The idea of owning a holiday home is gaining popularity in India. Most people prefer to invest in a second home, preferably in the hills or a beach and rent out these properties to tourists to earn additional income. Moreover, after the pandemic, the work-from-culture has led many people to seek housing options like homestays or rented accommodations in remote locations. Here are some useful tips if you are considering investing in a vacation home, whether you are simply looking to escape the city’s hustle-bustle or planning for investment.
What is a vacation home?
A vacation home is a property owned by someone besides their primary residence and is used mainly for recreation and relaxation. Usually, these properties are located in peripheral areas or neighbouring regions away from the city. Some people invest in vacation homes to earn rental income.
Plan your finances
One of the foremost things to do before investing in a second home is to ensure that you are financially ready. Buying a vacation home can be expensive. Thus, make sure you have set financial goals and are aligned with them. It is also beneficial to assess the returns on investment (ROI) if you plan to earn rental income through the property. Further, consider financing options like home loans or using existing investments.
Decide the location
Another crucial factor to consider when buying a vacation home is the location. Decide where you would want to own the house by taking into account climate, infrastructure and other factors. It can be wise to buy a property in proximity to your primary home, which can be reached in a few hours.
Research for properties
Start researching for properties by checking property listings online and checking reviews. Identify the preferred real estate destination for vacation homes. This will prove beneficial if you are planning to seek tenants when renting out the property. Many tier-2 and tier-3 cities, such as Mussoorie, Kasauli, Goa, Pondicherry, etc., have become sought-after destinations for second-home investments.
Seek professional advice
You can get professional help by approaching a real estate broker. You can get assistance for choosing the right property based on your preference and also for negotiating the price. Further, reach out to a financial advisor to understand the financial viability of the investment.
Understand tax implications
When investing in a second home, it is essential to consider the various tax implications, which are different from the primary property one owns. Make sure to know the stamp duty and registration charges in the state and the amount you will pay as annual property taxes. If the property is used for rental purposes, you will be eligible for tax benefits. According to Section 80C of the Income Tax Act, one is eligible for a tax benefit of up to Rs 2 lakh if one has availed a home loan to purchase the property.
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