Tag Archives: BREXIT effect might hurt Indian property market

Symbiotic relation of holiday home & affordable home?

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Bottom Line: First home for staying in and second home for holidaying in goes the conventional wisdom of the property market. And hence, second home (or popularly known as holiday home) is seen as a property investment by those who have enough to splurge without giving any serious thought to affordability.

Holiday Home, Second Home, Luxury Home, Investment Home, Homes for holidays, Holiday Homes, India real estate news, Real estate news India, Indian Realty News , Indian Property Market, Investment for weekend, Weekend Homes, Track2Realty, Track2Media ResearchWait! Before you think that second home is all about living life king size with all the luxury quotient attached, the market realities get you exposed to another rider. Is there any symbiotic relation between second home and affordable home.

There is a growing debate within the realm of second home market as to what is the psychograph of the buyer. Whether they actually go for affordability or location or amenities, or all these factors collectively drive the second home buyers. These are the emerging market realities and till recently the property investment pattern across the country in general and Mumbai in particular suggested that there existed a symbiotic relation between the second home and an affordable home.

Of course, the attraction that lies with the second home and what differentiates it from the first home is still the oft-repeated and clichéd parameter called ‘location, location & location’. Having said this, it is also the price point that differentiates the second home from the first home as people invest less in second homes compared to first home.

Analysts tracking the second home market maintain that second homes are usually purchased from an investment perspective or a holiday perspective. They believe affordability is one of the major factors influencing the decision to buy a second home. There are only a few examples where the second home has attracted a sizeable premium and the buyers have gone for the luxury amenities in the second home.

Moreover, most second homes are purchased on the outskirts of the city, where the market rates are usually low; however, when luxury projects outside the city offer the buyer natural open spaces and refined amenities, the cost is naturally driven up. So, it also depends on the profile of the buyer and his standing in the first home market, since affordable second home is a relative term. The ideal locations for second homes are normally close to nature, tourist spots or religious places.

Holiday home drivers

Psychograph of buyers at large suggests more investment with first home than second home

Affordable locations more in demand for second homes

Parameters of second homes changing fast and it is no longer just holiday home

An investment instrument than holiday options

Metro buyers go for open spaces with second home

Second homes also serving as affordable first home for the local buyers 

Pankaj Srivastava, COO of Maitreya Realtors & Construction agrees that there is a symbiotic relation between second homes and affordability since people invest less in second homes compared to first home. According to him, it is the price factor in a city like Mumbai where the first home is quite costly, but then people like to have a second home primarily for the weekend getaway.

“For the middle income group this is all about affordability, but for higher income groups this is not always true as the luxury second homes are equally or more costlier than many of the first homes. The main attractions for such kind of second home are the space – larger homes, open spaces, a swimming pool, a badminton court, a big lawn, gymnasiums and convenience facilities  that offer entertainment and ease of living. These additional features are what differentiate it from the first homes,” says Srivastava.

Diipesh Bhagtani, Executive Director, Jaycee Homes believes that location is the first major attraction in the second home followed by the amenities. He believes the buyer may adjust his budgetary parameters depending on the location of his purchase and the amenities being offered to him with the purchase of the second home, especially if he doesn’t enjoy these facilities with his first home.

“Second homes are all about luxury and some of the most important elements the buyer will be drawn towards include lush greenery, pollution free open spaces, shopping complexes, entertainment hubs, easy transportation access and the presence of basic amenities (if not luxury amenities). Even a super luxury project can be sold as second home. When something appeals to the buyer and if he can afford it, he will definitely invest. So, whether it is a super luxury project or not, it can be sold as a second home; however, the buyer’s decision of investing in a luxury project for a second home depends entirely on his purpose for this second investment. For instance, if the buyer is looking for a vacation home purely for the purpose of leisure, his first choice might be a luxury project,” says Bhagtani.

A believer of second homes in the affordable category, Surabhi Arora, Associate Director -|Research with Colliers International maintains that buying residential property is an attractive income investment for many in an era of a volatile stock market and low return in other popular alternative investments such as gold and mutual funds, as property can fetch rental income and has an upside potential for capital appreciation in the long term.

“When choosing a residential property as first property for self-use, selecting a location often depends on considerations like distance from own work place, children’s school, native place and social amenities. However, for buying a residential property for investment as second home, the decision is generally based purely on appreciation potential,” says Arora.

