How will COVID-19 impact the second homes market?

[ecis2016.org] Will buyers and investors continue to invest in second homes, following the Coronavirus pandemic? We look at the scenario in this real estate segment, to answer this question

The Coronavirus pandemic may have altered investment patterns in the short-term. In the long-term, however, buyers and investors are likely to continue to invest in second homes, despite the impact of COVID-19.

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Reasons to invest in second homes during Coronavirus

Many people prefer to buy second homes by the beach or a second home for rental returns. Some may even buy a second home, to bequeath it to their heirs. However, the COVID-19 pandemic has led to more people planning on a second home purchase, for reasons other than the common ones.

Healthcare reasons to invest in second homes

One of the reasons why medical tourism gained popularity, is the fact that a few cities/states in the country were able to provide better healthcare facilities than others. For example, Vellore in Tamil Nadu still remains popular for treating a number of ailments. The All India Institute of Medical Sciences (AIIMS) in Delhi or Shankar Nethralaya in Tamil Nadu enjoy similar fame. Varun Mathew, who lives in Bhilai but often needs to take his 66-year-old father to Christian Medical College, Vellore, for frequent check-ups, is planning to invest in a 2BHK property around Vellore.

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“Being admitted in the hospital for a long tenure often results in very high expenses. If you are someone travelling for medical reasons, it may be better to invest in a property therein. This way, you are saving on travel costs and hospital costs plus the benefit of staying close to the hospital,” says Mathew.

Safety reasons to invest in second homes

Among Indian cities and states, Goa and Kerala were able to control the spread of COVID-19 to some extent, during the initial few months. Manoj Karipuzha, a Noida-based engineer, says that he was initially planning to buy a property in Noida but may consider one back in his native place in Kerala.

“We have a tharavadu veedu (ancestral home) in Pathanamthitta and we now plan to invest in a second home in Kerala. It may be safer to consider this than some other city, where I may be stranded in difficult times,” he says, adding that his father, Abraham Paulose, also concurs with his decision.

While wealthy Indians may prefer second homes in another city, those with limited budgets may prefer areas within a driving distance. The risk of community-living during pandemics has revealed the problems of the concept.

Second homes for quarantine

With the Coronavirus scare and the number of checks and preventive measures that it warrants, families that have a room and bathroom to spare, know its importance very well. Take for example, the case of 55-year-old Karthikeyan Arumugam. In 2019, he purchased a 3BHK unit in Ashok Nagar, his second home in Chennai, moving out from a 2BHK near Koyambedu which was not fit for a family of five. A medical professional, he developed symptoms of Coronavirus and was isolated in a room.

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“We could do that because we turned our guest room to a quarantine room,” says Arumugam’s wife Lakshmi, pointing out that had it not been for a bigger home and facilities, their 2BHK would have surely cost them.

Segment-wise investment in second homes

Affordable housing and second homes

While schemes like the Pradhan Mantri Awas Yojana (PMAY) may have opened up affordable housing options for India’s urban poor and mid-income families, this section may not see any significant rise in demand for housing. Vikas Bardai, a broker in west Delhi, says that while PMAY affordable homes will not see an uptick, because it is meant for such buyers who do not have any other property in their name, other affordable avenues too will see only a normal or less than regular demand. Nevertheless inquiries are still going up, he says.

Mid-segment housing and second homes

For those looking at properties in the range of Rs 50 lakhs – Rs 80 lakhs, conversions have slowly started getting better and almost close to pre-COVID-19 levels. Depending on each state’s success in containing the pandemic, real estate investment in this segment will be directly impacted.

Luxury housing and second homes

So far, the luxury segment contributed 3%-7% of the overall sales. It has always been the affordable and mid-segment housing that have driven the real estate sector. However, industry experts suggest that in the short-term, luxury housing may save the day. On condition of anonymity, a Cuffe Parade-based broker says that while it takes time to close sales, luxury home buyers are inquiring about properties, because they have the disposable income to do so. Inquiries are ‘higher than regular now’, he says, adding that this may vary from location to location. “In Mumbai, there are a higher number of HNIs, than in Delhi or the rest of India. So, the luxury investment pattern is different,” says the broker.

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