Why demand for holiday homes is gaining traction in India

September 10, 2021 4:14 PM

In this post-pandemic world, people want prudent investment choices and holiday homes yield better returns over time than any other commercial or residential property.  

It is being noticed that a large chunk of the Gulf-based expat Indians have invested in the residential properties in India during the last one year.

The Indian real estate market has gone through various ups and downs in the past decade. A spate of regulatory movements such as demonetization, RERA and GST around 2016-2017 helped to give a facelift to this sector. While some of these steps were much needed, it impacted the sales. The year 2017 was an extremely challenging as the sales dropped a new low of 100,000 units but thanks to the positive sentiment, the sector posted good recovery in the subsequent years. It was rather unfortunate that just as things started to look for the real estate sector, this pandemic struck and jolted the growth.

The coronavirus pandemic, lockdowns and the travel curbs have all impacted the sector in a big way. However, the residential real estate market has shown great resilience in the year 2021. The sectors that have performed well in the first half of the year are the affordable residential sector and the luxury segment.

One of the major reasons for the increased demand in the luxury and affordable segments can be attributed to the changing need and mindset of the people. The pandemic and the uncertainty that it caused has resulted in an increasing desire among people to own a house of their own. This coupled with low interest rates offered by the banks and stamp duty cuts in some key markets have helped to keep the demand in the real estate segment steady during this testing time.

In the month of August too, RBI’s Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 4 per cent while the reverse repo rate has been maintained at 3.35 per cent. This accommodative stand will help in fuelling further growth in the segment keeping in mind the upcoming festive season.

The affordable dream

In this post COVID-19 time, it is the affordable housing segment that has been registering the maximum growth. According to industry reports, almost half of the total housing demand in the primary residential market across eight major cities is for two-bedroom apartments. These apartments fall under the price bracket of Rs 45 lakh and are the top performers of the segment.
There are various incentives that are being provided by the government to help the growth of the affordable housing segment. In order to make it easier to achieve this goal, the government is offering a number of subsidies. One of these subsidies is a reduction of GST rates for the affordable housing segment. For homes below the price of Rs 45 lakh, the applicable GST rates have been reduced from 8 per cent to 1 per cent.

The other end of the spectrum

There is another interesting convergence that this pandemic has brought about, which is between the ‘luxury real estate’ and ‘quality of life’. A lot of people have started equating the quality of life to luxury living. They want nothing but the best for themselves and are willing to spend to get the finest that life has to offer. It is thus not surprising to see that in this post pandemic phase there has been a significant increase in the buyers seeking luxury properties. It has been noted that there is a growing demand amongst homebuyers for bungalows, villas, farmhouses and spacious apartments.
As a result, new launches in the luxury segment have multiplied in the first half of the year.

According to industry reports, out of the total houses launched in this year, 17 per cent belonged to the luxury segment. In comparison, luxury houses comprised 9 per cent of the overall houses constructed in 2020.

Focus on overall well-being

Surveys show that homebuyers are now making a distinct shift towards investing in homes as long-term assets. With the house doubling up as their office, gym and even recreational space, homebuyers are eyeing spaces that are more spacious. Furthermore, the COVID-19’s virus impact has also made the way clear for larger, well-ventilated homes and second homes. Instead of focusing on buying homes near their workplace for an easy commute, homebuyers are showing interest in safe indoor environments, services emphasising health and wellness, and self-sufficient homes with open areas.

With the work from home culture being the norm, homebuyers are scouting for places that are picturesque. They are looking for self-sufficient properties in holiday destinations such as Goa, Alibaug, Kerala, Darjeeling or Shimla. The rationale behind choosing a holiday destination is that these places enable people to leave the hustle, bustle of the city life behind and enjoy time by the nature.

Favourable weather conditions all year round, easy connectivity, better air quality and better quality of life are some of the qualities that make these destinations a hot favourite among the new age buyers. Moreover, these places are not as densely populated as the metros and that is another big positive for people looking for homes in the post-COVID-19 scenario.

Another factor that is pushing homebuyers to contemplate holiday homes is that it offers a great return on investments. In this post-pandemic world, people want prudent investment choices and holiday homes yield better returns over time than any other commercial or residential property.  Given the benefits that they offer, holiday homes have started to become a hot favourite amongst the travel-savvy upper-middle-class, who earlier enjoyed annual holidays.

The return of NRI investors

Another interesting trend that is being observed in this post pandemic phase is that the non-resident Indians (NRIs) have started investing in luxury homes back home. It is being noticed that a large chunk of the Gulf-based expat Indians have invested in the residential properties in India during the last one year.

Depreciating value of the Indian rupee and great offers being offered by developers in the country are some of the reasons why NRIs have now started to look at real estate as a great investment option. Most of them are eyeing spacious and modern luxury homes, which are either 3BHK and 4BHK apartments or villas or holiday homes. This segment prefers larger and more luxurious homes because of the lifestyle they enjoy in the country they are staying in. These buyers are also extremely conscious about the health aspects and thus projects that addressed these issues gained the most last year.

Currently, the Indian restate market has been pegged as a $200-billion industry by the Ministry of Housing and Urban Affairs (MoHUA). The ministry further expects the sector to grow at an exponential pace in the coming years and become a $1-trillion industry by the year 2030. For the same to happen, the luxury segment will have to continue to be a great driver.

(By Aditya Kushwaha, CEO & Director, Axis Ecorp)

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