I need to fund my son’s education abroad. I will need around 40 lakh for that. I have ancestral land worth 1 crore. I also have a flat (only residential property I own) worth 30 lakh. What factors should I consider to decide if I should partially sell my land, or sell the flat or partially take an education loan? What will be smart from a financial perspective?

—Raghav Tomar

Your investments are currently in only real estate assets and there are mainly two assets—ancestral land and residential apartment. There are few financial aspects which need to be considered which will help you in deciding whether to sell one of the real estate properties fully or partially and/or take an education loan. Firstly, you need to decide whether the assets are investment assets or meant for personal usage. This is more for the apartment as the land is ancestral and hence can be considered as an investment asset. If the apartment is being used for own residence, then that takes it out of the equation. And if considered as investment option then it raises one more question i.e. you are currently staying on rent and whether it is good to move into your own apartment or continue staying on rent.

The second aspect which will further help in deciding is the growth of the assets. How much you expect your real estate assets to grow in the long run i.e. let’s say next 5-7 years. If the growth expectation is lower than the education loan rate (do consider the tax benefits offered by education loan on repayment under Sec. 80E of Chapter VI-A of the Income tax Act), then it is recommended to sell the real estate and fund the education loan; it could even fund the complete loan amount. If the reverse is true, then maximise the loan and sell only a part of the land or your house, as the case may be.

The same logic can be used in deciding between the land and apartment, in case you need to pick among the two.

Surya Bhatia is managing partner of Asset Managers. Queries and views at mintmoney@livemint.com 

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