What are the options available for retirees and what factors should you consider before committing to one? We spoke to a few solution providers to get the details.
Increasingly, many senior citizens in India are opting for or aspire to live in retirement homes. A combination of factors is driving this — the joint family system is giving way at a fast rate, life expectancies have improved, and senior citizens’ finances today are better compared with earlier generations. Also, the stigma earlier associated with staying in retirement homes (rather than with family) is gradually reducing.
Many elderly people want to spend their silver years comfortably with less physical and mental stress — with chores such as housekeeping and cooking taken care of. What are the retirement living options available and what factors should you consider before committing to one? We spoke to a few solution providers to get the details.
Three broad categories
Retirement living solutions usually fall under three broad categories — independent living (for senior citizens who are reasonably healthy and can manage on their own), assisted living (for those who require physical or medical help) and palliative care (for those with debilitating illnesses). In India, most service providers offer only independent living, which facilitates an active retirement lifestyle. Assisted living facilities are offered by a few non-profit organisations such as Bangalore-based Nightingale and Mumbai-based Dignity Foundation.
Under independent living, there are three models to choose from — outright buys, long lease, and rentals. In most cases, only those aged over 55 are allowed to occupy homes in retirement communities. Each model has its pros and cons. The choice would depend on factors such as your financial strength, long-term objectives, and the degree of flexibility you desire.
Outright buys: Flexibility at a cost
Outright buys, of the kind offered by players such as Serene Retirement Communities, entail high capital investments. This could range from Rs 20 lakh to upwards of Rs 1 crore depending on the location, type of accommodation, size, and facilities offered.
If you have the financial means, you can look at this option which offers maximum flexibility. Since it is in the nature of freehold property, you can live in the house for your lifetime, rent it out if you so desire, and also bequeath the asset to heirs — what many senior citizens in India desire.
You can also choose to sell the house in the future, realising any appreciation in value. On the flipside, you may not be able to sell the house before a certain number of years. To curb speculation, retirement community developers may specify lock-in periods after the sale of the house. For instance, Serene Retirement Communities does not allow first-time buyers to sell their property for three years.
You also have to pay monthly maintenance and food charges. In its properties in Coimbatore, Serene currently charges Rs 3.25 per square foot as maintenance charges (this works out to Rs 3,250 for a 1,000 sq.ft house), and Rs 4,250 as food charges per head. If you cook your own food, you will be charged Rs 500 monthly instead of Rs 4,250. Besides these, you will have to bear other expenses such as medical, electricity, telephone and Internet charges at actuals.
Leasing: Low upfront cost, less flexibility
Under the long-lease model offered by players such as Dignity Lifestyle, a senior citizen pays a one-time deposit upfront and monthly fees. This entitles you to live in the property permanently during your life-time.
A part of the deposit may be non-refundable. For instance, the one-time deposit for Dignity’s 500 sq.ft premium cottage in Neral near Mumbai is Rs 13 lakh, of which Rs 4 lakh is non-refundable and Rs 9 lakh is refundable. The monthly fee is Rs 10,000, six months of which has to be paid in advance as security deposit. Besides these, food is charged at actuals and you have to bear other expenses such as medical, transport, telephone, television and Internet charges.
The lease model may appeal to you if you have the finances to fund the one-time deposit but not the high capital cost of an outright buy.
But it is less flexible in the sense that it does not allow you to sell the property. Some developers also do not allow you to rent it out. You simply have to deliver the property back to the developer. In the bargain, you do not benefit from any appreciation the property may have seen over the years.
Also, with your funds being blocked, you lose out on the returns you could have earned from other investment avenues. Yes, the lease model allows you to easily move on from the property, if you so choose, without the hassles of finding a buyer and finalising a sale. But in cases where the deposit includes a non-refundable portion, you will stand to lose this amount. Also, the refundable portion may not be immediately returned after you vacate. For instance, Dignity Lifestyle has a lock-in period of 12 months from the date of handover of the cottage, and the amount is refunded only after the next occupant has registered.
Rental: Cheaper but uncertain
As a retirement living option, rentals could work out easiest on your pocket. They do not entail a high capital cost or an upfront deposit. You only need to pay monthly rentals. Coimbatore-based Melur Meadows which offers all the three retirement living models charges monthly rentals in the range of Rs 3,500 to Rs 7,000 for this option. Food and other costs are charged separately.
As against this, its lease model entails a deposit of Rs 8 lakh and monthly maintenance of Rs 1,000 (food and other costs are separate). Also, under its outright purchase model, Melur Meadows offers homes in the range of Rs 10 lakh to Rs 35 lakh, with recurring costs being separate.
But while the rental option may appear cheaper, it could suffer from lack of permanency. Rentals are typically offered for short-term periods, in the 1-6 months range. Moving in and out on a regular basis may defeat the purpose of calm and stability in retirement living. Yes, you could opt for renting a house from another senior citizen who has purchased it. But here too, with growing demand for retirement homes, you could be asked to vacate at short notice.
A few precautions and checks before you decide on your retirement living option will facilitate a smooth run in the future. First, keep adequate funds for increase in expenses (around 10 per cent annually for maintenance, food, rentals or other recurring costs).
This is important since these expenses may keep increasing even as your income remains capped. Lack of financial planning could mean trouble financing rising costs in the future. It is imperative that you take adequate medical insurance.
Don’t look at your retirement home purely from an investment perspective. You are choosing a different lifestyle, so be prepared to pay some premium for the various senior-friendly features in the community and in your house.
Check whether the house you plan to occupy has the promised essential senior friendly features such as anti-skid tiles in bathrooms, grab bars, wide doors, etc. Make sure that adequate medical facilities/services of residential nurses, doctors and first aid are at hand to attend to emergencies. Also, enquire whether the solutions provider has tie-ups with hospitals. Check whether the community has adequate recreational facilities of your interest to keep you occupied.
Make enquiries about the reputation and track record of the solutions provider. Read the agreements carefully and be sure of what you are getting into.
In an outright purchase, check the property documents to make sure that they are in order. In a lease, check that the agreement is for a sufficiently long period, else you may have to vacate when you need the house the most.
It is a good idea to experiment, experience, and then decide about your choice of a retirement home. Many solution providers allow prospective buyers to stay in their guesthouses for a few days (at a cost) to help you arrive at a decision.
Photos courtesy: Serene Retirement Communities