Why second homes in the hills are becoming the next big investment trend

Holiday homes, also known as vacation homes or second homes, are becoming increasingly popular in India. Particularly over the past few years, holiday homes have moved from being a luxury indulgence to becoming a second home and a smart investment choice. And the momentum is only growing.

Whether it’s the charm of green open spaces and clean air, or the financial appeal of steady rental income, more families are looking at second homes in beach and hill destinations as the perfect blend of lifestyle and returns.

“Our latest India Luxury Residential Outlook 2025 shows this shift clearly—54% of HNIs are keen on owning a holiday home in the hills or by the beach. Convenience is key, with 55% preferring properties within a four-hour drive and 27% a direct flight from their primary residence,” says Ashwin Chadha, CEO, India Sotheby’s International Realty.

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Goa remains the frontrunner, but demand for homes in scenic hill stations, and farmhouses at urban peripheries, are not too far behind. “While most UHNIs and HNIs buy these homes for personal retreats, many are also tapping into the thriving luxury vacation rental market— to generate better rental yields,” adds Chadha.

Driven by all these factors, the Indian second home market is on an accelerated growth trajectory.

Ankit Kansal, MD, Axon Developers, says, “The overall market is sized at over USD 3.2 billion and is growing at scorching pace of around 23% CAGR. Indian buyers are now actively scouting for bungalows, villas, branded lands & homes, cottages across various picturesque destinations in India. Average urban dwellers are now understanding the importance of spending time amidst tranquillity of nature. Refreshment and rejuvenation are no more just a buzz word, but becoming integral part of day-to-day lives. The rise in remote working has also been instrumental in accelerating the second home segment drastically.”

According to industry reports, the homestay sector is also experiencing a surge, with nights stayed increasing by 41% in FY23 and expected to grow 40% in FY24 and 36% in FY25. The gross merchandise value (GMV) for homestays grew by 74% in FY23, with an additional growth of 52% expected in FY24 and a further 40% projected for FY25.

“Locations like Goa, Uttarakhand, and Himachal Pradesh dominate the market, as luxury travelers increasingly seek private amenities, pet-friendly accommodations, and scenic retreats,” says Sanjay Khanna, Co-founder and Promoter, Scapes Hospitality.

“In the meantime Himachal Pradesh has emerged as a prime destination for second-home investments, offering both high rental yields (3-6%) and strong property appreciation,” informs Sameer Mutreja, Co-founder and Promoter, Scapes Hospitality.

For instance, luxury property in Kasauli has been witnessing double-digit price growth over the last few years. Luxury villas in the region have an average average (ADR) of Rs 8,500 per room, with occupancy rates peaking at 55% during summer. Additionally, villa rentals in Himachal Pradesh grew 25% YoY, aligning with the 30% YoY growth seen in the northern hill regions.

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Some of India’s leading developers, including DLF, Sushma Group, Tata Housing, and Scapes Hospitality, already have their luxury projects in or around Kasauli or are setting up their projects there.

For instance, Scapes Hospitality is coming out with its flagship project – 1842 Kasauli – in the Kasauli region of Himachal Pradesh. Entailing an investment of Rs 150 crore. the project consists of 39 luxury villas spread across 10 acres. Each villa can be customized to the buyer’s specifications and is priced between Rs 6 crore and Rs 20 crore.

“1842 Kasauli is set to officially launch on February 28, 2025. Even before the launch, however, the project has witnessed remarkable demand, with 18 villas already sold during the pre-sale phase. Moreover, with an expected rental income of 6 to 7% annually, the project is expected to appreciate significantly in value, with its current estimated worth at Rs 300 cr,” says Mutreja.

With its considerable natural beauty and proximity to major cities, Kasauli is becoming a notable second homes investment destination. It is conveniently close to Delhi and Chandigarh, and has breathtaking views, rich pine forests, and a year-round moderate climate.

According to Axon Developers, average land prices in Kasauli are in the range of around 3500-4000 PSF with a price rise in the range of 5-6% yearly. The market is small with around ~ 200 units but is expected to pick up soon. Rental yields are around 4.7% annually.

Santhosh Kumar, Vice Chairman, ANAROCK Group, says, “Driven by remote work patterns in the post-pandemic era, demand for holiday houses has made Kasauli popular among HNIs and C-suite executives. High tourist traffic encourages holiday rentals, and therefore consistent rental income for investors. Property prices range from Rs 2,500–Rs 8,000 per sq. ft. for mid-range flats to Rs 1.7 crore – Rs 8 crore for luxury villas. Kasauli has significant lifestyle advantages despite some legal constraints on ownership and high initial costs. With continuous infrastructural development and growing demand for hill station properties, this market looks upbeat in 2025 and beyond.”