With the increase in the quota of upper middle class people in our country, the new friend in the real estate bandwagon is the Holiday homes. Although this phrase might seem too classy initially and might prompt you to acquire one as well, but here are somethings that you might want to know.
Well, its a fact that most of us would love to own a house outside the city, far away from the hustle and bustle of the city, pollution and noise. Own a house that is different from the jail size apartments that the cities offer. I would love one such, atleast dream of it. But these kind of properties are best suited for those class people who have deep pockets, for whom the rising interest rates or monetary policies do not seem to affect much. But this housing segment is fast catching up according to the reports of Cushman and Wakefield.
Uday Dharmadhikari , CEO, Usha Breco Realty , adds, “The growing middle class, especially the younger generation, looks for a break from their work. Due to the cost of travel and other factors, they prefer to own a holiday home”. But before making any hasty conclusions which could cost huge deal, here are some things that you need to carefully understand and ponder into.
Should you go for it?
If you have a surplus in investments and do not have any legal settlements, then this kind of investment will, hopefully, treat you fine. But if you do not have your own house and are planning to first go for a Holiday home then, it is a bad idea. If in case you are looking for home due to family expansions, go for a second house and not a holiday home as it can cost you in future.
Selecting the right location :
Also, when you are trying to locate your dream holiday home, make sure that it is not completely on the outskirts of the city, keeping you away from the basic facilities like hospitals, malls and even your work place. See to that the distance is not far from your home in order to provide for constant checks on your new property. Ensure that you have the facilities to various recreational and sporting activities as well. Choose the location that has potential for growth in future which is possible by analyzing if there any infra structural developments called on by the government in the near future.
As a source of income :
“Your holiday home will be a good investment if you have bought it in a location where greater appreciation is likely,” says Uday Dharmadhikari , CEO, Usha Breco Realty. You are more likely to earn income on your holiday home if its in a location that is preferred by all. That a best way to avoid your holiday home to be vacant for a long period of time and the income arising can be directed to finance off the maintenance costs arising from keeping them.
Tax policy :
Just because is a holiday home, do not expect to get a vacation off your tax payment. If you have not rented out your second house property i.e. the holiday home, then the income received from such a property, will be in the hands of the joint owner according to the ownership ratio under the Income Tax Act, 1961 (Act). Also, if the joint owners take a loan for repair or construction of such a holiday home then the interest for the year on the home loan is a part of tax deductions. Selling your holiday home within 3 years of purchase, any capital gains( excess of sale price on the cost price) arising from such a sale will be taxable as short-term capital gains as per individual slab rates. If you sell your holiday home after 3 years of purchase then the capital gain which arise form such a transaction will be taxable as a long term capital gain at the rate of 20%.
The downside
I know it does sound exciting to have a home away from home, but its not all that bed of roses. It is not easy to maintain a holiday home and even very difficult to sell it mainly because, holiday homes are not a property set that is required by all. It is aspired only by a few people who have excess of investment options. And moreover selling such homes would lead to maximizing the time required to dispose off such property since the demand is not the same as that of renting houses in the cities.