September 2015
that rapid growth seen in the Indian economy, coupled with a considerable positive change in the lifestyle of people living in metros, has contributed to the spurt in buying second homes. He adds, “When an NRI visits his kin at home, he also sees these changes and in turn thinks about investing in a home, whether second or first. Demand for properties in metros is rising, leading to a hike in property prices. 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. The presence of increased capital income and regular income through rent makes it profitable to own a second home in India. The biggest advantage of buying a second home in India is the owner stays close to his/ her roots in the home country by purchasing a second home in India.” True, for many home buyers, the prime motive of buying a second home has been profitability. It is possible to own a second home by just shelling out 30 per cent of the cost of the second home (20 per cent down payment and 10 per cent financing costs). But the earnings come in two ways. You can add to your wealth through rental income and property prices in India are seen to appreciate at the rate of at least 10 per cent annually, which certainly makes an investment in a second home a financially lucrative proposition.
“loss from the second home” against your regular income, thus saving tax. Later if you wish to sell a second home for profits, the acquisition cost is calculated and deducted from the sale price, and the tax is calculated only on the balance amount”. “Conventionally the High Net worth Individuals as well as the NRIs have been the chief second home buyers in India,” says Samujjwal Ghosh, adding, “However with robust improvement in the Indian economic scenario and therefore on the overall job situation, the higher mid segment has also become an
QUICK FACTS
active second home buyer category. Their needs balance equally between aspiration and investment. The majority of our second home high net-worth customers are well travelled individuals who expect a lifestyle, where luxury is as uncompromised as the natural environment of the precinct. They would like to return home to a world-class environment that offers both.” Mid-segment homes have seen a rise in the uptake recently. Many who own a house in the metropolitan cities let out their city houses and shift to less expensive localities in Tier2 towns where they buy a more spacious home in less than they might have spent to buy their first home.
FAVOURITE LOCATIONS
• Investing in a second home offers multiple benefits to home buyers.
The demand for second homes can be seen across the country, in a variety of cities and locations.
• They can earn rental returns for the owners, or be enjoyed as vacation homes.
WEST INDIA Mumbai and the Mumbai Metropolitan Region (MMR) has always been the most coveted destination for those who can afford it. Upcoming suburbs of Thane, Dombivali-Kalyan and the beach locations of Alibaug in the MMR region have seen an uptake in demand for second homes and vacation homes alike. Pune, Goa Nagpur, Nashik, Ahmedabad, and Baroda are the other cities where development and demands are on the rise.
• They can also offer a safety net for the post-retirement years.
The Company Spokesman of Kalpataru Ltd adds another angle to the story of rising investment in second homes. “Rise in disposable income, increasing affluence and the aspiration for a relaxed lifestyle has been instrumental in the driving growth for second homes in India,” the spokesperson says. Of course, he also concedes that the segment "largely consists of buyers who either invest in second homes for post-retirement purposes or those who wish to earn a rental income. However, in recent times, second home buyers are no longer retired personnel but young individuals in their 30s and 40s. The urban population is more inclined towards peaceful luxury living, away from the hustle and bustle of the city life either for vacationing or for an occasional weekend relaxation. Some also see it as a investment proposition or invest for their young children as a security in asset class. Investing in a second house situated in a prime location or at least in a location that has a good scope for development in the future is very important.”
TAX BENEFITS Pic courtesy: Puravankara Projects
A second home in India can also provide a tax hedge, explains Mr. Sanjay Dutt, Executive Managing Director of Cushman & Wakefield, South Asia. “The purchase of a second home offers a number of tax benefits. The tax benefits are less when compared to the investment in your first home, but do present an opportunity to save some tax money. The rental income from your second home can be adjusted towards the interest that you pay for the home loan for the second home. If the interest paid is more than the rent that you receive, you can set off the
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