Retirement Resorts: An Investment Option
Gone are the days of miserable old age, when retirement homes have been portrayed as small units with bare minimum facilities meant for dispirited seniors, deserted by their families. Serene and leisurely, that is the way most of us would like to spend our twilight years. And why not? If we are slogging through the years, living a luxurious and peaceful final years is a right.
With dwindling joint family systems in the country, older family members are looking for comfortable and salubrious accommodations. This is where the retirement homes (also called resorts) are catching the fancy eyes and hence fast becoming a lucrative investment destination. Todays’ retirement resorts, inspired by west provide the elderly with independent lifestyles through state of the art facilities, while catering to their wellness and wellbeing. In addition to this, this provides them peace of mind, with no fuss about day-to-day activities.
Nestled in the Dasve Valley Lavasa near Pune, UTSAV project by Ashiana Project Ltd. is spread over 30 acres and offers 250 villas and 250 apartments. The entire retirement resort is a wheel-chair friendly campus meant with recreation facilities like club, swimming pool, badminton court and gymnasium. It will also have an activity center surrounded by lush green lawns, an in-house restaurant, library, TV hall, internet café, auditorium, card room, hobby room, table tennis room. Weekly activities like cinema, satsang, theatre, tambola, and cultural events have also been planned to make hit among elderly. Facilities like air-conditioners, private medical care are available on call.
Plenty of Options
As builder developers are competing to grab a share in lucrative senior citizen housing market, elderly are faced with ample choices in terms of location, price, amenities etc. Ashiana Housing, a pioneer in retirement homes, is operating a retirement home chain in Jaipur, and Bhiwadi (Rajasthan), whereas Lavasa (Pune) is under construction.
Besides Ashiana, there are other projects such as Dignity Lifestyle Township (Neral near Mumbai), Athashri and Golden Nest Senior Commune (Pune), and high-end projects such as Impact Senior Living (Amritsar) and Vivara Residents in Aprora (Goa). Projects from Paranjpe Schemes, Virgo Engineers, Sobha Develpers, Melur Meadows, Brigade Group etc. are also adding to the choices of investors. As far as the survey is concerned, retirement home projects are preferred in and around Pune, Kochi, Bangalore, Chennai, Mumbai, Delhi NCR, etc. The price ranges broadly between 20-50 lakh, which can also go up to Rs 1 crore, depending upon the facilities and location.
Key Ongoing Retirement Resorts Projects
Project (Location) Area (Sq. ft.) Upfront Cost Monthly Maintenance Cost Dignity Lifestyle Township (Neral, Near Mumbai) 500 13 lakh* Rs 7,200 per person UTSAV by Ashiana Housing (Pune) 500-2,000 50-80 lakh Rs 4 per sq. ft or Rs 7,000, whichever is higher Bahri Beautiful Country (Kodaikanal , Tamilnadu) 600 30 lakh Rs 10,500 per person Vivara Residents (Goa) 775 38 lakh Rs 6,500 per person (If you choose to pay Rs 25 lakh as initial deposit)
* Refundable deposits worth Rs 4 lakh. Monthly rent excludes food, outgoing telephone, cable, electricity etc.
The Investment Economics
There are two prevailing pricing models for retirement resorts – buying outright and lease homes. In projects where homes are being sold outright, the price depends primarily on location. Retirement homes that are situated on the outskirts of city are cheaper because real-estate prices are lower there. For instance, price in Ashiana project, Jaipur starts at Rs 11.8 lakh, whereas properties in Bhiwadi are priced at Rs 17.4 lakh onwards. Similarly, price of cottages at Melur Meadow starts from Rs 8.5 lakh, whereas apartments at Kudumbam (Tamilnadu) can be priced at Rs 20 Lakh onwards.
Even though retired officials do not have much of loan eligibility, few developers still provide loan facilities. Ashiana Housing has tied up with HDFC Bank for providing housing loans for their projects. In this special arrangement, a senior citizen can avail loan facility by clubbing his income with that of his earning child.
