There is no doubt in the
fact that Indian real estate sector has been going through a tough face for
last few years. However, there was a segment which showed signs of improvement
with price correction in the top 8 cities in India. And this segment was second
home market. The trend of buying second home and vacation homes saw an upswing
in H1 2016. But suddenly something happened in the country which shook complete
realty market. It was announcement of Demonetisation of high denomination notes
in India.
Effect of demonetization
After announcement of
demonetization, almost the entire real estate sector came to a standstill.
Sales volume of units came down by 9% in 2016 making it the worst year for real
estate developers and agents in terms of sales. In the last quarter of 2016,
sale of projects plunged by 44 percent (year on year) while launch of new
projects got down by 61%. Even the top real estate projects couldn’t
manage to sell new units.
Thankfully, sale of new
projects by top and ‘A’ grade developers has again got on the right track. But
what about the second home market? Let’s have a look at how it functions and
how it got affected from demonetization.
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What contributes in
demand of the second home?
Second home market is
generally driven by the property investors who look for rental income. Apart
from them, people looking for family gateway to get relief from everyday life
of city also buy second home. With limited availability of cash, the demand for
second home also reduced. Only buyers with legal income and desire to follow
complete legal buying process are interested in buying second home. But these
buyers are also holding back their decision to invest in another home as they
are waiting for the prices to go down due to decreased demand. Due to this even
the best
real estate websites in India are also experiencing a reduced
traffic of homebuyers.
Future expectations
Though the market
noticed a slowdown shortly, demonetization has offered more benefits than
losses. It resulted in price correction in both the primary and secondary
market. Around 10-15% price correction has already taken place and experts say
this it still has more potential to improve.
Further, implementation
of RERA will also contribute in growth of second home real estate market.
Buyers have already started coming back to India property sites to find the best project for
investment. All in all, an increase in demand and supply for affordable housing
is expected in near future. If you are planning to buy a second home to earn
more income or to get capital gains, the market is still suitable to enter.
