Waking up to the sound of birds chirping, walking on tender grass wet with the morning’s dew, listening to the sweet songs of flowing water as memories of an earlier time come flooding over you, soaking in the delights of nature over a cup of coffee… if this is your dream, investing in a second home is the road to realise it.

Though owning a single house continues to remain a dream for most people, buying a second home obviously continues to be nothing more than a fantasy. However, this relatively new concept in India is catching up with many high net worth individuals (HNIs) and non-resident Indians (NRIs). The main aim for buying a second home is to have a relaxing place away from the hustle and bustle of city life. This also becomes a good investment avenue, as the second home segment all over the country has appreciated astronomically in recent times.

Positive factors

The aspirations of the new generation are changing and steadily growing. As a result of liberalisation and strong growth of the economy, they have very high incomes and, therefore, have huge disposable amounts. Home loans are easily available and at highly competitive rates to fill any gaps that exist. Real estate has already emerged as a decent and transparent investment option. The availability of a wide variety of residential formats and options of locations and budgets became an attractive proposal for the newly-emerged consumer class besides NRIs to go in for it.

The benefits

The second home offers a relaxing space for those stressed out with city life. One can just get away for a quick and fun-filled holiday with family or friends. Many use it as a weekend home while others call it a vacation home. In addition, buying a holiday home also becomes an asset, wealth, a long-term investment. It can extract good rentals if it is not for personal use. This can also fetch high returns on disposal as appreciation has been very good so far. Last, but not the least, owning a second home is a status symbol today. Many artists in the Western world use second homes for their creative pursuits as well.

The selection

One’s personality, aspirations and budget usually determine the product. However, two main criteria are followed while selecting the location of a second home in India. One, it should not be too far from the city. Two, it should be away from the noise, pollution and artificial routine life of the big city. Some choose waterfronts; others opt for hilltops and others still settle for green landscapes. Most buyers go deals that come with ready possession of a villa while some prefer plots to later build on. At present, a variety of locations and formats are available in terms of geography and budgets.

The locations

Geographically, four types of locations are selected for the second home. The first is urban or suburban area — apartments or villas are within city limits but in tranquil stretches. The second location is peripheral areas — well-connected and decently developed outskirts offering tranquil landscapes not too far from the city. The third option is that of nearby towns which are at a driving distance of one to three hours from the city. These locations have better infrastructure, larger open and green zones at a competitive price. The last option is buying a house overseas. This is the most expansive option and difficult to work out. Some do have homes abroad for reasons other than an investment using it as a vacation retreat. The most popular option is that of locations on the outskirts of cities as they are easier to reach and are comparatively cheaper.

Finance options

Most deals for a ready second homes or plots are carried out from one’s surplus fund. Both the apartment and plot can be mortgaged if required. Financing institutions or banks give home loans for second homes as well. However, some regulations restrict a few banks on the amount and the rate of interest for the loan on a second home. To get a loan on agricultural land is difficult as compared to that on non-agricultural land. Approved developers and sites should be preferred as legalities do not become a hurdle in the financing process. The process to gain possession becomes faster and a larger amount can be loaned as compared to under-construction projects. One can take the loan on one’s first home as a top-up loan in case the second home does not qualify for a loan or if one wants to be free of mortgage. If one takes a loan, the bank will check all legalities. If one does not opt for a loan, then it is in the buyer’s best interest to hire a legal hand throughout the purchase process.

The pricing

Agricultural plots are cheaper than the non-agricultural plots. Non-agricultural plots are also cheaper than readymade villas. Taking location into consideration, second homes abroad are the most expensive option while weekend homes on the outskirts of the city are the cheapest option. The range of these homes is between Rs 25 lakh and Rs 1.25 crore. However, there are some proposals that have recently been advertised that come in the range of Rs 5 lakh and Rs 10 lakh for plots and from Rs 12 lakh to Rs 20 lakh for bungalows in locations far from the city. In short, one can get an option from Rs 15 to Rs 1.25 crores for a second home at Dehradun or Dubai, at Lavasa or London, at Mohali or Malaysia.

As an investment

In the past few years, second home buyers have been very happy as they have reaped the rich fruits of appreciation in value at various locations though investment was not at the top of their priority list. For example, a plot at Lonawala near Pune was sold at Rs 15 per sq ft about a decade ago and was recently resold for Rs 3,000 per sq ft. It is not only plots that have shown such a marked appreciation; readymade villas have also shown an amazing upward march. A villa on the outskirts of Mumbai was sold for an amount between Rs 4 lakh and Rs 5 lakh a couple of years ago. It is now being offered at Rs 12 lakh. There is appreciation in the entire segment at all levels and for all locations and formats.

The other side

Despite the success story of thousands of proud second house owners, many still shy away from such a purchase. This lot feels that once you buy a second home, you are stuck with it. They think they will tend to, or will have to, go to the same place over and over again and will eventually get bored by it. Human nature wants change. Everyone would prefer to be at different places whenever possible. This lot also believe that having to visit the same place just because it has been bought, becomes a compulsion instead of being a relaxing experience. Therefore, many people prefer dishing out cash every time they go out on weekends or on vacations. Though they have to let go of the benefits of appreciation of a second home, they don’t mind as they find the change of place more recharging and the capital saved more rewarding.

Possible hiccups

Buying agricultural land is a complicated issue as there are many restrictions and conditions. Many buyers have run into trouble after they purchased agricultural land without their knowledge and are not permitted to construct their bungalows there. Many a time, buyers are fooled by fly-by-night developers who sell plots or apartments that are under litigation and their ownership titles are not clear or are under dispute.

Buyers are at a loss as they are not aware of the local problems such as floods, riots, proposed industry, insufficient infrastructure, inadequate connectivity, etc. As a buyer does not stay at that place and visits his property only occasionally, there are high chances of encroachment or house break-ins.

The property may not appreciate as projected as this segment is at a nascent stage and may disappoint the buyer who would repent for not putting his money in other investment avenues.

The last mile

The concept of owning a second home is gaining steam in India especially for those in Tier-1 cities who look at tier-II cities as their second home locations. More and more locations are being explored and developed to woo HNIs and NRIs to invest in.

Traditionally preferred locations like Goa, Lonawala, Pune, Dehradun, Haridwar and Shimla remain popular among many Indians irrespective of their city of residence. With easy availability of home loans and wide price ranges to suit almost anyone’s budget, the second home is no more an affluent-oriented product. Now, there is something for everyone. According to a developer, many of these second homes will become first homes in times to come.

Anshumali Ruparel - expressestates.in