INVESTMENT OPTIONS
September 2015
appreciation is steady. For many buyers, a second home is often bought in the upcoming suburbs or outside the city, to get respite from crowded cities, extreme heat and the stresses of work. For others, it’s a quick way to generate cash or to secure the future of a growing child.” According to a study conducted by Kapston.com, a Bengaluru-based e-business consulting firm, second-home sales in India increased by 50 per cent from 2002 to 2007. It slowed down a bit between 2008-2010, mostly due to the economic downturn in the United States, says Amar Sodhi, owner of Avatar International, a United Kingdombased property brokerage firm. He points out, however, that secondary property is still in demand and has once again picked up tremendously among Indian buyers and non-resident Indians (NRIs.) “Now it’s a normal, regulated market where good stuff sells very quickly,” he says.
In fact, the recent buying pattern of NRIs have shown that they do not necessarily buy in resort towns or in big metropolitan areas. Many choose to buy residential property close to their parental homes or in cities where they have bought their primary property. Many buy in the suburbs. Ms. Vineeta Narain, an NRI residing in Colorado, USA, whose father has been in India says, "I bought my first house to gift my parents a better living standard in Delhi and recently bought a second home in Gurgaon as it fetches good rental income that brings in additional cash to my kitty.” She adds, “Most NRIs would like to keep the option open to come back to India, after our working years are well-spent here in our adopted country. You can say it is our retirement plan, where hired maid servants and domestic help is available easily and we get an additional comfort of being close to our friends and families.”
A HOME FOR THE FUTURE Many NRIs thus buy a second home as part of their retirement plan, if they wish to return to India in their old age. They give it out on rent while staying in their primary home, or sometimes sell it for an appreciated price to add additional wealth to their coffers. Sometimes if they wish to stay back in their adopted country, they still have the option to sell out and add wealth to their income. Samujjwal Ghosh, Vice-President-Marketing, Lodha Group avers, “Many buyers have invested in a second home, which 24
Pic courtesy: Parksyde Homes
For some time, second home purchases were focused on the high end of the market. But now, as another 10 to 15 million people join the ranks of the middle classes, buying activities are seen in the affordable housing segment, points out a report from Tata Housing Limited, from both Indian buyers and the non-resident Indians (NRIs). The report observes that this is true of those who are already in jobs for more than four years and have some disposable income to buy mid-level housing. NRIs can easily buy a house in India because they were born here, or if it is the birthplace of their parents or grandparents.
"An investment made in a property today is sure to attract returns in the immediate future. The amount of returns depends on the project, location, and proximity to business centres, among other things. The property owner can also earn a fixed income from the property by offering it on rent.” - Mayur Shah, Managing Director, Marathon Group they use as a vacation home also. A second home provides the perfect escape from the bustle of the city – offering the luxury of space within the home and ample open spaces outside, both rare in cities. Sizable returns could be expected from second homes as they are sited within close proximity by road and airports from major metros. Although sometimes stereotyped as a holiday home, a self-encompassing project that offers a plethora of world-class leisure options and ease of living could serve well as a home for long stays too. Such projects considerably reduce the cost of maintenance as compared to an individual country house located in a remote area. Sometimes these homes are also fitted with sports facilities that offer the opportunity for sports such as golf, tennis, cricket and leisure alternatives like a spa and entertainment options. It has some advantage in it for every member in the family.” Ashish Puravankara, Managing Director, Puravankara Projects, Bengaluru, who has projects in other cities of Southern India says, “Customers buying second homes are on the rise as the real estate market continues to grow exponentially in the country. There are two main objectives that drive the decision to invest in a second home: a) Lifestyle / Leisure and b) Financial Investment in Real Estate.”
He adds, “Many customers look to enhance their lifestyle with a weekend/vacation home and most of these customers target homes/villas on the outskirts of the city that they currently live in, not more than a few hours’ drive from the city. However it must be noted that these markets are illiquid and price appreciation over a period of time would be modest. We have also seen a large percentage of the population securing post retirement homes, to be amongst like-minded communities. If consumers are looking to buy a second home as a financial investment or to accommodate a growing family, opting for a second home in large metropolitan cities is a wise move. It is imperative that consumers follow the same due diligence process as with purchasing their first home. It is essential to focus on the right developer, right city, location within the city, supporting infrastructure and other commercial activity, which will ensure robust capital appreciation as well as steady rental income. Investors can expect a 15 -18 per cent annualised return over the long term, on investing in projects of Grade A developers in large metropolitan cities."
RETURNS THROUGH RENTALS Mayur Shah, Managing Director, Marathon Group, feels www.indiapropertyinsider.in | A
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