In the last decade, especially during the last few years, a new niche segment has been taking root in the Indian real estate market — the second homes/vacation homes segment. Additionally, the demand for holiday homes these days has been further stimulated with several banks and financial institutions providing loans for such projects; they can finance up to 75 per cent of the cost of the property.
The second homes market in south India is no exception. Previously, rich families bought land or residential property at vacation or pilgrimage destinations. However, today many people, including the middle class consumer, aspires to own a holiday home. As per a survey, second home sales increased by up to 50 per cent during the period from 2002 to 2007. Currently, second homes account for 3 to 4 per cent of the total home sales per year.
The draw of Kerala
As expected, NRIs (Non Resident Indians) are considered to be the biggest group of potential customers for vacation properties in India. Though there are several second home destinations in the country, Kerala seems to be the most popular choice for setting up a second home or vacation home. And in Kerala, Wayanad is the top spot.
To cater to this segment, a slew of weekend home players are consolidating their position in the market. To make these projects more attractive, various perks such as community farming, international themed architecture, spas, yoga centres, outdoor themes such as golfing, water sports and more are being offered.
Many properties are a part of a gated community, with utilities and maintenance services. If the buyer has the budget, he is spoilt for choice. From beachside properties and plots in hill stations to sites on the outskirts of metros, there's a lot on offer.
Deepak Bapna, a NRI and self-employed defense software contractor for the US government, says he likes spending time at his weekend house on the outskirts of Bengaluru, along with his children. "It has a huge lawn where the children run around and have a picnic outside the house."
In terms of weekend home destinations, apart from the Wayanad region of north Kerala, plots in hill stations such as Kodaikanal, Ooty, Munnar and Yercaud are much sought after. The East Coast Road stretch, from Mahabalipuram to Pondicherry, is also becoming a popular destination for such projects, and upcoming beach houses seem to be a trend. Other areas such as Yelagiri, Ponmudi, Chikmagalur, are also becoming hot spots.
A win-win situation for owners and vacationers
Interestingly, even cities such as Mysore and Cochin are becoming attractive to investors looking for a second home. Villas, houses and apartments are popular. Apart from being a holiday retreat in India for the NRI, these homes also make for a unique investment opportunity. The investment can yield immediate returns if the owner takes up rental or timeshare schemes (the rental income will attract tax).
So why are these schemes popular? Because vacation rentals are usually considered cost savings. Those who avail of this service save a lot of money in the form of tips, taxes and service charges. Moreover, by opting to stay in vacation homes, tourists get to live in larger spaces as compared to what's offered in hotels. Most holiday homes in the market today are rented out for vacations or home stays, though statistics show that almost 54 per cent of second homes in India are bought particularly for recreational use such as vacations.
However, the cost of the property and the rent it will yield is dependant on several factors such as location, size, the amenities offered, and the way in which the property has been maintained. The area of an average holiday villa or row house ranges from 1,500 to 2,500 square feet, while studio apartments range from 500 to 1,100 square feet. One can buy a plot of land and have a contractor build the house as per one's specifications, or it can be outsourced to the company from whom the plot of land has been purchased. These days, there are townships for weekend homes, too.
Before you buy land or a house in India
An NRI looking to buy a weekend home in India should keep in mind:
•There is no point scrimping on cost. It's better to spend more money and deal with an established real estate player. This way, you can be assured that all the legalities for owning that plot or house are in order. Land rules in India are complicated. Many plots that are on sale may not have a clear land title. They could be agricultural plots, forest land, government land and so on. If you want to be doubly sure about the status, you could also hire a local lawyer to look into the land title. You would also need to research the dos and don'ts, tax implications, coding, permit and building laws in that state and so on, for NRIs owning a property on Indian soil. From increased transfer taxes to capital gains taxes for foreigners, every country has different rules. Figure out all the potential costs, taxes, service fees and future taxes associated with that purchase. A local immigration lawyer should be able to help you with these details.
•Also, it's imperative to hire a property manager or a property management company. The upkeep of the property is especially important if you are looking at earning a rent off it. The other perks would be that they will screen potential renters, keeping an eye out for vandalism and oversee payments in your absence. The property manager will take a percentage from your rental profits, but a reliable person will be well worth the expense, since you won't be in a position to come to India to address all problems.
It's worth the trouble
At this stage, if potential buyers are wondering whether a second home is worth all this trouble, then they should look to home owners who already live in such properties — they will reveal that their home makes a qualitative difference to their life.
The Ziegers, for instance, have a country-styled farmhouse on the Angsana resort grounds near Bengaluru. Andreas Zieger is the CEO and owner of a company that deals with construction accessories, called ZAAS, and Silvia Zieger is an independent housing specialist who helps expatriates get settled in Bengaluru. The couple have been residing in India for more than five years. They have two children, aged three and six.
"The house is a red stone house with sky-lights everywhere and a wonderful garden in the front, into which I have put in a lot of effort," says Andreas Zieger.
Interestingly, this isn't the Ziegers' weekend getaway; this is where the family lives. Away from the hustle and bustle of Bengaluru, the couple say they enjoy the greenery and the quiet that the area affords them.
