At 83, S. Jagannatha Rao no longer owns a house. After his wife died, Rao found himself living alone in Bhopal in a three-bedroom house while his two sons were in Bengaluru. The property needed upkeep, and there was little reason for him to continue living so far from his children.
Buying another house in Bengaluru was an option, but homes near his sons were expensive. So he chose to rent instead. He sold the Bhopal house and invested the proceeds in Section 54EC capital gains bonds, government securities and fixed deposits. Separately, he also sold an ancestral property in Andhra Pradesh that held greater emotional value.
“I was not reluctant to sell the Bhopal house as it was in everyone’s best interest to sell and move on. However, I was emotionally attached to my ancestral property in Anantapur. After weighing the pros and cons and discussing it with my sons, I realized it was far more prudent to sell it during my lifetime,” he said.
The sales did not dramatically alter his retirement budget as Rao already had enough savings. But selling the properties simplified his life.
“Having my net worth in liquid instruments rather than physical real estate brings immense peace of mind. Had something happened to me, managing and selling the properties remotely would have been a significant administrative burden for my sons,” he said.
A new calculus
Rao’s experience raises a question more ageing homeowners may have to confront: how much real estate do they actually need in retirement?
India’s population aged 60 and above is projected to reach 347 million by 2050, according to the United Nations Population Fund. At the same time, family structures are changing as children increasingly move to other cities or countries and geriatric care becomes less centred around large families living together.
That is changing retirees’ relationship with property. Homes accumulated for the next generation may have little practical use if children have settled elsewhere, while maintaining and eventually selling those properties can become a burden for heirs, said Kalpesh Ashar, CFP and Sebi-registered investment advisor.
Some retirees are therefore selling secondary real estate during their lifetime and moving the proceeds into financial assets that are easier to manage and divide.
Too big for two
The other shift is downsizing. As large family homes are left to elderly couples, some seniors are moving into managed or gated housing.
A 67-year-old Noida resident, who did not wish to be named, sold his large independent bungalow and moved to an apartment in a gated complex.
“It was my family home–a two-storey house with six rooms, two kitchens and five bathrooms. My children grew up there, went to college and started their careers. Eventually, however, the children moved out and I was left there with my wife and elderly father,” he said.
The house, once suited to a multigenerational family, became a burden for three older residents. It needed major repairs and security was a concern, as the family was uncomfortable leaving it locked for extended periods.
“My children suggested selling it and buying an apartment. It took me a year to make up my mind as I was emotionally attached to the house. Seeing a friend make a similar move helped me understand the economics better,” he said.
The move also strengthened his finances. He spent only about one-fourth of the sale proceeds on the new apartment and placed the balance in fixed deposits. The new society provides security, power backup, water and maintenance.
“I can freely go for walks and run errands. Quality of life has improved,” he said.
His experience highlights the trade-off between holding property for future appreciation and unlocking its value to improve finances and quality of life today.
Selling a property rather than renting it out can make sense financially and mentally, said Ajay Pruthi, founder of PLNR and a Sebi-registered investment advisor.
“Rental yields are typically around 2-3% of the property value before society charges, property tax and repairs. Moreover, chasing tenants in your 70s-80s is not easy. An empty property, meanwhile, generates expenses without income,” said Pruthi.
Pruthi’s broad rule for retirees is to retain the house they live in and reconsider holding additional properties unless they generate sufficiently attractive returns.
Ashar said the preference for accumulating residential property also needs to be viewed in the context of the investment choices available to the previous generation. “Holding several properties now can become difficult in retirement, especially when the next generation has settled elsewhere.”
Unlocking value
Selling is not the only way to unlock the value of a family property. Redevelopment can work for retirees who want to remain in the same location but no longer want the upkeep of an independent house.
That is what Padma Mahadevan’s parents did with their family property in Chennai. Her father built an independent house on inherited land in 1984. As he and his brother, who lived next door, grew older, maintaining the properties became difficult, with recurring expenses on waterproofing, pest control and repairs.
The brothers eventually handed their adjoining properties to a developer. Mahadevan’s father and uncle received two flats each, along with cash. For Mahadevan’s parents, redevelopment meant they could remain in the same prime locality while moving into homes that were easier to maintain. It also unlocked wealth from land the family had held for decades.
“My father was a state government employee and we as a family always lived frugally for much of my childhood. The surplus changed my parents' lives in retirement. They started going on holidays and financially upgraded into a completely different bracket,” Mahadevan said.
Succession also became simpler. One flat has already been given to Mahadevan, while the other, where her parents lived, will go to her brother, who lives in London. The family’s housing needs have since changed again. Mahadevan’s father died in April and her mother moved to a senior living community in Coimbatore, where her sisters live. She is renting there for now but has enough savings to buy a home in the retirement community if she chooses to.
Redevelopment worked for Mahadevan’s family because it unlocked the value of their land while allowing them to retain homes in the same location. But holding multiple properties may make less sense when the next generation is unlikely to use them.
Ashar said retirees will increasingly need to consider how much of their wealth they want tied up in real estate. “You might be asset-rich in retirement with multiple properties, but if you are cash-poor, it is of no use,” he said.
The problem can be more pronounced when children live abroad. Ashar said he has seen families where the next generation has little interest in property held by their parents in India and finds it difficult to sell it after their death.
“As far as possible, make life easy for the children by selling your real estate, which is difficult for heirs to liquidate in comparison with financial assets, and keep inheritance as simple as possible,” he said.
Plan first
For retirees who sell property, what they do with the proceeds is equally important. Pruthi recommends deciding the allocation before the sale.
First, set aside the capital gains tax liability and evaluate whether Section 54EC bonds make sense.
“Buy capital gains bonds only if the tax you save is bigger than what you lose by locking money at 5.25% for five years,” he said.
A separate corpus should be earmarked for medical emergencies and old-age care. The remaining money can then be divided according to when it will be needed. Senior Citizens’ Savings Scheme, Post Office Monthly Income Scheme and fixed deposits of different maturities can provide regular income, while money not required for several years can be invested in growth assets depending on the retiree’s risk profile.
“Split the money into buckets and don't dump it into one big FD,” he said.
Ashar also cautions against giving away the entire sale proceeds or assets to children early simply to simplify succession. Retirees should first ensure they have enough under their own control to fund the rest of their lives.
“It is a good idea to give away a part of the money meant to be passed on so that the children can put it to good use. However, it should not be done at the cost of losing your own independence,” he said.