A recent survey carried out by Savills India has revealed that owing to a variety of reasons the second home market in the country is poised to witness high traction in the near term.
In the current times, second homes have again come to the fore as the pandemic appears to have created several resets in real estate. Several aspirational buyers appear to be evaluating alternate and additional homes, as the market seems to be providing value-based investment opportunities, according to Savills India.
A recent survey carried out by Savills India has revealed that owing to a variety of reasons the second home market in the country is poised to witness high traction in the near term. Driven by wider acceptance of work from anywhere and increasing advent of organised as well as professional players in this segment, latent demand for such properties has surfaced in recent times.
In fact, almost 70% of prospective home buyers want to invest in a second home priced at Rs 2 crore or less. The survey reveals that 57%-70% of the respondents want to buy a second home within 2 years. This short-term commitment of less than 2 years is evident not only in the domestic market, but also in the preferred offshore destinations. The maximum preference of investments is within India in a horizon of less than 6 months.
Almost 80% of potential second home buyers intend to hold the properties for more than 5 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.
Improved affordability is one 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. Interestingly, the recent surge in demand of second homes can also be attributed to rebound in domestic tourism after tapering of the second wave of the ongoing pandemic.
Savills India’s research analysed responses on critical parameters that buyers consider while purchasing a second home. 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 further highlights that almost 60% 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 home owners to enjoy facilities such as swimming pool, gymnasium, health centre and sporting amenities, without having to worry about the maintenance of such provisions on a regular basis.
“The Second Homes market appears to be on a gradual upswing. Unlike earlier, when capital appreciation and rental incomes were the governing criteria, an additional dimension of a safe home away from pandemic hotspots appears to have become a key consideration. Rental yields in popular second home destinations are reported to be witnessing an increasing trend. Additionally, technology too has played a vital role in strengthening the investor confidence,” said Shveta Jain, MD, Residential Services Savills India.
Location Preferences for second home investment
Aspiring second home buyers are more inclined towards domestic locations, be it holiday destinations or staycation homes nestled in the mountains or beach side locations of the country. 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.
While the survey respondents were willing to invest in second homes across the length and breadth of the country, starting from Kovallam 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% within the domestic locations.
Goa: The state leads the domestic demand for second homes with one-fifth of respondents interested in buying a second home here. Almost 70% of demand is within the Rs 2 crore price range. Rental yields have been in the range of 4-7% and are on an upward trend. There has been more than 20% appreciation in land rates as compared to the 2019 pre pandemic era.
Maharashtra: 29% of the survey respondents would like to invest in the popular second home destinations of the state. Across locations in Maharashtra, 65% of the demand is within Rs 2 cr. Net yields of Maharashtra properties have been in the range of 4-6%.
Uttarakhand: The state leads the domestic demand for second homes in the northern part of the country. Only 3% 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%.
Himachal Pradesh: The state has witnessed limited demand for second homes priced at more than Rs 5 cr (Only 3% respondents are in search of such properties). Low preference for plots in the hill state (less than 5%). Net yields of Himachal Pradesh properties have been in the range of 3-6%.
Tamil Nadu: Leads domestic demand for second homes in the southern part of the country. In Chennai East Coast Road noteworthy (13%) demand comes from penthouses compared to other locations where penthouses account only 3-7% of the overall demand share. Rental yields have been in the range of 3-4%. The state has seen around 15-20% appreciation in property prices as compared to the 2019 pre pandemic era.
Of the one-fourth of respondents who prefer purchasing their second home in international locations, the top 5 destinations – London, Dubai, Portugal, Scotland and Canada – account for more than 75% of the share. Other notable investment destinations are Australia, Barcelona, Bali, Netherlands, Switzerland, USA, Oman, Qatar and South East Asia.