Can a senior citizen in India buy a home with a bank loan?
Well, of course, he can!
The upper age limit for a home loan has been capped by SBI at 70 years!
Should a senior citizen in India buy a home with a bank loan?
Well, that depends!
And the factors on which that depends, we shall be examining here.
CASH FLOWS
Generally speaking, cashflow streams turn weak or shrink in size in old age. In some cases, they may even dry up completely!
Only those who have been prudent enough to build robust and futuristic cashflow streams during their young and productive years have a financially stable and comfortable life in their sunset years.
Robust and futuristic cash flow streams could mean some or all of the following - regular payouts from profitably running well established businesses, periodic returns from investments in the form of interest, dividend, rent, annuity and pension.
And finally, royalties from patents, books and other forms of art. People with such robust cash flows can buy anything even in their old age. Such people are not a case in point here.
Case in point here are people who, for whatever reason, have not been able to have a house property of their own before retirement and who do not have enough financial resources also to buy a house property on their own. If such people wish to buy a house property, they have to do so with a help of a bank loan only.
Buying a house property on loan after retirement is a big decision that involves substantial financial commitments over a long period of time. This decision can profoundly impact the rest of a senior citizen’s life either way. It is, therefore, important that implications of such a decision are clearly understood before it is taken.
REASONS WHY ONE SHOULD OWN A HOUSE IN OLD AGE
With ever-growing job opportunities in India and abroad, the traditional joint family structure in India has split into several nuclear families.
In joint families, elders in the family used to enjoy their own distinct place at the higher rungs. In nuclear families, however, such higher places are conspicuous by their absence. The focus in nuclear families is more on adopting and maintaining a contemporary lifestyle and ensuring a modern and upscale upbringing of the children.
It is not the point here that nuclear families do not value their elders or look after them with love and respect at all. They do, but such nuclear families are very few. A much higher number of nuclear families look after their elders not so much out of love and respect for them but on account of sheer social pressure. In such families, taking care of elders is perceived more as an onerous duty from which there is no escape. Still worse, some nuclear families are just not bothered about their elders and choose to leave them alone to fend for themselves in their sunset years.
CHANGING MINDSETS
The changes family scenarios have led to a change in the people’s mindset. Most people now do not foresee staying in their old age with their children. They foresee an independent life of their own in their old age. They don’t want to compromise on their dignity only because they are aging.
They, therefore, start planning for their old age during their young and productive years way ahead with multifold investments.
INVESTMENTS
These investments could be directed towards creating reliable sources of regular income to meet health care and sustenance needs in the old age.
The investments could also be directed towards creating a healthy corpus to discharge social responsibilities timely and honorably, to meet unforeseen contingencies, to undertake visits to children, grand children and other relatives, to buy them gifts and make them happy, to undertake religious or excursion tours and finally, to dabble in the fondest of hobbies during the last and idle phase of life to get some happiness and a sense of fulfillment.
That there is a distict shift of mindset towards leading an independent life in old age is amply borne out by the fact that about 15 million elderly people were living alone independently in India in 2014.
And in a more recent survey, it has been found that about 23.44% elderly people in India have chosen to live independently, away from their children in their sunset years.
BUY OR RENT : SOME SERIOUS CONSIDERATION
Where a senior citizen has retired from his vocation – be it a job, a profession or a business –
without having a house property of his own, inherited or self-acquired, the question of whether he should buy a house property of his own with a bank loan or spend the rest of his life in a rented house should receive some serious consideration.
The following factors assume great relevance while examining this question:-
FACTORS : MONEY
The most important factor here is money. How much money does a senior citizen have in terms of savings, investments and superannuation funds like PF and Gratuity to take of care of the rest of his life, that of his spouse and his other dependents?
• Whatever amount of money a senior citizen has, he has to spend it in such a way that it lasts him till he breathes his last. A senior citizen has not only to provide for sustenance needs of his immediate family but also for medical and health care expenses which are rising by the day. A prudent senior citizen has not only to provide for the costs of treatment of pre-existing diseases but also for the costs of treatment of diseases that are likely to afflict him and his immediate family as they grow older with advancement in age.
According to the National Council on Aging, about 92 percent of seniors citizens in the US have at least one chronic disease and 77 percent have at least two. Heart disease, stroke, cancer and diabetes are among the most common and costly chronic health conditions causing two-thirds of deaths each year there. The postion is not much different in India. In addition to the serious health conditions as aforesaid prevalent in the US, health conditions such as blindness, locomotor disabilities and deafness are commonly found in senior citizens in India. Mental illnesses arising out of senility and neurosis are other health conditions that are commonly observed amongst senior citizens in India. Absence of geriatric care facilities further compounds the problem for senior citizens here in India.
If the money a senior citizen has, barely suffices to meet the host of above referred expenses, he would be well advised to avoid buying a house on bank loan.
Where, however, the senior citizen has sufficient money left over after providing for the above-referred expenses, he should seriously examine the pros and cons of buying a house property to spend the rest of his life vis. a vis. living the rest of his life on rent.
PROS AND CONS OF BUYING VERSUS RENTING
The following are the pros and cons of buying or renting a house from the perspective of a senior citizen:-
RESOLVING THE RENT V/S EMI DILEMMA
It is to be clearly understood that EMI is an investment that confers ownership of the house whereas rent is just an expense. And while EMI remains more or less fixed during the tenure of the loan(except when there is a drastic change in the floating interest rate), the rent increases year after year due to inflation.
A senior citizen doesn’t know how long he is going to live. If the life span is short and there are strong reasons to believe this, a rented house would be the clear choice. But if a senior citizen lives a long retired life of say 20 to 25 years which many people actually do, a point of time will come in his life where his rent would exceed the amount of EMI had he bought the same house property after attaining the age of 60 years.
STABLE LIVING
EMI ensues only after a house is bought. The buyer owns the house property for life. No one can drive him out of his property unless he defaults in payment of the EMIs. Unlike this, if a senior citizen lives in a rented house, the owner of the house can drive him out of it as soon as the lock-in period gets over. Even if the owner does not exercise such option, finding another house would become inevitable after the lease period comes to an end. Choosing to live in a rented house will thus compel a senior citizen to move from one rented house to another till he breathes his last. No prudent owner allows a lease of more than 5 years for fear of attracting tenancy related provisions.
A rented house thus does not provide for stable living when it is needed the most in old age. As age advances, it would be torturous for a senior citizen to endure the pain of shifting lock stock and barrel a number of times.
INCREASING COSTS – YEAR AFTER YEAR
Renting also means ever-increasing cost of living year after year as rent would keep increasing every year, sometimes too sharply, as has been seen by us recently, post-Covid.
CONDITIONS ATTACHED TO RENTING
Many property owners are reluctant to rent out their house property to a certain category of tenants including the unmarried and the old. This could restrict the choice of rentable houses for a senior citizen. Besides, some house owners are too intrusive and dictating. They tend to become an unbearable nuisance.
CONCLUSION
Considering all the above aspects, owning a house is definitely a better option if a senior citizen has the money to afford one. Even though owning a house also has some hassles like maintenance costs, property/ house tax, outgoings, etc., these hassles are far outweighed by the benefits of owning a house for living a stable, peaceful, happy and dignified life during the sunset years as a senior citizen!
Penned by Sudhir S.
CEO - Yellow Oak Realty
Yellow Oak Realty is a luxury real estate advisory services company operating from South Mumbai.
