Why Holiday Homes Are Gaining Popularity in India

Much before the pandemic hit the country, and the globe, in 2020 there was a growing trend of people buying holiday homes across India. The infectious disease just gave this new housing boom a new tailwind.

A holiday home is typically a house or flat that someone owns in addition to their usual home and uses for holidays.

  
With more and more couples working day in and day out in key traffic-prone metro cities and then taking care of their families and sometimes their parents too, a vacation is no more something one needs to take every year. Those are meant for Europe or South East Asia or somewhere more exotic. But a growing number of these executives are seeking refuge from the hectic pace of city life by spending more time in nature which is often a driving distance away. And that usually means clubbing weekends with a few days off and zipping off to a hilly home a few hours away or a beach house not too far. 

 
Hot spots

Internationally most second-home buyers seek a spot within 2-3 hours by car from their main city base. India appears to be no different. Many are choosing to build their holiday homes on the outskirts of key work hubs like Mumbai and Delhi – for example in Alibaug, Lonvala, Goa, Pune and Rishikesh. Kasauli, Lansdowne, Dhanaulti, Shimla, Solan, Mashobra, Sirmaur Narendra Nagar, Nilgiris, Wayanad, Dooars and Puri are other popular places across India.

Some are thinking even more differently. Many young and middle-aged buyers are not buying property in cities like Mumbai and Gurugram where property prices have gone through the roof. They are instead staying on rent and then escaping the hustle and bustle of the town by spending time in their vacation homes which are much cheaper to buy. People are also buying small land parcels which are a few hours away and making small homes there to stay. Some say staying there is cheaper than checking into a wellness resort to refresh themselves. What’s more, these properties if chosen at a decent location grow in value by 8-10% annually making one’s net worth growth gradually and becoming a fallback option for emergencies.

Family time

Unlike hotels where there could be restrictions or segregation, a holiday home serves well for the great Indian family where all can bond together in large spacious rooms set amidst green expanses and even cook meals of their choice or have a help serve them for those few days when they are away from their daily grind. Most families also like to travel in groups these days and do not want to be scattered all across. A private home is therefore the best place to come together and share a good time.

Managing

Holiday homes are often empty when not used and many do not like the idea of giving it away on rent. But increasingly people are keeping one room and their kitchen items and quilts for themselves and allowing for the rest of the place to be rented out. With a growing market for holiday homes some firms have even entered the arena of providing maintenance for these properties. What’s more they even provide you with guaranteed rentals while you are not using this property bringing in cash flow into your bank account. Typically a 20-25% occupancy during the year is usually enough to break even and around 30% can bring you small profits, experts say.

Corporates

Some studies indicate that this holiday home market is growing rapidly with some suggesting at around 20% annually. Many big corporates have also taken to this new trend of buying holiday homes that can be used by their top executives. Often these are offered as perks to keep the employees motivated and happy. The unit itself appreciates and is a good value-add for their asset base too.

NRI

A big rush for holiday home buying is being led by Non-Resident Indians (NRIs) who are investing it both as an abode for temporary stay that provides a connection with their home country, an investment opportunity, as also a place they can retire to if the need so arises at some point in their lives. This trend became very prominent with many NRIs in the Middle East investing in southern Indian cities. Visits to places like Mangalore, for example, will make one realize how international the city has become catering to the deluge of people buying villas and farms there. There is often one or the other luxury café opening in the city every few weeks. Many developers have become so focused on NRIs that they have even abandoned the idea of making small-ticket homes altogether and are now fully concentrating on luxury homes with all the latest international gizmos and comforts installed there.

Fractional Ownership

While buying a holiday home can cost anywhere from upwards of Rs 1 crore upwards there are models like fractional ownership which are becoming increasingly popular with those who cannot cough up so much. This so-called fractional ownership allows multiple investors to collectively own an asset via a Special Purpose Vehicle (SPV) where all investors become shareholders. This way they can own a part of the property for say just Rs 10 lakh and can also exit it whenever they want to. Typically holiday homes are used for about a month in a year but maintenance is a year-long affair. This can mean painting the place to changing swimming pool filters and mowing the gardens. In fractional ownership homes this gets split between all the owners. Besides each owner gets to stay around 45 days in that property and if one does want to use that for some reason, the manager of the property rents that time out on portals like Airbnb and the money is transferred into the respective owners bank account.

Conclusion

While holiday homes are a great idea one must make sure that one is financially fit first. This means having a stable job or business or other passive income sources besides emergency funds and a healthy retirement corpus etc.