Second Home Investment in India: The Yield Nobody Prints in the Brochure
A villa in North Goa at Rs 1.5 crore, let through a managed programme, realistically nets its owner somewhere between Rs 4 lakh and Rs 6 lakh a year before tax. That is 2.5% to 4% on capital, in a year when a fixed deposit pays more and demands nothing of you. Anyone selling you a second home on the arithmetic of Rs 12,000 a night times 365 is selling you a hotel, and you are not buying a hotel.
None of which makes it a bad purchase. It makes it a lifestyle purchase that pays for part of itself, and the difference between those two framings is what decides whether you are happy with it in year four.
Key takeaways
- Indian leisure short-lets run 30% to 50% occupancy year-round — roughly 110 to 180 nights — with prime North Goa stabilising nearer 60%.
- Managed programmes keep 15% to 25% of revenue, and 20% to 40% when they run housekeeping, guest services and listings end to end.
- Fixed costs of Rs 1.5 lakh to Rs 3 lakh a year continue whether or not a single guest checks in.
- Two self-occupied houses can now be valued at nil from assessment year 2025-26, with combined interest deduction capped at Rs 2 lakh.
- Uttarakhand bars outside buyers from agricultural and horticultural land in 11 of 13 districts; Himachal requires state permission under Section 118.
What it really earns
Start with nights, not nightly rates. Indian leisure short-lets realistically run 30% to 50% occupancy across a full year, spiking in season and collapsing off it. Well-run properties in prime North Goa locations stabilise around 60% to 65%. Hill destinations are worse, because a Kasauli or Mukteshwar cottage sells December, May-June and a handful of long weekends, and sells almost nothing in July or February.
Then subtract your own use. Three weeks a year for yourself and a fortnight lent to family removes 35 nights from the lettable calendar, usually the best 35, because you go when the weather is good and so does everyone else.
The realistic profit and loss
| Line | Amount |
|---|---|
| Nights let (40% of 350 available) | 140 |
| Average realised nightly rate | Rs 9,000 |
| Gross revenue | Rs 12,60,000 |
| Management and platform share at 25% | (Rs 3,15,000) |
| Housekeeping, linen, consumables, utilities, pool and garden | (Rs 3,00,000) |
| Estate maintenance, property tax, insurance, internet | (Rs 1,20,000) |
| Net before tax | Rs 5,25,000 |
| Return on Rs 1.5 crore | 3.5% |
At a 30% marginal rate that is closer to Rs 3.7 lakh, or about 2.5%. And this is the good version — a well-located, well-photographed property with a competent operator, in a year with no monsoon damage and no six-week gap while you replace the air conditioners.
What the managed programme actually keeps
Read the contract for three things.
- The base. Is the share taken on gross booking value or on net of platform commission? Fifteen percent of gross after an 18% OTA fee is a very different number from 15% of net.
- What sits outside the share. Linen, consumables, minor repairs, deep cleaning and utilities are usually charged to the owner on top of the management cut, not out of it.
- The guarantee. Assured-return second-home programmes exist and some have paid for years. They are still an unsecured promise from a developer, priced into a purchase rate that is typically 10% to 20% above the same specification without a scheme. If the operator stops paying, you own an illiquid villa in a resort you cannot manage yourself.
The costs that never stop
| Item | Typical annual cost |
|---|---|
| Estate or society maintenance | Rs 60,000 to Rs 1,20,000 |
| Municipal property tax | Rs 15,000 to Rs 40,000 |
| Caretaker or watchman | Rs 96,000 to Rs 1,80,000 |
| Insurance | Rs 12,000 to Rs 25,000 |
| Minimum utilities and connectivity | Rs 24,000 to Rs 48,000 |
| Repairs, repainting, monsoon and pest work | Rs 50,000 to Rs 1,50,000 |
An empty hill house deteriorates faster than an occupied one. Damp, termites, rodents and a garden that becomes a jungle in one monsoon are the real depreciation, and they are the reason a caretaker is not optional. Farm and orchard properties add their own labour bill — our page on farmhouses in Naugaon gives a sense of what that segment costs to hold.
