Investing in a second home in India is an exciting opportunity for many, whether for personal use, rental income, or long-term appreciation. However, the process requires careful planning, from analysing market trends to obtaining the right financing. As the Indian real estate market continues to evolve, financing options such as home loans have become crucial in turning this aspiration into reality.

This article breaks down the key aspects of purchasing a second home in India to help you navigate the process smoothly.

Understanding the Indian Real Estate Market

The Indian real estate market is diverse, with urban hubs like Mumbai, Delhi, and Bangalore offering premium properties, while tier-2 cities like Jaipur, Coimbatore, and Lucknow provide affordable yet promising options. Demand for a second home in India has surged due to rising disposable incomes, remote work trends, and a growing preference for vacation homes or rental properties.

However, market dynamics vary by region – metros promise higher appreciation but come with steep prices, while smaller cities offer value for money and steady growth. Before investing, it is crucial to research market trends, property appreciation rates, infrastructure developments, and local demand factors to make an informed decision.

Financing Options

Securing the right financing is a crucial aspect of buying a second home in India.

Most lending institutions offer tailored home loans, typically covering 70% to 90%* of the property value, depending on factors such as your income, credit score, and existing liabilities.

Another financing option is a Loan Against Property (LAP), which allows you to leverage an existing property – whether residential or commercial – to secure funds. This can provide access to a substantial loan amount with relatively lower interest rates compared to unsecured loans.

Using personal savings to cover down payments or the full purchase price is also an option if you want to save on long-term interest costs. However, it is crucial to ensure that this does not deplete your emergency funds or disrupt financial stability.

Legal and Tax Considerations

When purchasing a second home in India, it's essential to ensure the property complies with all local regulations, including land use norms, construction standards, and necessary clearances.

Following the Union Budget 2025, homeowners can now designate two properties as self-occupied , exempting them from taxes on notional rental income for the second home. This change eases tax obligations and lightens the financial load for property owners.

If you lease out your second property, the rental earnings are fully taxable under “Income from House Property.” However, you can offset this by claiming deductions for costs such as home loan interest.

You can deduct up to INR 2 lakhs per year on home loan interest under Section 24(b) of the Income Tax Act (under the New Tax Regime), providing significant tax relief.

Cost Considerations Beyond Purchase Price

The cost of buying a second home in India extends beyond the property’s sticker price. It is important to factor in stamp duty (which varies by state and typically ranges between 5% to 7% of the property value) and registration fees (around 1%). Maintenance charges are another key expense, particularly for properties in gated communities.

If you plan to rent out the property, account for property management fees and occasional repairs.

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Associated home loan costs, such as processing fees and documentation charges, also add up.

Budgeting for these expenses upfront ensures that your second home purchase aligns with your financial goals and long-term investment strategy.

Future Value and Exit Strategy

A second home in India can be a lucrative investment if chosen wisely. Properties in emerging areas with planned infrastructure developments – like metro lines or highways – often see significant appreciation.

Additionally, rental yields can provide a steady stream of income, while vacation hotspots like Goa or hill stations offer seasonal returns.

When considering an exit strategy, you could sell at peak market value or retain the property as a legacy asset for future generations. Analyse historical price trends and consult real estate experts to gauge future value before committing to a second home purchase.

Navigating the Purchase Process

The journey of buying a second home in India follows a structured path:

• Define Your Purpose: Decide whether the property is for personal use, rental income, or investment.
• Set a Budget: Account for the purchase price, taxes, home loan costs, maintenance fees, and other ongoing expenses.
• Research Locations: Shortlist areas based on growth potential and lifestyle preferences.
• Property Selection: Visit shortlisted properties and verify legal documents, including title deeds, encumbrance certificates, and necessary approvals.
• Secure Financing: Apply for a home loan, ensuring you meet the lender’s eligibility criteria. Submit the required documents, including income proof, property details, and KYC information.
• Finalise the Deal: Pay the down payment, sign the sale agreement, and register the property with the relevant authority.
• Loan Repayment: Repay the home loan through Equated Monthly Instalments (EMIs) over the agreed tenure.

Location-Specific Research

Location is key when investing in a second home in India. Assess factors such as local demand, connectivity, infrastructure, and upcoming developments – including smart city projects, metro extensions, or new airports – that could drive future property appreciation.

Investing in a location that aligns with both market trends and your personal goals can make your second home purchase significantly more rewarding.

Conclusion

Buying a second home in India is more than just a lifestyle upgrade – it can be a smart financial decision when backed by the right planning and financing.

SMFG Grihashakti supports your ambitions with home loans of up to INR 1 crore* or up to 90%* of the property’s value. Our competitive interest rates and flexible tenures of up to 30 years* help keep EMIs manageable. Estimate your monthly payments using our home loan EMI calculator and apply online today!