Buying a second home in Uttarakhand: Pros and cons

An increasing number of aspirational second home buyers, are now investing in vacation home destinations in hill stations, owing to the picturesque location, booming hospitality industry and concept of home stays and wellness that such regions offer. One such state, Uttarakhand and its cities, including parts of Dehradun, Haridwar, Rishikesh and Mussoorie, have been favourite investment destinations among investors and buyers from across the country. Some other cities such as Nainital, Rudrapur and Chamoli, are also on the radar of many home buyers looking for a second home.

Recently, the Uttarakhand government increased the circle rates of land in the state. The circle rates of agricultural, non-agricultural and commercial land have been hiked by 15%.

Buying a property in Uttarakhand needs an in-depth understanding of the market. Here is a closer look at some of the factors that one should consider, before buying.

Check out properties for sale in Dehradun

Advantages of buying a second home in Uttaranchal

1. State regulations favour buying

Uttarakhand is open to investments from people from other states. The government has clearly spelled out the buying restrictions, for people residing outside the state. There is no restriction on the size of the property/plot, if one is buying within the municipal limits of the cities. However, as per the rules, a person can buy only 250 sq metres of agricultural land falling outside city area. This also means that two or three people of the same family can buy co-joined or distant, separate 250 sq metre land parcels. However, if the agricultural land is within city limits, one has to comply with the Land Ceiling Act of the state.

2. Multiple options for prospective buyers

Properties are available across categories – from apartments and villas, to plots and agricultural land. While some of the high priced locations across the state’s capital Dehradun and the tourist destination of Mussoorie offer small-sized two-bedroom apartments in the range of Rs 6,000-6,500 per sq ft, plots are also available in the range of Rs 30,000-35,000 per sq yard. A villa or a plotted development, will be priced from Rs 50 lakhs to as high as Rs 10-12 crores.

“The entire region has developed as a residential-cum-vacation destination, with options for all kinds of buyers. New-age buyers who can spend on a second home with their high disposable incomes, are particularly attracted to this region,” says Pranav Sahini, a Mussoorie-based real estate broker.

See also: Weekend homes: Does luxury rule the roost or affordability?

3. Steady appreciation in property rates

Developing and established areas have seen a steady appreciation in property prices across categories, except land. Delhi-based resident KK Gaur, who invested in a plotted development on Sahastradhara Road, in Dehradun, says, “I have witnessed an appreciation of more than three times, over the past two to three years.” According to brokers in the region, property rates in Mussoorie have seen the biggest jump over the past two years, due to the rise of the hospitality and tourism industries.

4. Freehold properties

All plotted developments across the state are sold as freehold properties, where mutation and transfer of the property is easy, with the necessary paperwork, informs Sahini. This makes fresh registrations of properties easier for new buyers.

5. Leasehold model becoming popular

With several hospitality chains entering the market, room rents have also gone up significantly. Thus, a number of second home buyers and investors, now look at these residences as a source of rental income. “The concept of Airbnb-like home stays, have now become popular in Mussoorie and other cities,” explains broker, Govind Negi.

Disadvantages of buying a property in Uttaranchal

1. High property prices in important regions

Most strategically located properties across the hills in Uttarakhand, come at a premium. Moreover, there is a significant difference between ready-to-move-in apartments and under-construction ones. Prices also vary significantly across different regions. While a typical homestay in Mussoorie will come for Rs 3,000 per night, a similar home stay in other remote locations may be available for as low as Rs 1,000 per night.

2. Not enough new properties

Uttarakhand is gaining popularity among investors and vacation home buyers from the nearby cities of Chandigarh, Delhi, Jaipur, Lucknow, etc., who are keen on making investments here for self-use and even for earning rentals. This has made the real estate market here very competitive. In fact, the market is unable to keep up with this demand for new properties, especially in important regions. The lack of supply of new properties is heating up the market for land owners, pushing prices further up. This is the reason most of the second home buyers invest in old properties that require a complete makeover and hence, additional funds.

3. High maintenance and upkeep requirements

If you are planning to use your second home for self-use, chances are high that you would not use it for more than 45 days in a year. For this, you would be spending at least Rs 3 lakhs annually, for hiring a caretaker staff and maintaining the property. If you plan to rent it out to short-term vacation rental companies, you will be highly dependent on the ratings that you receive from your guests, since the entire experience will be based on the services provided by your caretaker. Keeping all the calculations in consideration, you would be spending a lot more than you earn through this property, unless you plan to shift in to your second home permanently.

What should buyers do?

There have been several cases of fraud, where unsuspecting buyers have been duped of their money, on the false pretext of an upcoming project. Many such companies in the region, have also been booked by the Enforcement Directorate for fraudulent practices. Hence, buyers need to be careful while looking for under-construction properties.

It is safer to invest in completed projects or resale properties. Also, invest only if you intend to visit the place often or if you have some business in the region. A property in Uttarakhand, with the potential for healthy rental income could be a good investment option for prospective buyers, at the prevalent property rates.

Popular home-buying destinations in Uttarakhand

A number of hill stations have come up, as second home destinations for city-dwellers. Some of these are popular, because of the scenic view they offer and availability of land:

• Ramnagar (Jim Corbett National Park)
• Binsar
• Ranikhet
• Dehradun
• Mussoorie
• Almora
• Nainital

Things to know before investing in Uttarakhand

• In Uttarakhand, land is measured in ‘Nali’. One Nali is equivalent to 2,160 sq ft.
• An investor can buy only 1.25 Nali (2,700 sq ft) of residential land on one PAN card.
• A lot of land in Uttarakhand, which is available for sale, has not been measured officially. So, investors should guard against scams. You have to get the plot measured in the presence of the government officer. Make sure the owners of the neighbouring plot are also present at the site, during the measurement of the land.
• A plot with a view of the Himalayas carries a premium price tag and is often preferred, if you are planning to build a cottage or holiday home.
• There is severe water scarcity in Uttarakhand. Since house construction requires a lot of water, you need to check if the government water connection is available in the area. Locals usually rely on natural water resources, which are seasonal. At various locations, the state government has banned borewells. There are many places in the state that still do not have a regular local body water supply. Check, before you purchase the land.
• Uttarakhand is prone to natural calamities. Therefore buyers should opt for comprehensive home insurance when buying a property here. On February 7, 2021, a glacier burst at Joshimath in Uttarakhand’s Chamoli district, leading to an avalanche and massive flooding along the Alaknanda and Dhauliganga rivers, damaging life and property. If you are planning to buy an apartment, opt for a variant that offers ‘agreed value’ as you will be owning only a part of the structure. If you are opting for an independent house, opt for the variant that pays for the property’s construction.

How to make your second home a profitable investment?

If you are buying a second home property in Uttarakhand, with the intention of using it as a vacation home, you can still earn a regular income through it by offering it for short-term rentals. Various aggregators, such as Airbnb, Vista Room and various other small players, are active in this space who can offer you consistent money by listing your property on their portal where people planning holidays search for accommodations on a short-term basis. However, you need to be cautious when letting out your property through these third-party platforms, as the security and the upkeep of the property has to be taken care of by the owner and you have to be virtually available for addressing the queries of your guests.

Stamp duty in Uttarakhand

FAQs

(With inputs from Surbhi Gupta)