When it comes to how the realty sector has changed over the last one year, several trends come to mind: people are looking at buying larger homes, they are including home offices in the blueprint, and workcations are the new normal. Another trend gaining traction is that of people buying vacation homes.
While the concept of a second home is not new, these homes are now being bought in India’s smaller towns and for the purpose of staying and working from there for longer periods of time. But is it just the work-from-home (WFH) scenario that has prompted buyers?
Amit Agarwal, Co-Founder and CEO, NoBroker, says that the return on investment is another motivation. “Property prices have reduced in the wake of the pandemic and home loan interests are at an all-time low. People who buy a home now can enjoy significant capital gains on their investment in the long run and rental income from second homes can also be a strong addition to one’s overall income,” he says, adding that a recent survey on their platform indicates that 82% of people are looking to make a purchase in 2021.
Other factors are plenty: health and wellness concerns, the WFH set-up, people moving closer to their families, and favourable realty policies. “Wellness concerns due to COVID-19 have pivoted the focus towards spacious holiday homes, away from densely packed metro cities. Further, with competitive prices being offered by developers and low-interest rates on home loans, non-metros have become a preferred choice of investment for second-home buyers. This is gradually attracting even the travel-savvy upper-middle-class, who earlier enjoyed annual holidays but can no longer opt for it due to travel restrictions,” says Karan Kumar, Senior Vice-President and Chief Marketing Officer, DLF Ltd. He adds that cities such as Kasauli, Panchkula, Alibaug, Panjim, Lonavala are some of the popular destinations for holiday homes.
Experts are also of the opinion that these buying trends indicate a revival in the vacation homes market that has been in the doldrums for years on the back of a slowing economy. “Second home buyers are no longer considering rental income and future appreciation, for which the outlook continues to be dim over the next few years. Their focus is on leveraging the lower property prices in such locations to get bigger homes in greener, safer surroundings,” says Santhosh Kumar, Vice-Chairman, Anarock Property Consultants.
It’s no surprise then that it’s not only the country’s hill stations that have been seeing a high demand, but Tier II and Tier III cities too. Agarwal says the demand for second homes is primarily driven by wealthy individuals from Tier 1 cities such as Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Chennai, and Pune. “The demand within Tier I cities is for apartments and villas. Independent homes are popular choices when the location shifts to places like Goa, Alibaug and Haridwar,” he explains.
As for average prices, major middle-class-favoured destinations around the top cities range anywhere between ₹3,000 and ₹12,000 per sq. ft. For the ultra-rich eyeing opulence in prime holiday locations, deals have been closed at over ₹200 crore in certain locations, most notably in Goa and Amby Valley, says Kumar of Anarock.
Tata Realty’s properties in Kasauli, Lonavala and Goa have been popular among buyers. Sarthak Seth, Chief Marketing Officer, Tata Realty & Infrastructure Ltd, says that with the pandemic leading to travel bans, there is a strong demand for safe homes that are away from urban hotspots. “Hence, a majority of the demand for these homes is coming in from metro cities like Delhi, Mumbai and Bengaluru.”
At Auramah Valley, a luxury residential township project in Shimla, founder Manav Singh says there is demand for areas such as Dharamshala, Shimla and Manali. He says a home in the hills is three times cheaper to one in the city and a second home is a necessity more than a desire. “We’ve seen interest from professionals with an income of over ₹1 crore, businessmen with income of more than ₹3-4 crore, retired individuals with disposable incomes, etc.”
Singh adds that investors and developers are now eyeing Tier II and Tier III cities. “Places like Amritsar, Chandigarh and Shimla, etc. are on the radar of bigger builders due to reverse migration.”
What should you keep in mind when looking for a property in small towns and hill stations? For starters, the property should be easily accessible, have good internet connectivity, and be in proximity to basic amenities such as grocery stores, hospitals, etc. “Buyers must also evaluate that the property has all necessary permissions and clearances before making the purchase. Buying a property at a hill station, for a non-domiciled resident, often requires additional permits and paperwork. It is also important to conduct a property rate check locally before committing to the purchase to ensure that the price quoted is fair and in keeping with the local circle rates,” explains Agarwal of NoBroker.
Buying only from developers who understand local laws and regulatory frameworks, especially in hill states, is important too. “There are many fly-by-nights local operators who could offer you a ‘dream deal’ but buyers must actively carry out due diligence to see their track record, especially with reference to transactions they have already completed in the past,” adds Kumar of DLF.
Each town has specific legal terms when it comes to buying a home or land (by non-agriculturalists). Navigating these laws isn’t easy, so keep a few ground rules in mind to avoid future legal hassles:
Title deed: When buying a property, it is vital to ensure that the land/property being sold is in the name of the person selling it. The individual or group must also possess the right to sell that property without the consent of another party. Title deeds must also be verified by a lawyer for their validity.
Sales deed: When making a purchase, it is essential to also demand a sales deed from the seller, as the document conveys that the property has been transferred from the seller to the buyer. The document also affirms that the land belongs, absolutely and in entirety, to the buyer and not to any other society, builder, development authority, etc.
Tax receipts and bills: Before making the payment and taking over the property, buyers must ensure that the seller has cleared all previous dues such as electricity bills, water bills, and property tax, etc.
Pledged land: When buying a land/home, buyers must ensure that the property in question is not mortgaged under loan by the seller. Any outstanding payments must be cleared by the seller before the property transfer is finalised.
Agreement: Agreements are essential in any property purchase. Having an agreement in place ensures that the seller does not go back on commitments. It also ensures that the deal is not hijacked by another buyer offering a better price at the last minute.
Registration: The proof that a transaction has taken place between the selling and buying parties, this document is one of the penultimate legalities that must be addressed in a property purchase. It attests that all the details and conditions mentioned in the agreement are true and have been satisfactorily met by both parties. At the time of registration, all the previous deeds, property/house tax receipts, original title deeds, etc. must be presented, along with two witnesses. Buyers and sellers must also ensure that the relevant deeds are registered within the timeframe mentioned in the agreement.
The COVID-19 pandemic seems to have spurred the demand for weekend and second homes in key markets, according to real estate developers and analysts.
Mumbai-based Nirvana Realty said it recently sold more than 400 weekend homes at its Signature Resorts near the city.
“We are also launching a project where we will develop custom-built Royale Pool Villas at Wollywood, Wada and Viroha, Dahanu,” said Punit Agarwal, MD and CEO.
“The pandemic may give a new lease of life to the previously lacklustre second-home market,” said Santosh Kumar, vice-chairman, Anarock.
He said while short breaks from city life, rental income and/or eventual retirement were the previous aspirations for owning a second home, COVID-19 has given rise to a more urgent motivation — the relative safety from infection of homes away from the urban hot zones. “For those with the financial means, it is certainly the optimal time for such an acquisition.”
He said work-from-home options (WFH), now extensively available across many industries, the rock-bottom and often further negotiable property prices, the lowest home loan interest rates in two decades and significantly-reduced stamp duty and registration rates in some States have helped in creating demand.