, unwind and rejuvenate, a spacious and larger upstairs, and health and well-being. -to be. Other important parameters include direct connectivity from the base destination, internet infrastructure and access, and initial return on investment.

We found a higher preference (approximately 58%) for second homes in gated communities that include apartment complexes, gated villas, penthouses and condominiums compared to farms, bungalows and stand-alone plots. Shoppers want to cherish even the limited sense of community as COVID-19 has forced everyone into self-isolation for a long time.

Increasing affordability is one of the main drivers of demand for second homes. Although residential property costs have increased over a period, so has affordability. This is accompanied by lower interest rates on home loans. The rise is also attributed to the increase in the number of professional gamers in the segment. Developers are increasingly offering targeted sourcing for different customer segments and a seamless digital selling experience to promote safety and hygiene amid the pandemic. The growing presence of property management operators such as AirBnB, Vista Rooms and Isprava is attracting more organizations to the segment. These operators provide end-to-end property management services to clients.

In India, holiday destinations such as Goa, Lonavala, Dehradun, Shimla and Alibaug are emerging as favorite destinations for second homes. All over the world, Indians are investing in second homes in London, Dubai, Portugal, Scotland and Canada.

A Snapshot of South India

Coonoor, Ooty, Kodaikanal and East Coast Road (ECR) of Chennai are the popular second home destinations in Tamil Nadu. In Karnataka, Coorg is a popular holiday destination, and in Kerala, people invest in second homes in Wayanad.

Tamil Nadu leads the domestic demand in the south, contributing more than 9% of pan-India demand for second homes. In Chennai’s East Coast Road, 13% of residential housing demand comes from penthouses which are purchased as second homes. In other markets, the demand for penthouses is around 3-7%. The secondary property market in the area is in an early stage of recovery and rental yields are around 3-4%.

The rich cultural heritage, beautiful coastline and picturesque hill stations make Tamil Nadu, which is among the top tourist destinations, a favorite second home destination. Although there has been a 15-20% appreciation in house prices compared to the pre-pandemic year of 2019, homes are still affordable compared to many other markets. Investors thus benefit from good rental income as well as a high appreciation advantage. The market is also ideal for end users with excellent road, rail and air connectivity to all parts of the country and foreign countries.

Key Considerations

Millennials don’t see second homes as a symbol of wealth or a way to diversify assets. In fact, they are now the least important factors in all age groups. The most important considerations when investing in a second home are price brackets and short- and long-term returns. They are used as a way to generate good income in the form of rentals and high exit returns. Even when investing in overseas second homes, the key consideration is getting a good return on investment.

In a market where many lucrative options are available, it becomes even more important to weigh the pros and cons and make an informed decision. Therefore, several investors are also looking to rapidly developing localities, rather than just evaluating to invest in an already developed location.

The writer is CEO, Savills India.