What drives holiday home investment?

Bottom Line: The debate as to whether location matters more to the second home buying decision or the affordability leads to a chicken and egg syndrome.

Second homes, Holiday homes, Weekend homes, Investment homes, Leisure homes, Investment for weekend, India real estate news, Indian realty news, Real estate news India, Indian property market, Track2Media Research, Track2Realty

Weekend Home

There are no clear answers over the debate about location or affordability. Different set of buyers have different concerns and outlook with regard to buying a holiday home.

While the advocates of location as a demand driver argue that if affordability, or the cost conscious mindset, is the critical factor why would one even go for a luxury of availing second home for holidays?

Those who believe affordability is the prime criterion remind that a second home is not necessarily a luxury for holidaying alone but it can also be purchased as an investment with appreciation potential in mind.

While the first school of thought has a firm conviction that if luxury projects are today being sold as holiday homes it shows that price point is not the only factor; others question if affordability and its appreciation potential is not the key determinant how come some of the tourist locations could never blossom as the market for second homes. As a matter of fact, some of the buyers even look to invest in the second home with rental yields in mind. The debate hence continues.

What can be vouchsafed is that it is all about the buyers’ profile that determines the criterion to buy a second home. While the rich and affluent buy it out for sheer luxury and pleasure of holidaying, the mid segment buyers go for it with investment horizon in mind.

Holiday home drivers

Three critical factors of second homes—Location, Affordability & Amenities

Natural surroundings, tourist spots and religious places ideal for second homes

Equally lucrative market for high end and mid segment buyers

Amenities & luxury more important for high end buyers

Affordability a key concern for mid segment buyers

Location equally critical for all second home buyers

The developers active in this space have their own views and concerns to cater to two different extremes of thought process. It seems more market research and strategy is needed in this segment of housing which may appear to be a leisure investment as an outside view.

Diipesh Bhagtani, Executive Director of Jaycee Homes maintains that both the location and affordability matter equally. If a buyer is investing in a second home purely for the sake of monetary investment gains, he might consider affordability over location. But if he is considering a second home as an extension to his living space, he might place his location preference over affordability. It is all about the reason why the buyer is opting for the given property.

“What the first home does not have often lead the buyers to second home. One of the biggest reasons for a buying a second home is the extension of luxury space. Most buyers will look for natural landscapes filled with lush greenery when looking for a vacation home. However, these elements of luxury living need to be complemented with easy access to hospitals, shopping complexes and transportation modes. A frequent business traveller will naturally look for ease of access while shopping for a second home, whereas families may prefer entertainment hubs along with natural open spaces,” says Bhagtani.

Hiral Sheth, Director-Marketing with Sheth Creators is of the opinion that several factors influence the price structure of these second homes. The most important is the location of the project. She reminds that in a city like Mumbai where space is the most important constrain location becomes a prime factor in investing.  Connectivity along with social infrastructure in a prime location is of utmost importance while investing in this segment of real estate.

“Location along with amenities offered plays a major role while choosing a second home. In real estate, amenities are features such as location, outlook or access to a park, lake, highway, view or the like, which enhance the desirability of investment in project that contribute to the pleasure and enjoyment of the occupants. Location and social infrastructure definitely plays an important role in the mindset of the buyers while they are investing in second homes,” says Sheth.

Surabhi Arora, Associate Director – Research with Colliers International, however, maintains that it is difficult to say whether location or affordability matters more in case of second home buying. According to her, one can always choose any promising location and need not pay much heed to personal choices. By promising location, it does not mean the most expensive or the cheapest. It is a location where people would like to live, and that can be for a variety of reasons, like commercial development, location, infrastructure, educational institute and social life.

“Promising locations can always fetch you a good return whether it is rental yield or capital appreciation. Further, if someone is planning to rent out the property, he always thinks about the target tenant and chooses the property accordingly. For example, buying property near a commercial hub make sense as target tenants are generally young professionals who like to live near their workplaces,” says Arora.

Pankaj Srivastava, COO of Maitreya Realtors & Construction feels that many people have disposable income for whom owning a luxury second home is a status symbol. They look up for modern amenities. Locations with scenic beauty and natural surroundings are preferred while investing in them.

“There are various factors which are looked upon while investing in second homes. The basic decision is based on the location and accessibility from the city. The connectivity to the main city, the infrastructure in terms of roads, electricity, water supply, waste management and the facilities provided by the developer, the ease of maintenance and upkeep of the property are all crucial in making a decision,” says Srivastava.

Second home market is a new phenomenon in urban India but has emerged as a sunrise market in cities like Mumbai. With the ever changing trends the demand for holiday homes has varied according to the consumer’s needs and tastes amongst various cities. Hence, there cannot be a one size fits all answer to the dilemma of location or affordability. For many a second home in India is housing which offers opulent living spaces and ultra-modern luxurious amenities; whereas for others it is a safe investment.

With the changing demographics of consumers and younger generation as buyers, developers are also continuously researching over the issue before any new offerings to strategise the sale of their projects. Right from technology to brand association, the developers are positioning the portfolio innovatively as this segment of housing is catering to a wide range of buyers.

By: Ravi Sinha

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