Vacation Rental Homes in India have witnessed significant traction in the last 3 years. The product from being a mere lifestyle product is now one of the most sought-after investment products. In India, key tourist destinations of Goa, Alibaug, Shimla, Kasauli, Rishikesh are witnessing development of vacation rental homes.
Of the preferred locations in India, Goa is the most preferred destination for investment in a vacation rental homes in India. Early developments of vacation rental homes were around Candolim & Calangute areas on account of its proximity to Panjim and the Dabolim International Airport. The areas around Mormugao and Sancoale (in proximity to Dabolim airport) have witnessed the launch of significant apartment projects. Post the year 2015, areas around Assagaon gained prominence due to availability of suitable lands and proximity to the Manohar International Airport at Mopa. As an extension to Assagao, the areas around Mandrem, Siolim, Moira, and Anjuna gained traction for development of vacation rental homes.
Goa is among the most preferred destinations for investment in a vacation rental homes on account of the following reasons:
Goa is well connected to major cities of India through air and road. Goa International Airport at Dabolim, 8th busiest airport of India was the only airport serving the state. With Manohar International Airport commencing operations at Mopa in North Goa, the state has now two operational airports connecting not only tier I but many tier II cities of India.
2. Established Tourist Destination:
Goa popularly known for its sandy beaches has been one of the most preferred tourist destinations for Indians and foreigners. The state attracts close to 70 Lakh tourists annually, with nearly 95% of tourists being domestic travelers.
Tourism in the state has steadily grown at an average rate of 8% per annum. The state is popular for destination weddings, corporate events, leisure trips by solo travelers and groups as well as popular for health and wellness.
3. Evolving product type and emergence of short-term vacation rental companies:
Early development of a vacation home in Goa was largely restricted for celebrities or CEOs and CFOs of business houses wherein local developers would source land and build luxurious exclusive residences. Today, the Goa market has significant developers focusing on vacation rental homes – Isprava, Sun Estates, Vianaar Developers, Acron Developers, and Ashray Homes to name a few.
Vacation rental home as a product type has evolved significantly from being a stand-alone unit to a community of villas. The villas are designed anchored around a theme and are fully furnished units with an option of having whitegoods.
Most of the developers have an operating rental arm company (owned or exclusive tie-up). The vacation rental companies provide seamless management to the property owners – property maintenance and housekeeping, rental management, and client management.
4. Expanding Target Audience:
HNI and UHNIs in India have grown at an average growth rate of 12% since 2013 and this cohort is expected to continue its growth trajectory in the coming 3 – 5 years. Investments in vacation rental homes in Goa were preferred by residents of Delhi NCR and Mumbai. Since 2021, the target audience has expanded and now includes residents of Hyderabad, Bengaluru, Pune, Kanpur, and Lucknow.
5. Returns on investment:
Vacation rental homes offer a return on investment in the range of 10% - 14% per annum. Between 2020 -2023, capital values of villas have witnessed growth in the range of 5% - 7% per annum; however, we expect this to stabilize in the coming 1 – 3 years horizon and the growth in Capital Values is likely to be between 3% - 5% per annum.
Vacation rental properties in Goa witness an occupancy upwards of 200 days in a year and net rental yield from an investment in vacation rental home varies between 4% - 6%.
Vacation rental home product is an alternative to a traditional leased office space. It is a lifestyle product that allows the owner to stay at the property (for a pre-agreed duration) as well as enjoy the returns on investment. Of all the tourist locations, Goa will continue to remain one of the most preferred locations and with Manohar International Airport being operational, the tourist activity in the state is expected to strengthen further.
Read our detailed report on Handbook for Vacation Homes and Holiday Homes Business in India
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