The tax position
Budget 2025 fixed the most irritating part of second-home ownership. From assessment year 2025-26, the annual value of up to two self-occupied houses is taken as nil, and the old conditions in Section 23(2) — that you could not occupy the second house because your work kept you elsewhere — are gone. Two houses had been allowed since assessment year 2020-21, but only on those conditions, and a third house is still taxed on notional rent whether or not anyone stays in it.
The limits that remain:
- Interest deduction on those two self-occupied houses is capped at Rs 2 lakh combined, not Rs 2 lakh each.
- If you let it out, you are taxed on actual rent less municipal taxes, less a 30% standard deduction under Section 24(a), less full interest paid.
- Loss under house property can be set off against other income only up to Rs 2 lakh a year, with the balance carried forward eight years.
- Under the new tax regime, which is now the default, interest on a self-occupied house is not deductible at all and house-property loss cannot be set off against other heads. Many second-home tax pitches quietly assume the old regime.
If ownership is split with a spouse, the deduction and the rental income split with it, and the split follows who actually funded the purchase, not whose name went on the deed — see what registering in a spouse's name does and does not do. The deduction limits themselves are set out in our note on home loan tax benefits.
Where you are simply not allowed to buy
| State | Restriction |
|---|---|
| Himachal Pradesh | Section 118, Tenancy and Land Reforms Act 1972 — a non-agriculturist needs prior state government permission to buy land |
| Uttarakhand | 2025 amendment bars outside buyers from agricultural and horticultural land in 11 of 13 districts; Haridwar and Udham Singh Nagar are outside the restriction. Residential purchase up to 250 sq m is still permitted |
| Sikkim | Land transfer is restricted to holders of a Sikkim Subject certificate under Article 371F protections |
| Goa | No bar on Indian citizens, but agricultural land needs conversion and coastal plots sit under CRZ rules |
The practical consequence in Himachal and Uttarakhand is that a large share of what is marketed to outside buyers is either apartment or approved-colony product, or is agricultural land sold through arrangements that do not survive scrutiny. Power of attorney sales, "agreement to sell with possession", and purchases in a local associate's name are all common and all end badly. The rules on farm and orchard land are set out in our guide to agricultural land buying rules in India, and they apply with full force in the hills.
Where the format works, it works because the project is legally clean and professionally run — the developer-built hill villa route, as at Terra Grande in Kasauli and Rishikesh, exists precisely because individual plot purchase in those states is so constrained.
Resale, and why it takes a year
Second-home markets are thin in both directions. There are few buyers at any moment, few comparable transactions to price against, and almost no distress-free urgency on the other side. Expect 12 to 24 months to sell a hill or beach property at a price you are content with, and a 15% to 25% discount if you need it gone in three months.
Location does most of the work here. A villa within 30 minutes of Goa's airport, on a titled non-agricultural plot with a clear sanad, sells. The same construction 90 minutes inland does not. Before you commit, look at what is trading and at what price in the specific belt — our overviews of the northern hills of Goa and the wider Goa property market are a starting point.
The honest framing
Buy a second home if you will use it eight weeks a year, if the purchase does not stretch you, and if you would still want it at zero rental income. Rental revenue then becomes a partial subsidy on a thing you wanted anyway, which is a reasonable place to be. Buy it as an investment and you are accepting a 2.5% net yield, illiquidity, management overhead and state-level legal risk, for an appreciation story that in most Indian hill and beach markets has been driven by land scarcity rather than by rental economics.
FAQ
How many days a year will a holiday home actually get booked?
Plan on 110 to 180 nights. Prime North Goa with a professional operator can reach 200 to 230. Hill properties with a short season often fall below 100.
Is a second home taxed on notional rent in India?
Not any more, for up to two self-occupied houses, from assessment year 2025-26. A third house, or a house you have let out, is taxed on its annual value or actual rent respectively.
Can I buy land in Himachal Pradesh if I live in Delhi?
Only with prior permission from the state government under Section 118, and permissions are granted selectively and usually for a specified purpose. Buying an apartment in an approved project is the straightforward route.
Are assured-return second-home schemes safe?
They are a promise from the developer, not a secured return, and the assured payout is usually funded out of an inflated purchase price. Price the property against comparable stock without a scheme before you value the guarantee at anything.
If you are weighing one
Work out the number of nights you will personally use it, then decide whether the remaining maths still holds. If you would like a specific property run through the occupancy, cost and tax picture before you commit, send us the details and we will go through it line by line.