However, the most popular among consumers is ‘long term lease model’, as most developers do not encourage disproportionate selling of land. Under this model, senior citizens can enjoy privilege of a luxuries-loaded house, without any legal title. The buyer has to deposit an initial amount (usually between Rs 8-20 lakhs) and refundable, followed by fixed monthly charges (rent). Fixed charges are generally exclusive of food, electricity, telephone, cable TV, emergency services charges etc. Deposits & rent, invariably depend upon each other and a part of total cost of the resort.
For example, to get a 1-bedroom apartment worth 775 Sq. ft. for Vivara Resident’s project in Goa, you need to shell out Rs 38 lakh with zero rent option. For different initial deposits, the monthly outgoes are as follow:
Monthly rent is dependent on upfront payment:
Range of Monthly Rent and Lease Deposit Option The monthly rent payable will be (Rs) If occupant choose to pay a lease deposit of (Rs) 6,500 12,000 18,000 24,000 25,00,000 20,00,000 15,00,000 10,00,000 In each option, the deposit is refunded to you in full when occupant leaves.
The monthly rent will increase by 5 per cent every year, but deposit is refunded back to the occupant when he/she leaves. Then the deposit can be invested anywhere else to derive returns. So, investing in a retirement home is not completely illiquid. In case of death, spouse can continue to live in the resort without any extra charge, whereas in the case of death of both the partners, home will have to be handed back to the trust that maintains it. The deposit money will be returned to nominees after making certain deductions.
There are two options available for investment in retirement resorts/ homes. In the first option, you can choose to take the deposit back at the time you are leaving (or death) the property. Secondly, consumers can opt for the capital appreciation option, under which they will not only get original lease deposit alongwith a percentage of capital appreciation in the lease value of property. Capital appreciation is defined as the difference between your lease deposit rate and new deposit rate (second occupant to which the resort is leased after you). According to an illustrative table worked out by Vivara, if you choose to pay a deposit of Rs 30.4 lakh (and a monthly rent of Rs 9,000) for a 1BHK apartment, you will get 80 per cent share of capital appreciation, whenever you will leave that house, whereas if you choose to pay a deposit of Rs 26.6 lakh (and rent of Rs 13,000), you will get 70 per cent of capital appreciation, so on and so forth.
Capital Appreciation Benefit illustrated:
Options that include Capital Appreciation Benefit Monthly Rent (Rs.) & Lease Deposit (Rs.) % Share of Capital Appreciation 9,000 13,000 18,000 22,000 30,40,000 26,60,000 22,80,000 19,00,000 80% 70% 60% 50% Investing in Retirement Resorts: Few Advantages
- Lease & rent model makes retirement resorts less costly option than actual buying a house, while capital appreciation option work as an investment.
- “Initial deposit is refundable, which can be used for other investments in case elderly decides to leave.
- Nomination facility available for initial deposits & capital appreciation money.
- Young people can use retirement homes purely for investment purpose as they can be rented out to elderly.
Under each option, the deposit is refunded to the occupant in full when the occupant leaves.
As capital appreciation will naturally be higher over a period time, the option of capital appreciation works like an investment in property and yield market-linked returns. The returns generally range between 10-20% per annum. All features combined, it would not be wrong to say that investment in retirement resorts costs lesser than buying actual cost and gives all related benefits like market-linked returns in capital appreciation. Besides this, lifestyle housing & peace of mind sound fantastic. Isn’t it?
Developers will remain in beneficial situation throughout as they remain owner of these housing units and receive fixed rent payments alongwith other charges. In addition to this, the upfront deposits can be put to any use they desire.
Similar opportunities are also available to any casual investor. Though, only people above 55 years of age can live in retirement resorts, but buyers can be anyone irrespective of the age. As per market estimates, a retirement home can fetch you anywhere around Rs 8,000-10,000, depending upon the location. Developers don’t mind it as long as persons living in there are senior citizens.
In a nutshell, retirement resorts not only belongs to those who wants peaceful life after retirement with minimum fuss about their day-to-day management, but also to those, who are not willing to park their entire corpus into ill-liquid assets, such as house. You can also park your extra money to other investments avenues and earn returns to compensate fixed monthly rent, while your principal stands intact. Above all, capital appreciation is the reward for the luxurious & peaceful time you spend.