Owning a second home can be wonderful. And second home ownership in India has picked up in recent times, with an approximate 10-12% annual growth rate, as per the experts.
The concept of investing in a holiday home far from the hustle and bustle of the city or a second home that becomes a source of rental income, has picked up traction is now a prevalent practice with urban dwellers. Augmented by an increase in affordable housing, booming real estate in emerging Tier II and Tier III cities, and the desire for portfolio diversification—one thing is clear: citizens of India are actively pursuing opportunities to purchase a second home and reap its benefits.
Homeowners in Mumbai, Delhi, Bangalore, and other large cities have given a massive impetus to the ‘second home’ real estate market. In Mumbai, especially, if you are interested in buying a property in Thane West, Navi Mumbai, Kandivili or even a second home in Goa for spending your holidays, then reputed real estate companies like The Dynamix Group have a plethora of options ranging from ready-to-move-in flats, villas and even plots to your liking. Their Aldeia de Goa luxury beachside gated community in Goa is definitely worth consideration and is one of the best developments in Goa. However, before you join the bandwagon, here’s a mini guide to buying a second home.
Let’s dive right in:
Reasons to invest in a second home
Before deciding to purchase a second home, it’s highly recommended that you have a clear reason, as to why you want to make the purchase. This will help in narrowing down on the right location, property type, and property price, while also factoring for future returns.
Ultimately, these reasons also underpin the long-term benefits of buying a second home. Let’s have a look:
- For recreational/ retirement purposes. If you have always dreamed of owning a holiday home, then invest in a second home at a serene location you can visit in your downtime. Be sure to choose a development in which you can spend quality leisure time with your family and loved ones. Serviced apartments, apartments which are part of a large and vibrant community, and luxury beachside villas fall into this category. A second home of this nature, thus, offers you peace of mind and ensures the well-being of your family.
- As an investment with a view to selling off the property in the future at for significant profit. Such a second property banks upon its capital appreciation, especially in urban locations which are experiencing fast-paced infrastructure growth and development. Look for under construction and early stage developments by reputed companies – these are the ones which will offer the best price and therefore, the greatest potential upside return on your investment.
- As a source of income. If your objective for buying a second home is to earn a steady income, then purchasing a second home in a locality with a vibrant rental market is indeed a great investment. You can also look to tie up with reputed corporates who will pay you higher rents for your second home which can be used to accommodate their employees, with longer tenures and lower levels of delinquency. Furthermore, these properties will appreciate in value over time, along with providing you a steady rental income, enhancing your return substantially.
Additionally, the current macroeconomic conditions and their resultant effects on the real estate market has created favourable conditions for purchasing a second home. Many developers and builders are offering attractive market prices for ready-to-move-in, and under construction homes. Additionally, home loans – if you need one – are available at extremely attractive rates today.
The right time to invest in a second home
One should not simply buy a second home on a whim, especially since there is a lot of financial planning required and it is invariably a sizeable investment. In India, the average age of buying a second home, is in their mid-40s,- This being a time when people are generally professionally and financially stable and are advancing steadily through their careers. However, second home ownership is prevalent across all age groups and the majority of socio-economic demographics.
Usually, buying a second home with the help of a loan is the go-to solution for most people. Thankfully, banks and financial institutions have steadily increased home loan disbursement rates over the years – growing at around 30-40% over the last decade annually. Keeping all this in mind, here are some tips to choosing the right time for buying a second home, whether it is one of the resale flats in Thane West or a sprawling penthouse in Kandivali, or a wonderful flat in Goa:
- Try to keep a gap of 7 or more years between the first and the second home loan. More importantly, try to close (or substantially pay down) the first loan before opting for the second one. Career growth will also enable you to take a higher loan amount or increase your level of sustainable leverage.
- The total value of home loans should not exceed more 75% of the value of the property you purchase.
- Before applying for a home loan, do ensure that you have a good credit score and a stable employment history.
The real estate sector is quickly picking up after the successive introductions of RERA and GST, and demonetisation before that. For a second home buyer, the prices are encouraging and the options are excellent. Overall, a second home offers great return-on-investment, income, and space for personal growth. It is a versatile investment which offers more than just a financial return. The key to finding one for yourself is effective financial planning and informed decision making.