Demand for second home to rise in near term: Survey

The second home market in India is poised to witness high traction in the near term as wealthy individuals look to get away from cities amid the ongoing covid-19 pandemic.

Almost 70% of respondents want to invest in a second home priced at ₹2 crore or less, according to a survey by property advisory Savills India. The survey reveals that 57- 70% of the respondents want to buy a second home within two years.

This short-term commitment of less than two years is evident not only in the domestic market, but also in preferred offshore destinations.

Almost 80% of potential second home buyers intend to hold the properties for more than five years. As the ticket size of the property increases, so does the intended investment period, reflecting the intent to attain capital appreciation and rental return before eventual exit from the property.

According to Savills India’s research, parameters that buyers consider while purchasing a second home include owning a second home at a holiday destination, spacious and larger floor space, health and wellness factor, connectivity from home city, internet infrastructure and an eventual return on investment.

The survey also highlights that nearly 60% of the respondents would like to invest in a second home in a gated community that offers security and amenities such as swimming pool, gymnasium, health center.

“The second homes market appears to be on a gradual upswing. Unlike earlier, when capital appreciation and rental incomes were the governing criteria, an additional dimension of a safe home away from pandemic hotspots appears to have become a key consideration. Rental yields in popular second home destinations are reported to be witnessing an increasing trend. Additionally, technology too has played a vital role in strengthening the investor confidence.” said Shveta Jain, MD, Residential Services, Savills India.

The demand for second homes emanates from a variety of factors that have caused fundamental shifts in the industry over time. Driven by wider acceptance of work from anywhere and the increasing advent of organised as well as professional operators in this segment, latent demand for such properties have surfaced in recent times. Technological advancements that have enabled sales worldwide and led to emergence of aggregators and operators have also enhanced the income generation ability of such properties, Savills said.

Respondents were willing to invest in second homes across the country and the top 10 destinations emerging from the survey collectively have a share of 87% within the domestic locations.

Across locations in Maharashtra, 65% of the demand is within ₹2 crore and net yields of properties have been in the range of 4-6%.

Goa leads the domestic demand for second homes with one-fifth of respondents interested in buying a second home there. There has been over 20% appreciation in land rates as compared to the pre-pandemic era.

In northern India, Uttarakhand leads the demand. However, only 3% of respondents want to purchase plots there given the stringent local ownership laws.

Tamil Nadu has seen maximum demand for non-primary homes in the south. In Chennai East Coast Road, nearly 13% demand comes from penthouses compared to other locations, where they account for only 3-7% of the overall demand share.