Tourist destinations are a new-age choice of real estate investors. Along with the potential to yield healthy rentals, homes in places driven by the tourism industry also serve as holiday homes. With many such locations in India being on the hills, it is essential that property buyers do the due diligence before investing.

Rising disposable income and the need to get a break from the fast-paced city life has opened up new avenues for real estate investment in tourist destinations. Over the years, demand for properties in such locations has been on a rise with several young professionals, entrepreneurs and self-employed professionals such as lawyers, doctors and businessmen looking to own a second home there. Among notable locations, properties situated in hill stations such as Lonavala, Shimla, Kasauli, Darjeeling and Mahabaleshwar are on top of the popularity charts of investors.

While the growth prospects of investing in a property situated in hills are robust, one should always take caution before taking the plunge.

Here are some handy tips that investors should keep in mind before investing in such property:

Easily accessible location

While properties in tourist destinations are primarily seen as holiday homes, investors often prefer destinations that are easily accessible and are close to metro cities or their first home locations. In addition to this, civic infrastructure and connectivity are some of the other factors that potential investors should look out for before investing in such properties. For instance, Lonavala and Khandala in the west, Darjeeling in east, and Shimla and Dehradun in the north have emerged as popular tourist destinations for real estate investment in India.

One of the major factors driving Lonavala’s real estate market is its strategic location close to both Mumbai and Pune. Besides, the presence of well-developed infrastructure, proximity to nearby towns such as Khopoli, Karjat and Talegaon, and connectivity through the Mumbai-Pune Expressway and the Mumbai-Chennai Highway have triggered real estate growth in the region.

Do due-diligence before purchasing

Before investing in a property situated in a tourist destination, homebuyers and investors should do proper due diligence. They should ascertain that the property has all necessary permissions and clearances and gets sufficient resale value if need be. Also, since the property is situated in an unfamiliar region, investors should inquire about the local property rates to check if the price quoted by the builder is right or not.

For instance, plots measuring 100 sq yard are available for as low as Rs 5 lakh in Dehradun. However, investors looking to invest in such plots should exercise caution and make sure whether the property in question has a clear title and is being marketed by renowned developers. Also, the land should be demarcated appropriately with fence and must have basic infrastructure such as electricity and water supply.

Growth prospects

Investors looking to park their excess funds in tourist destinations, particularly in hill properties should also consider the growth prospects of the region. While the returns on investment in such properties are generally good, property prices also tend to fall in certain localities. Hill stations such as Lonavala, where basic amenities and social infrastructure is already in place, will have bright prospects compared to a newly emerging tourist destination. Lonavala offers a wide array of options to its residents including bunglows, row-houses, individual villas and flats.

According to Pankaj Kale from Lonavala-based Pankaj Reality, “Lonavala’s property market is driven by second homebuyers from Mumbai region looking to own a property in a peaceful location. Majority of demand is for bunglows, villas and row houses and their prices depend on the exact location, the view it offers and the area of the property.” Moreover, the area has been able to witness healthy price appreciation of about 20-30 percent in the last four to five years. Similarly, Khandala, another hill station in proximity to Lonavala offers premium properties. It is highly popular among renowned Bollywood celebrities since most of them own a vacation home here.

As of date, an individual can own a 4BHK independent house measuring 3,200 sq ft in Lonavala at a price of Rs 2.5 crore. Besides, capital appreciation of hill properties also depends on how a particular hill station fares on the popularity charts of the tourists.

Check if there is any restriction

It is also important to check whether there is any restriction on a non-resident of the State for purchasing a property in a tourist destination. For instance, non-residents cannot own a property in Jammu and Kashmir, whereas non-natives of Himachal Pradesh have to seek permission from the State government for purchasing land. Similarly, outsiders looking to invest in a piece of land in Uttarakhand cannot purchase more than a 250 sq m plot. They need to seek permission from the government in case they wish to buy a bigger land parcel. In Meghalaya, transfer of land is controlled by the government. A tribal of the State is not allowed to transfer land or property to non-tribals, except in certain areas in and around Shillong.