Weekend homes, also called second homes or vacation homes, are currently an oasis of market activity in India's otherwise lacklustre residential real estate sector.
Earlier, only the affluent could and would invest in them - today, these properties are generating interest even from the country's middle class.
So what exactly are weekend homes?
After the basic needs of shelter are met, most people have an in-built desire to own properties to use purely for relaxation.
Obviously, such properties need to be in the more bracing and beauteous environs than the cluttered, polluted cities.
People like to invest in weekend homes as short, hassle-free getaways and often serve the extended purpose of providing a peaceful post-retirement life.
In absolute terms, the growth registered by the vacation home segment in year 2014 was 57% over the year 2013. The total number of properties sold was 1.3 million, and made up almost 21% of all real estate transactions. On an average, the second homes market is growing at a healthy rate of 10-12% per annum.
Are they good investment options?
- A weekend home is generally purchased only after one's primary home is secured. If the first home is debt-free and one has sufficient reserves, then investing in a weekend home make perfect sense.
- Keep in mind that one spends only a limited amount of time per year in a weekend home. Nevertheless, there will be regular expenses on maintaining the property. If one does not wish to put the property on rent, the costs would include keeping a caretaker.
- If the property is to be put out on rent throughout the year, there would be expenses on regularly upgrading the basic amenities.
- The average rental potential of such a property is 2-7% of its value. This may not suffice to cover one's expenses towards paying the mortgage, if one is availed of, and the maintenance expenses.
- In a majority of cases, weekend homes attract higher rental revenue-generating tourist activity for only about 10-15 weeks a year. From a rental perspective, the rest of the year would be a slump.
- Capital growth or appreciation will only happen in case the town or city has round-the-year tourist footfalls and additional activity of (and capabilities for) seminars, conferences, corporate training events, spiritual workshops, etc. Only such kind of market fundamentals resulting in regular rental demand in the city chosen for a weekend home can ensure appreciable capital value growth of a property.
Unlike America, where almost 25% of the population has a second or a weekend home, India is just waking up to the idea. The potential of this segment is considerable and growth is assured, given that a luxurious lifestyle ranks high among the priorities of the current generation (rather than remaining just a dream, like the previous generation.)
As a buyer, perform your research diligently and only invest if your financial goals are in place. These homes may not offer the best in terms of monetary returns on investments, but they can certainly make you rich when it comes to peaceful living, even in small spurts.
