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Retirement and Second Home (RSH) market to reach $4 bn in 5 years: 360 Realtors

360-Realtors

As per the research by 360 Realtors, India’s Retirement and Second Home Market (RSH) is presently sized at USD 1394 million, jumping by over 88.6% in the past 2 years (before the pandemic). Though the RSH segment has been growing at a visible pace in the past 5-7 years, the pandemic gave a big thrust to the demand.

Amidst a growing WFH culture, corporate professionals, tech entrepreneurs, lawyers, doctors, and media people are looking to operate from second homes. While some are buying their home, others are opting for long-stay rentals. 

Ankit Kansal

In the next 5 years, the market is slated to reach a size of over USD 4 billion, growing at a staggering CAGR of 23.63%, the research by 360 Realtors further revealed.

To learn more about the growing RSH market in India, we had a chance to talk with Ankit Kansal (Founder & MD, 360 Realtors). Here are the key details of our interview with Kansal:

Q. What is the present condition of the Retirement and Second Homes (RSH) in India?

The RSH segment, which is also called the Holiday Homes in India, has been growing steadily in the past few years.

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Earlier Indian HNIs used to invest in second homes in the international market such as Singapore, Dubai, Europe, etc. Meanwhile, the indigenous market also started evolving. Hill stations in North India (Shimla, Solan, Dehradun, Mussoorie, etc.), Goa, Ooty, Nilgiris, Coorg, etc. started witnessing a steady rise in demand for a second home property.

Meanwhile, the pandemic further gave a big flip to the demand. The growing trend of work from home and work from anywhere culture is fuelling growth in the segment. On average RSH can give an annual capital appreciation to the tune of 5-12%, thereby piquing the interest of the investor class.

The RSH is also an attractive proposition in terms of rental income. The demand for long-stay rental is increasing in numerous markets such as Ooty, Goa, Shimla, Solan, Chail, etc. Developers and property owners are also making their proposition more attractive by clubbing new activities such as nature walk, adventure sports, eco-tourism, etc. There are also second home/holiday home properties with private pools, lawn areas, etc. which are further attracting the interest of tourists and long-stay professionals.

Q. What are some of the popular second home destinations in India?

In India, there are numerous upcoming second home destinations. In the North, hill stations in Uttrakhand and Himachal Pradesh such as Shimla, Chail, Solan, Hrishikesh, and Dehradun, among other scenic locales, are becoming popular RSH destinations. In the West, Goa is the very popular RSH market. As per the report by 360 Realtors, around 23% of the RSH market in India is concentrated in the coastal state. Lavasa and Lonavala, situated between the metro cities of Pune and Mumbai, are also receiving a strong buyer interest, especially from Mumbai and Pune source markets. In the South, Ooty and Coorg are prominent destinations that are attracting a lot of investors and buyer interest. Ooty is conveniently located close to major South Indian cities such as Hyderabad, Bangalore, and Chennai.

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Q In your report, you have also mentioned the growing significance of peripheral destinations transforming into the second home market. Can you throw some more light on it?

The trend wherein numerous peripheral locations are moving up the curve is also on a rise. Peripheral micro-markets situated close to nature are offering alternate destinations for city dwellers to live a peaceful and serene life. Many city dwellers are living a hybrid life, wherein they shuttle between their main home and the second home. They prefer to spend time in the latter during the weekend.

In MMR, Khargar is becoming popular amongst residents. The place has plenty of natural beauty alongside well-established social and physical infrastructure in the vicinity. Likewise, in Bangalore, the Bannerghatta region is becoming a popular destination for homebuyers and investors. There are plenty of green reserves & natural endowments in the region, and this is making it a major draw as a popular 2nd home destination.

Q. How should one assess the investment potential in second home markets in India?

There is no exact blueprint to evaluate the investment potential of the RSH sector. However, a few critical parameters can help us evaluate the gross attractiveness of a project. Firstly, one has to understand the appreciation potential of the project, which is generally the product of a few crucial factors, such as demand in the locality, proximity to the source markets, reachability of the location, and availability of basic amenities such as healthcare, grocery, recreational activities, etc.

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Similar to the appreciation potential, it is also important to scrutinize the rentability of the property as rental yields are essential in calculating the overall ROI of a holiday home property. Properties located in areas with a high footfall of tourists can give better rental yields. Similarly, better connectivity and the state of social amenities in the vicinity also make a property attractive for lease.

How do you think the RSH segment will evolve in India?

The RSH segment will continue to be one of the fastest-growing categories in the Indian real estate industry. In the next 5 years, the size of the Indian RSH industry will cross USD 4 billion, growing at a CAGR of 23.63%, as per research by 360 Realtors.

Currently, the market is unorganized. However, a host of big developers such as Tata, Kalpataru, and Prestige are entering the space, lured by the long-term potential in the segment. Increased structure and the growing concentration of large developers are good signs for the industry.

Likewise, the concept of RSH will also keep evolving at an unprecedented pace. Second homes or holiday homes would not just be about accommodation but also complementary offerings such as ecotourism, adventure sports, private lawns & pool areas, etc. Numerous hotels and resort properties will be rebranded and repackaged into second-home destinations. As the sectors are set to grow fast in the foreseeable future, institutional players and big investors will also enter the space.

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