Goa leads the domestic demand for second homes.
With the COVID-19 pandemic appearing to have created several resets in real estate and the wider acceptance of work from anywhere, the demand for second homes has gone up. As many as 70 percent respondents want to invest in a second home priced at Rs 2 crore or less within two years, a survey by Savills India, a global property consultancy firm amongst prospective homebuyers, has said.
Approximately three-fourths of the potential buyers would like a second home in locations like Dehradun, Nainital, Shimla, Goa, Alibaug, Lonavala, Mahabaleshwar, Coorg, Ooty and Wayanad.
The survey respondents were willing to invest in second homes across the length and breadth of the country, starting from Kovalam in the south to Manali in the north and Gujarat in the west to Meghalaya in the east, the top 10 destinations emerging from the survey collectively have a share of 87 percent within the domestic locations.
Goa (20 percent) leads the domestic demand for second homes with one-fifth of respondents interested in buying a second home here. Almost 70 percent of demand is within the Rs 2 crore price range.
As many as 29 percent of the survey respondents would like to invest in the popular second home destinations in Maharashtra and 65 percent of the demand is within Rs 2 crore. Net yields of Maharashtra properties have been in the range of 4-6 percent, the survey said.
Only 3 percent of respondents want to purchase plots in Uttarakhand reflective of the stringent local ownership laws. Net yields of Uttarakhand properties have been in the range of 3-6 percent.
Himachal Pradesh witnessed limited demand for second homes priced at more than Rs 5 crore (0nly 3 percent respondents are in search of such properties). Preference for plots in the hill state is also low. (less than 5 percent). Net yields of Himachal Pradesh properties have been in the range of 3-6 percent, the survey said.
Of the one-fourth of respondents who prefer purchasing their second home in international locations, the top five destinations--London, Dubai, Portugal, Scotland and Canada--account for more than 75 percent of the share. Other notable investment destinations are Australia, Barcelona, Bali, the Netherlands, Switzerland, the USA, Oman, Qatar and South East Asia.
This short-term commitment of less than two years is evident not only in the domestic market, but also in the preferred offshore destinations. When compared maximum preference of investments is within India in a horizon of less than 6 months.
Almost 80 percent of potential second homebuyers intend to hold the properties for more than five years. As the ticket size of the property increases, so does the intended investment period reflecting an intent to attain capital appreciation and rental return before eventual exit from the cherished property, the survey said.
Savills India’s research analysed responses on critical parameters that buyers consider while purchasing a second home and these include - owning a second home at a holiday destination, spacious and larger floor space, health and wellness factor, connectivity from home city, internet infrastructure and an eventual return on investment.
The survey highlights that almost 60 percent of the respondents would like to invest in a second home within the security of a gated community that offers a sense of security and allows homeowners to enjoy facilities such as a swimming pool, gymnasium, health centre and sporting amenities, without having to worry about the maintenance of such provisions on a regular basis.
The survey was carried out during June-July 2021.
Several aspirational buyers appear to be evaluating alternate and additional homes, as the market seems to be providing value-based investment opportunities. The driving factors for such purchases are many, ranging from the need to create an asset pool, diversification of investment, future residence planning, lifestyle choices, or holiday and staycation homes.
Affordability Driving Residential Housing Market in India
Improved affordability is one of the major key demand drivers of second homes. Though the property costs have been rising over a period, so is the affordability due to rising income and lower interest rates.
The recent surge in demand for second homes can also be attributed to rebound in domestic tourism after tapering of the second wave of the ongoing pandemic. Domestic air traffic witnessed a growth of 41 percent month on month in June 2021. As international travel norms for Indians are getting progressively relaxed, the surge in demand for second homes has extended to international hotspots as well.
As many as 46 percent prefer a second home in the ticket size of Rs 50 lakh to Rs 1 crore and 24 percent prefer second homes in the range of Rs 1 crore to Rs 2 crore, the survey said.
A vast majority want to hold on to their second homes for a longer time horizon. The long-term investment option does not change, even when the end use of the property is renting out.
Across majority of the price points, the preference for a holding period greater than 10 years is higher than a 5-10 year horizon. In fact, as the ticket size of the property increases, so does the intended investment period reflecting an intent to attain capital appreciation and rental return before eventual exit, the survey said.