The debate continues as to whether or not there is a symbiotic relation between the second home and the affordable factor. But what can be vouchsafed is that the price point of the second homes has a co-relation with the location and the amenities. Now whether the second home is also affordable or not depends on the two given factors even though the collective consciousness would like us to believe that since one invests more in the first home hence second home is more or less an affordable option for the buyers at large.

By: Ravi Sinha

BREXIT effect might hurt Indian property market

Posted on by Track2Realty
Track2Realty Exclusive

News Point: might hurt the Indian property market with both inbound taking a hit and outbound investment at the cost of luxury investment at home.

BREXIT, BREXIT impact on Indian property, Britain leaves European  Union, London property market, UK property, India real estate news, Indian property news, NRI investment in UK, Track2Realty has always fascinated me and I feel this is the right time to make a move. After BREXIT not only the property prices will come down with the immediate effect, but the Pound conversion rate has already come down pretty low,” says Jagjit Kalra, a Mumbai-based HNI with business interests across Europe.

He feels the nose-diving shares of property developers in Britain after the European Union exit suggests that the prolonged spell of house price boom is over in that part of the world. This expected sharp fall in property prices (FTSE 100 fell record low) added with the weakening of Pounds (it fell by 10 per cent as an immediate setback of BREXIT) makes the UK properties quite attractive for high-end investors like Singh. If the Bank of England cuts down the interest rate, as expected widely, it will make investment in the UK more lucrative. 

Ground realities

  • BREXIT to crash market and weaken Pound rates
  • UK property becomes quite attractive for Indians with lower price point and lower Pound rate
  • It will affect investment into office space by European companies
  • Luxury buyers to invest into UK properties

Anuj Puri, Chairman & Country Head, JLL India seems to agree with this HNI when he reminds that when economic recession had hit the US, Indians took up a leading position among investors keen to take advantage of the falling property prices there. The British Pound is currently at a 31-year low, which itself provides an attractive rationale for foreign investors with an appetite to do so to acquire properties in the UK.

“There is no doubt that the UK – particularly cities like London – has always held a special attraction for Indians, particularly HNIs, with business interests or families there. Such individuals will certainly keep a close watch on the effect of BREXIT on UK’s property prices, and it is very likely that many more Indians will seek to invest there,” says Puri.

However, this opportunity for HNIs and NRIs in the UK property market is not necessarily good news for Indian property market. It may affect the PE and FDI inflows into the Indian property market as the investors are risk averse and would play wait & watch for the time being. This has an adverse effect on the Indian real estate market that is struggling to revive.

Moreover, several major IT firms such as Infosys, TCS and HCL Tech earn a third of their revenues from the EU. A possibility of EU slowing down will have an adverse impact on their revenues. The IT sector is a leading occupier of office space in India every year. India’s office market, that is the biggest trigger point for the growth of the sector, is largely dependent on the European companies to set up base in India.

For the last 18 months many European retailers entering India as part of their expansion strategy to new markets may now prefer to wait for more clarity in the financial market.

Nikhil Hawelia, Managing Director of Hawelia Group feels the impact would be definitely there but not uniform across the segment of property. According to him, the impact on the office up-take might hurt the Indian economy as well. High-end property market will suffer more than the affordable housing.

“I feel there are ways and means to deal with BREXIT effect and the policy makers might be taking some steps soon. The remittance cap by the RBI over the Indians investing in the foreign property needs to be re-looked at. Then the RBI should also think of lowering the interest rates now. The Indian market has to be made more attractive and competitive to deal with it,” says Hawelia.

Vineet Relia, Managing Director of SARE Homes, however, maintains that it is too early to comment on the impact of BREXIT on the Indian real estate sector.

“I believe that Indian real estate sector will continue to progress on the path of recovery in the wake of policy reforms taken by the government and resilient economy,” says Relia.

In this cost & benefit analysis, while the sector may have to weather an adverse impact in the short term for the NRIs and HNIs like Singh, it is time to make the best of opportunities available in the UK market. The only catch here is the fact that the Reserve Bank of India (RBI) has a cap over the annual overseas remittance. The RBI has capped the overseas property investment at $200,000 per person per year.

Analysts still feel this remittance cap would not deter the investment into the UK property, keeping in mind the average cost of apartments across the major cities of Britain. And the fall in prices and the fall in Pound rates make it ever more tempting for Indians to invest in Britain.

By: Ravi Sinha