All of us dream of owning a second home in the hills or on a beach. So when we have barely got past paying for the last of the EMIs on the current dream house that you plan to own as a your primary home, you start looking for that second home. The debate begins between you and your spouse on where the family would like to pick up a property and usually it’s always that dream home that you have always wanted.
Whether it’s that lovely cottage on top of that misty hill overlooking the valley or that quaint little home near the beach where the family would spend long hours walking and playing on the beach next to the sea.
Time availability
Let’s explore two of India’s prime metros as a case in point. A large number of second home investors are based in the metros, so they happen to be a good place to analyze the potential investor.
Take Delhi for instance. Being an area of extreme heat or extreme cold, Delhites prefer to run to the hills in summer and also head to the hills in winter to catch the snow. Most people like to drive out to the hill stations as they get more time to spend with the family, as also the fact that you need your own vehicle to move around, as per your own schedules. Most hill stations can be reached between 6-12 hours driving time from Delhi.
Cost of homes
A simple two bedroom home could cost anywhere between 15 to 25 lakhs, while premium properties can hover between 40 lakh and 2 crore. Let’s take a mid-price of 20 lakh in our example which would be a fair average price to consider. So if you were to buy an independent home or get it constructed, you would need to keep someone to maintain it. Say you pay someone Rs 5,000 per month i.e. Rs 60,000 annually. Then there are taxes etc that will need to be paid, For this example, I will leave out the additional expenses.
Now, if you were to invest Rs 20 lakh in financial instruments such as Mutual funds etc instead of buying a home, you can safely assume a minimum return of investment of 12% per annum. In this case, that would be Rs 240,000 per annum.
The choice
If the logic for buying a second home is investment and property value appreciation, then it is always better to invest in the NCR, as the appreciation of value will be faster. The primary home that you have already purchased will fulfill that need.
Now if you would like to buy the second home to fulfill your need to get away to a space that you and your family could reach to unwind, then you need to consider the facts below.
The fact
Several home owners who already own second homes in these locations and who are residing in Delhi, visit their homes for only around twelve days in a year. In the initial years it varies between 12 and 30 days, which drops over time to around 12 days in a year. Which means the property remains unutilized through the year.
So why is the usage so low? Two primary reasons. One is paucity time and the other is family members wanting to go to other locations on longer holidays. The fact is that time is at a premium, given that most people work or are busy in their respective businesses. The only time they can get away for a quick holiday is when they get a ‘series’ of holidays thrown in which combines with the weekend. So you get 2-4 days, at most. Of this you lose one night going and one night returning. That is if you prefer to drive at night. So you are left with barely 2 full days to enjoy your break. In a year there are only 3-4 such occasions. That’s the time when these owners tend to visit their homes in the hills.
The problem is that children and very often the spouses, get bored of visiting the same location and put pressure to visit other locations. This means further costs on hotels, boarding and lodging.
Most potential second home buyers do not take this aspect into account. Would you like to visit the same place and home, year after year or would you like to travel to a different location each year and on every chance that you get? The answer by majority would be the latter.
So if you had Rs 240,000 available per year for holidaying wouldn’t that be great? You would have the money available, without issues of house maintenance, manpower recruitment, and no taxes to bother about, year after year. It was an answer to this dilemma that the concept of ‘time share’ as a holiday cum investment option came about. It’s actually a good alternate option to look at. Though availability of property at times and at locations that you prefer may not always be possible.
It would be a great idea to weigh all options before taking a call to invest in a second home. The reasons and the implications must be well considered.
Read Also:
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Home Loan: Frequently Asked Questions
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