Mortgage your commercial property to raise loans :: Business Line

I am 65 years old. My wife, 58, prepares snacks and eatables at home and sells them.

I have a 30-year-old son who is married. He has a daughter. I live in my own house. My pension is Rs 16,000 and our family expenses are Rs 35,000.

We have an ancestral commercial property at a prime location that we have let out for Rs 65,000.

My son is not interested in employment. Besides our property, we own a large open space of around 4,000 sq ft. Should I construct shops in the space and let that out for my son’s family’s future needs? We can earn Rs 45,000 by doing so.

But we have no savings to build the same.

Instead, should I sell the plot and deposit the money so that my son can earn interest? Alternatively, should I construct small shops and ask my son to take care of the snack business?

I also need to take care of my granddaughter’s education and marriage.

My concerns are:

If I sell the plot what are the best investment options available? Currently my savings is Rs 10 lakh in fixed deposits.

If I plan to construct a few more shops, what are the best options to raise funds?

— Haricharan

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You can raise funds in several ways, since you have a property. You can mortgage your commercial property which is fully constructed to raise a loan. The plot will not be eligible for a loan. The interest cost will be around 13.25 per cent. If you wish to construct a 1,000 sq ft shop, you can do that at Rs 1,200 per sq ft. The overall cost will be less than Rs 15 lakh. If you raise a loan for a 10-year term, your EMI will be Rs 22,600.

This option is possible provided your existing shops are not very old. In that event utilise your fixed deposits and take a loan against rent receivables. You can raise a loan only up to Rs 2 lakh. So, first construct two shops and lease it out and with this inflow, you can complete building the other shop.

Education

Since you have not mentioned what course you want your grand daughter to pursue, we are going with the popular options.

For engineering graduation, currently the cost approximately is Rs 10 lakh. If this cost is inflated at 7 per cent (same rate applied for all calculations), after 16 years, you will need Rs 29.5 lakh. For this you need to save monthly a sum of Rs 5,500 and you can achieve annual returns of 12 per cent.

Marriage

For her marriage, if the present cost is Rs 20 lakh, it will be Rs 88 lakh after 22 years. If you save a sum of Rs 7,600 monthly, you can reach the goal. Since all your goals are long term in nature, allocate 60 per cent of your investments to equity mutual fund schemes. Maintain a 30:10 ratio in debt and gold respectively, to balance the overall portfolio.

If the plot is in your name, create a trust in your grand daughter’s name and transfer the plot to that trust. Then the income from the new shops will automatically go to the trust. Make your wife, son and daughter-in-law as the trustees, to ensure that all your goals are achieved.

Since you have only one son he will automatically be the beneficiary for the ancestor’s assets after your days. So don’t sell the property, for now.