Seniors citizens looking to invest in property must examine all their options threadbare before closing the deal.
Narendra Kumar, a retired senior government official, now living in New Delhi, plans to use his sale proceeds of his house in Allahabad. While the laws of taxation prompt him to use the sale proceeds to book another property or buy capital bonds, not all seniors are as lucky as Kumar.
Often, due to pressing needs, buying property becomes a necessity. But they are often stuck and troubled buying a property, as investing in a property once you are over 60 can pose some risks and challenges.
Here is a list of some risks you may face and the possible ways to tackle them.
Risk of missing on the EMIs or possession: If you are investing in a property under construction or taking a mortgage, there is a chance of default on the EMI if you have limited savings and a limited source of income or a small pension.
With the amount of delays that projects under construction see, there is also a risk of not getting the property on time. In such a situation, you may end up paying higher interest from your hard-earned savings, even as you suffer from anxiety and tension in waiting for the possession of the property.
Ability to take home loan: Senior citizens planning to buy a property on a home loan have poor chances in getting that loan. “Their ability to get a loan is poor. Typically, banks will check the overall income of the entire family and would want to give the loan in conjunction with someone in the family who is still earning and has a good potential at income generation,” Harsh Roongta, a chartered accountant and investment advisor said.
Cost of holding and transference: There are a host of other challenges that seniors may face when they purchase property. A plethora of incidental costs like maintenance, repair, etc, go into a property. “If the senior citizen wishes to transfer the property to his daughter or son, the cost of transference is also high. Property transfer could be a tricky issue,” Rohit Shah, Founder and CEO of Getting You Rich, a financial planning services firm, says.
What are the options available to senior citizens?
List of some dos and don’ts: Research well and consult extensively before you buy: Buying property may not be the only option if you have limited savings and a limited source of income or are living on a small pension. Invest some time to understand the liabilities that you will incur in buying property. Purchasing second property may come with attached taxation.
There is a slight benefit on the interest to be deducted on rented property. In case you buy a second property which is deemed to be on rent, you can claim an interest deduction of Rs 3,00,000 against the normal limit of Rs 2,00,000.
Buy with a younger member of the family: “Buy in joint ownership with your child, who is young and earning. This way banks may easily fund a certain portion of the loan,” Roongta says. “Having a successor or a coowner or a nominee beforehand will save from additional cost of transfer,” Shah says.
Map your investment and avoid home loans if possible: Experts strongly advise against a bank loan in purchasing property if you are over 60. “They should not take any loan, as there is so much uncertainty,” Roongta says.
“It is advisable to assess the exposure of the buyer to real estate market. It should be balanced. Buy a property only if you have enough resources and, even then, do so if you have investments in other asset classes. Do not put all your resources and surplus funds into real estate alone,” Shah says.
Planning for less risky asset holding gives better anchorage in old age.
Investing in a good project that is nearing completion or ready for possession makes sense. Above all, a “will” often safeguards the interests of the elderly owners and saves them from transfer charges at a later stage. Save as much as you can for any unforeseen event.
Source-Times Property, The Times of India, Delhi/NCR