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Fractional Real Estate Can Reshape the Second Home Market in India

By: Ankit Kansal

MD, Axon Developers

The Indian second home market is soaring on the back of accelerated market demand. As the nature of traditional hospitality is disrupted, the demand for second home market is gaining momentum. The upcoming trends of staycations, workcations, and remote working are fueling the demand for second homes and other related categories such as holiday homes, vacation villas, farmhouses, etc. Indian households are now realizing the significance of rejuvenation and wellness and are taking regular breaks amid pristine weather and natural trails. This is also pushing ahead the demand for Ayurveda centers & spas, nature resorts, holistic health centers, etc. amid serene natural environs.

The market of second homes in India is growing at a CAGR of 23% and is set to cross a market value of USD 4 billion (30,000 crores) by 2026, as per the research by Axon Developers. All over India from the Himalayan ranges to the lush green hills of the Sahyadri to the extended picturesque sea coasts of India, concept real estate and hospitality business ventures are thriving.

A Commendable Investment Assets
The second home assets also make great investment choices laced with tremendous appreciation potential and heightened rental yield. On average second homes annually appreciate by around 5- 12%. There are high-growth markets such as Sindhudurg, Pernem, Chamba, Alawar, etc. where the potential of appreciation is even higher and can easily give an appreciation in the range of 15-25% yearly.

The rental potentials are also great and mostly in the range of 7- 9%. As the concept of long leases is jumping, the rental income is naturally getting a shot in the arm. These days a large chunk of corporates, entrepreneurs, medical professionals, tech professionals, lawyers, etc. prefer to work remotely for some time of the year. While many will buy second-home properties, others will opt to lease out such properties. This naturally helps the rental market.

In addition, investing in such properties comes with a natural benefit of personal use. One can always use them to reconnect with nature. Having a second home property in a popular location will always help to save a lot of money on expensive hotels and resorts.

Fractional Real Estate Can Further Give a Boost to Second Home

One of the optimal ways to invest in the second home segment could be via the fractional route. If someone wants to invest in a high-income generating asset but has limited resources at their disposal, fractional can be a suitable medium to invest. As the name suggests, an investor owns a fraction of the property, following the investment made. The ownership of the property is proportional to the investments made.

Under fraction even with a limited bandwidth of INR 10 lacs, one can invest in a promising asset and make greater returns. Via the fractional route, one can invest in farmhouses, rental villas, nature resorts, and other second-home asset categories. It is a relatively safe & secure way of making elevated yield and appreciation. Besides recurrent rental income, one can also earn from selling the asset, provided a majority of investors agree to do so.

The Fractional real estate is in its initial phases and the market is pegged at around 4,000 crores. However, the market is set to grow enormously in the foreseeable future. In a time, when there is renewed interest in commercial assets, fractional properties can become one of the go-to approach to invest in.