Is buying a second home a lucrative investment?March 15, 2017

Is buying a second home a lucrative investment?

Owning real estate in India is not all about profits and investments, it’s also about an emotional bond for the owner. While owning a first home is a given for almost everyone, buying a second home is an investment that few go for; the question begs an answer, is it really worth it owning a second home?

Investing in real estate is considered a respectable and much sought-after pastime for the well-heeled Indians, a source of pride of sorts. Indians have so far been lucky as property rates have been on an upward swing for the past 50 years or so, with only mild fluctuations in between to flutter the heart rates. Buying a second home is still an option that Indians with money to spare, consider as realty rates are as upbeat as ever. Couple that with the fact that home builders are now incorporating numerous security and luxury factors into their apartments and the investors tongue can’t resist drooling!

Perhaps it wouldn’t be wise to invest in a second home in posh neighborhoods, but rather in upcoming neighborhoods. The suburbs of cities like Chandigarh, Vadodara, Jaipur, Ahmedabad, Pune, Nagpur, Bengaluru, Chennai, Coimbatore, Trivandrum and Delhi would make a good choice of investment.

The trend of investing in a second ‘holiday’ home is catching up with more couples opting for this rather than investing in gold and stock market; owning a chunk of land or property always seems more satisfying than holding onto some jewellery or a piece of paper indicating ownership of some stocks.

Real estate market has grown at the rate of 10-15% over the last 50 years or so. Aside from the property market, such an exponential growth is only possible in the equities and shares market; the latter are however very risky as the fluctuations in shares can be very drastic and lead to greater losses. In such a scenario, the home market is relatively safer.

Purchasing a second home also offers you tax benefits as 70% of the rent you collect on your second home can be adjusted against the interest you pay on your house loan, and is not taxable. And when you sell the house eventually, only the profit difference made on the sale is taxable, so gains all around.

If you are investing in jewellery or the stock market, all the money needed has to come from your pocket; when purchasing a second home on the other hand, up to 70-80% of the financing can be taken as a loan and paid over a certain period of time. In this way, you stay financially viable at any given point in time.

When investing in a second home and giving out for rent, you end up earning at least 3% of the cost through rent and at least 10% as price appreciation of the property annually, thus making investing in a second home a very lucrative investment indeed!

So buying a second home is recommendable for those who have surplus finances as buying a second home in India is not only about investment; it also has to do with social status within the society. The fact that our real estate market is a stable one makes for a great icing on the cake! So for once, you can have your cake and enjoy it too!



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