Renting vacation homes has always been a popular holiday option. However, as Covid confined people to their homes, they started looking for a salubrious climate to spend their time indoors. Also, the middle-class population that was left unaffected by the pandemic sought to put their disposable income into buying a home, many for second or vacation home as well. No wonder, we saw the second home and vacation home market across cities get a new lease of life during the pandemic.
“The preponderance of India’s retirement and second home (RSH) market segment has led to the parallel development of luxury vacation homes. Even though the concept is not entirely novel, the pandemic proved to be an epochal event for the segment’s growth. And as the Covid curbs increased its popularity, the growing acceptance of remote working, long rental leases, and workations further enhanced its appeal. In the next five years, the market is expected to grow at a CAGR of 23.63%. The market size in 2021 was USD 1.394 billion and is expected to reach USD 4.021 billion by 2026,” says Ankit Kansal, Founder & MD, 360 Realtors.
Besides popular tourist spots such as Shimla, Chail, Lonavla, Goa, Coorg, etc., peripheries in the Indian metros are also emerging as favourite vacation home destinations. “Recent times have seen Panvel, Alibaug in Mumbai, Nandi hills in Bangalore, and Delhi-Jaipur Highway in NCR emerging as new hot destinations for vacation homes. Big developers are also understanding the significance of the segment and coming up with new lavish community-styled projects,” adds Kansal.
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Starting with farmhouses and homes by the seaside and hill stations, the segment grew in popularity post-pandemic. Not only their sale increased, but the rental income also spiralled upwards.
“The scenario of owning a luxury vacation home started transforming from the beginning of 2021 when, according to a report, the sale of holiday homes almost doubled compared to the average annual sale in the years before. It started with Goa, and hill stations such as Kasauli and other lesser-known destinations soon took over. Today, Himachal Pradesh, Uttrakhand, Nilgiris, and many city suburbs have emerged as popular options. Most of these properties are open for long-term rental stays. I would also like to add that the success of our project in Himachal Pradesh has led us to come up with a new project in the state in 2023,” says Prateek Mittal, Executive Director, Sushma Group.
“India’s holiday home, retirement home or second home segment also offers a valuable rental income opportunity. Many corporate professionals, digital entrepreneurs, creative freelancers, professional consultants, techies & coders now prefer working in calm, serene, and picturesque locations rather than the typical 9-5 office lifestyle. Besides, vacationers opting for authentic travel experiences also look forward to an unconventional holiday. Such buyers opt for renting out homes for extended stays. The market is expected to grow at a steady rate in 2023,” says Rajesh K Saraf, MD, Axiom Landbase.
According to a study, this market has increased by around 89% between 2019 and 2021, defying a general slowdown in the real estate industry.
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Ambika Saxena, CEO, The WOL House, a luxury villa developing boutique company based out of Goa, says, “Vacation homes have tremendously increased in popularity in recent years. Further, a large number of tourists are also now preferring homestays rather than traditional hotels and resorts. From the investor’s point of view, Goa is giving a high rental income of more than 7-8 % in luxury housing. Besides, land investments are also providing a consistent annual yield of above 15%. Service apartments also attract an attractive rental value of around 8-9% on properties at Goa’s beaches.”
“India’s rental vacation homes (with serviced amenities) will continue to expand. Its popularity is leveraged by a surge in WFH culture, a growing trend of shunning hectic city life, and the viability of second homes as a prudent investment option. As the fear of possible future waves persists, many buyers will also opt to buy a second home property to mitigate future risks. At the same time, the possibility of the outbreak will also add to the lure of a vacation home (with a personal kitchen) and yield a high rental income,” says Ansh Batra, Director, Buniyad Group.
Undoubtedly this segment has all the portents to yield high income for investors. And with economic prosperity percolating among the masses, it is the time to invest in vacation homes and benefit from price appreciation and rental income, according to experts. However, it is essential to exercise due diligence before investing in such a property.