Are you the one who has bought a house for yourself, and another for your child, perhaps one for each of your children? You feel this house that you would leave behind as your legacy of love is the best thing you could have done for your child. An asset that will be worth a lot, only getting better with time, generating a steady income, and to cap it all will have the child’s name in the records. This is all awesome only in your imagination.
Is your child likely to come back and live in this house? Seriously? Step back and consider the past 30 years of your life. Don’t you measure success by how you moved from the rented chawl to the one-room kitchen and then to your own three-bedroom flat in a complex that has a jogging track and a swimming pool?
The house you just bought for your child is equivalent to the chawl where you began. If development is the mantra in your head that will make this property a nice `investment’, the flat you booked will be 25 years old by the time you bequeath it to your child. Think about it.
But you are adamant. You can’t stop thinking about how once remote areas have now become part of the city . You are awed by the stories of smart decisions that some friends, or their fathers made.You are unable to give up on the idea that a house is an appreciating asset and one should therefore have it. What you have not considered is the burden this will impose on your beloved child.
Do you really think that your child will spend precious two weeks of annual vacations to return to your city to look up the house? Or remember to pay the society’s dues and property taxes, each time dealing with different office bearers of the housing society? Imagine the hassles of renting out 11 months at a time, and doing the paperwork each time. Consider the pain of persuading the broker to strike a 33-month deal and agreeing to pay the entire brokerage upfront. This is apart from the renovations, maintenance, painting and modernisation that the house will demand. Unless your child actually lives in the house you bought, this investment is just a pain.
But you tell yourself that the house represents a lot of wealth. The idea that you your child will be worth millions, is so appealing. But how will your child use those millions? They probably cannot sell one bedroom and the balcony to raise money for higher education. Nor can they mortgage such a large value asset for their marriage expenses. They would be too worried to raise a loan to start a business, lest they lose what they have.And whenever they think of selling the property , spooky facts about how a house will only grow in value and how every seller rues his decision will appear in their nightmares. What is quite likely is that your child will bequeath the property to his child, and pass the albatross.
You are now screaming at me. You tell me that your child is not so dumb, but will use this asset to build other assets.So, is the house in the child’s name? I hear a lot about property being the source of much discontent, and how parents should not give up what they have before they die. Therefore these large assets are in your name, or jointly held with the child. Another set of hassles.
If you will your property to the child, the will has to be registered and probated before the property moves to the child after your time. This means trips to the court and payment of fees. The registration and stamp duties take time, effort and cost. The paperwork will also involve other siblings, and lets hope for your sake that your extended family is cordial with each another. When your child wishes to sell the property, there would be the hassle of dealing with the cash component that is a sad part of property deals in India. The paperwork to acquire, transfer or sell will also include dealing with the by-laws of the society . What you see as prime assets are actually burdens you impose on your children.
When you think of assets for your children, think about ease of operation too. Financial assets such as deposits, equity shares, bonds and mutual funds make immense sense since all you have to do is name your child as a nominee.After your children turn 18, you can name them as joint holders. They can access the assets electronically, anywhere in the world and get the benefits right into their bank account in the currency of their choice.
Real estate is too much of a gamble and too ridden with questionable practices. Residents of Delhi will tell you tales about Gurgaon’s `development’ featuring no water, power or roads. The much-touted shift to CBD Belapur never happened, Mumbaikars will rue. Many of Chennai’s building complexes stand precariously on dried lakes and rivers.Bangalore and Kolkata’s ghost complexes earn no rent. Love thy children. But do not buy houses to evidence that love.
The author is Chairperson, Centre for Investment Education and Learning
