Real Estate: One Good Retirement Savings Option

Bangalore: Property is tangible assets and investing fetches good return on investment. Most of the people invest in real estate to keep as a savings option after retirement.  Over the past, it has been observed that the real estate market has managed to sustain even in volatile economic situation. So, many investors feel the market is one safe place to park their earnings which they can use as savings for future.

Considering the retirement savings option, investing on property can be can be smart move to retain the income even after retirement. Housing shortage in India can be one good reason to invest for your retirement saving, for instance, if you rent out your house it will fetch good capital amidst inflation as renting property can help you in long run because after a certain point of time you can avail over two things, firstly the price appreciation of the property increases and secondly rental value gradually increases benefitting you even during the time of inflation or volatile market situation. Other than that the favourable demographics of the country and the friendly tax system where buyers can easily avail home loans.

Property can be used in many ways, for instance, if your rental income is good enough and the loan taken is also paid off then you can use the rent as pension plan and if the rental income is unsatisfactory then you can use the alternative option to sell the property and gain cash.

However, a large segment of people can not avail this option because of high property prices. This option is only fruitful for those sections with enough savings and good income. Moreover, the sluggish economy and decline in share market price aroused tension and gloomy atmosphere among investors, but there is a continuous support for real estate as a retirement tool, from financial planner.

According to a certified financial planner, Pankaj Mathpal, "For those who don't yet own a home, buying a house has to be a top priority. But even for homeowners in a high tax bracket, there are a number of factors such as tax savings, capital appreciation and cash flow that would tempt them to definitely look at a second home," reports Economic Times.

According to Brigitte Miska, head of international pensions with German insurer Allianz, who conducted a study on the preparedness of various countries to look after retired citizens, stated that the large part of demand for housing comes from young couples. She also added that "The elderly live in small cities and villages while the young move to larger cities. As a result demand for houses in smaller cities shrinks. We are already seeing that in the West," reports ET.

On this note, Keki Mistry, vice chairman and CEO, HDFC, stated that "Unless there is a dramatic increase in supply, I do not see demand coming down because we have a sizeable young population adding to the demand,"

Arnav Pandya, a certified financial planner said that "If you have a second house in which you do not live in the notional rent that you could earn from is taxable. What most people do is to take a housing loan and rent out the place." He further stated that "If the borrower is earning a rent income and simultaneously paying interest on a home loan, the rental income can be set off against the interest expenditure.”