If you are in your 50s and considering buying a home, one of the available options is communities specially built for seniors. These offer many helpful features and services that specifically cater to the interests and needs of those in their post-retirement years.
The characteristics of properties in these projects are, however, by design, unlike those of in regular housing projects. So, it helps to understand the key factors to consider when buying. For example, the location of the property, access to infrastructure such as schools and shops and amenities may be important when buying a regular house. A senior home, due to the nature of the requirements, must be measured with a different yardstick.
One main difference is the details you need to get into in the agreement. A house in a senior living community often comes in different ownership models. Also, there are many services that come with the property. The period of engagement for the contract may be 20-30 years. So, it is important to understand the terms of the contract with the developer.
For one, the structure of the ownership and the various restrictions placed on you may be complex to comprehend. For example, even in an outright ownership model, there may be restrictions on renting out the place — your tenant must be over 50 years of age to stay in the property. Similar rules may exist when selling the property. And if your children inherit the house, but do not meet the minimum age required to live in the community, they should sell or rent out. It also helps to pay attention to the exit clause, in case you want to move out due to some circumstances.
There may also be more intricate rules if it is on a long-term lease model. As the contract may be for 20 years or so, any change in ownership or structure may adversely impact your position. So, it is good to understand the termination clauses — when you may be asked to terminate, or the conditions in which you can ask for termination.
The contract may also cover other terms on prices and escalations. It is good to get the list of one-time, fixed and variable costs (paid based on usage). These have big implications on your finances, as ongoing expenses form a sizeable outgo.
A 2017 study on retirement homes by Moneylife Foundation for HDFC showed that nearly two-thirds of the survey respondents had not signed a contractual agreement that clearly outlined the service terms and their rights. This is a big risk not worth taking.
Another factor that sets a senior housing project apart is access to services. Often, seniors opt for houses in these communities for their bouquet of services such as food, laundry, security, housekeeping and maintenance. There are also medical facilities, community activities in parks or a club house, gyms, ample open space, and various classes on health and fitness. Many communities also provide access to transportation services, within the premises and outside.
The Moneylife survey found many retirement homes without their own ambulances or even wheelchairs; some were in remote areas with poor access to medical facilities. The survey, not surprisingly, showed that over half of the residents were dissatisfied with the services provided and 61 per cent were unhappy with the medical services.
So, while selecting, you must check whether the community can tap qualified service-providers, the selection process, ongoing quality supervision and audits. As service costs tend to escalate a lot (typically 1.5-2 times the rate of inflation), you must understand what measures are in place to control costs. So, you must evaluate senior housing as you would a service contract — with attention to quality and cost of service. Another important aspect is the credibility of the developer who may typically also be the service provider. In a regular housing development, ensuring the quality of construction and the financial strength of the developer to complete the project is often enough; this consideration needs to go much further in a senior living project.
For one, the developments tend to be large projects with hundreds of houses, club houses, parks and other common facilities. Sales happen much later and at a slower pace; so, the financial strength of the developer to deliver must be assessed thoroughly.
Also, things do not end with construction; there needs to be ongoing support to offer services. If the developer is mired in larger financial issues, this may not be a priority for them. So, the residents may feel the pinch of late or non-payment to service providers or staff.
The Ministry of Housing and Urban Affairs (MoHUA) recently drafted a set of guidelines for retirement homes. It has information on building code requirements, common facilities, ways to ensure transparency in fund utilisation, disclosures required, and the right of seniors such as having a say in price escalations.
It also gives a sample agreement that can be used among the buyer, the developer and the service provider. You can look at this (on the MoHUA website) during your selection process.
The writer is an independent financial consultant