Why only sentiment should not drive your decision to buy second home; ensure it yields good returns, is a strategic investment

Time of India

12-05-2025

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Strategy, not sentiment
India is witnessing strong demand from first-time homebuyers, while an increasing number of high-net-worth individuals (HNIs) are investing in second or holiday homes. This trend— driven by lifestyle upgrades in scenic locations like Goa, Himachal, and Coorg—has gained momentum since the pandemic. The 2025 Luxury Residential Sentiment Survey by India Sotheby's International Realty supports this shift: 54% of respondents expressed interest in buying or upgrading a second home. It's not a passing trend but a structural change in lifestyle priorities.Convenience is the new luxury. Over half of the surveyed HNIs prefer second homes within a four-hour drive. And infrastructure is catching up fast. The New Delhi-Dehradun Expressway is set to cut travel time dramatically, unlocking quick access to weekend favourites like Mussoorie, Rishikesh, and Haridwar. Meanwhile, the widening of NH-44 is smoothing routes to Shimla, Kasauli, and Mashobra — charming Himalayan destinations that now feel much closer.In the west and south, places like Alibaug, Lonavala, Goa, and the Nilgiris are seeing rising interest. Mumbai's Trans Harbour Link has made Alibaug commuter-friendly. The new Mopa airport in Goa has further connected this already beloved destination to international and domestic markets.This demand is being met by a surge in luxury projects across second-home hotspots. Major developers like Emaar and Eldeco have joined forces with local players to launch villas that blend indoor-outdoor living, smart amenities, and wellness-focused designs. Think private pools, spas, jogging trails, and gyms—all within scenic, secure gated communities. The appeal? These homes offer a physical and emotional escape, a way to unplug from city chaos and reconnect with oneself or family. For many, it's a conscious bet on work-life balance and mental wellness.Yes—if done wisely. Prime locations like Goa, Alibaug, and Kasauli have seen annual capital appreciation of 9–12%, with some parts of North Goa touching 18–20% over the past four years. The real game-changer, however, is short-term rental income. The rise of luxury villa rental platforms has unlocked new revenue streams. Fully furnished beachfront or hillside villas in gated communities can command premium rentals during the holiday season. Chosen well, these properties can deliver annual rental yields of 4–6%—often double or more than what luxury apartments and standalone homes fetch in top-tier cities.A second home is undoubtedly an exciting prospect, but it's important to ask a fundamental question: how often will you or your family use it? If you are not able to spend at least 30-50 days a year there, does it make sense to buy a property and take on the financial and logistical burden of maintaining it? In such cases, it might be more practical—and enjoyable—to simply rent a fully furnished villa on Airbnb or stay at your favourite hotel.The trade-off with buying a second home is that it must either be used extensively or deliver strong returns to justify the investment. If you're viewing it purely as an investment, keep in mind—it's a complex one. Liquidity is a major concern, as selling a second home during a market slowdown can take longer than selling a primary or city-based property. And ongoing maintenance is non-negotiable. Besides, in India, homes in rural areas (hill stations, far-off locations) might still get sold part-cash, part-cheque. In an era where tax evasion has become tougher and tax vigilance has become sharper, such transactions are ill-advised.It's also essential to compare its potential returns with other investment avenues, both within real estate and across other asset classes.Location plays a key role in determining how often you'll use the property and what kind of returns you can expect. From weather damage and security concerns to the upkeep of high-end amenities like pools or gardens— owning a second home is a hands-on affair, especially if it's a standalone unit.Besides that, in regions like Goa or Uttarakhand, it is important to be mindful of local communities, as sometimes they may not always be welcoming of outsiders purchasing homes. It is also important to consider cultural sensitivities, and community norms which could significantly influence your experience, particularly if you plan to build or buy an independent villa.Buyers must also ensure title clarity, as unpaid taxes, disputed inheritances, or incomplete documentation can hinder sales or rental income. Moreover, Indian inheritance laws, FEMA regulations, and tax liabilities can make property succession especially complex for NRIs. A legally sound will, proper succession planning, and a trusted local Power of Attorney are essential to safeguard the value and legacy of a second home.HNIs though, must align second home investments with their broader portfolio strategy. We recommend capping second-home investments at 25% of one's total real estate allocation. This ensures a balanced mix of capital appreciation potential, rental yield, and liquidity management.In short, second homes have evolved from being emotional or occasional getaways into serious lifestyle investments. They offer dual rewards; a place to unwind and a portfolio asset that works if chosen well. Like all smart investments, second homes require more than a scenic view. They demand clear thinking, clean paperwork, and a well-thought-out plan to work for you.