Partial ownership secures the child’s future and is a better option than popular gift options like gold and cars
As a parent, you want to give your child a wedding gift that they will cherish forever. As restrictions have reduced the number of weddings across the country, savings can be made in assets such as gold, cash, house / apartment, car, etc. It pays to study the nature of these assets to better understand their usefulness as gift options .
gold
Drawing on a centuries-old tradition, the gift of gold is usually an integral part of Indian marriage customs. From an economic point of view, properties such as appreciation and liquidity give gold a meaning that other precious metals do not enjoy.
In the past primarily available in the form of commodities, new innovations have made it easier to buy, store, and monetize gold. But it is also up to consumers to choose the right type of gold that meets their needs.
- Physical Gold: Allows for greater control over the asset since you actually own it. There is no need to wait for the due date or rely on the stock market to monetize the asset. But you need to keep it safe. In addition, physical gold does not generate passive income in the form of interest or dividends; a decisive shortcoming.
- Gold ETFs and Gold Funds: Gold ETFs invest in physical gold or stocks of companies that are engaged in mining or refining the yellow metal. However, gold funds are mutual fund systems that invest in gold ETFs and stocks of companies involved in gold mining, production and distribution. Gold ETFs and gold funds have an advantage over physical gold in terms of storage, price differentials, and tax efficiency. However, we cannot ignore the fact that despite seasonal highs that result in low optimal returns, the price of gold tends to remain unchanged for extended periods of time.
- Sovereign Gold Bonds: These are government bonds that can replace physical gold. They generate guaranteed returns of 2.5% annually, which increases their attractiveness. Plus, there are no storage challenges. But a lock-in period of five to eight years puts a strain on his liquidity.
cash
The liquidity associated with cash allows the beneficiary to spend it at will, but there is always a temptation to spend the amount on unproductive assets.
Residential real estate
Residential properties only make sense if they are for personal use. At 2-3% per year, residential rental returns in India are among the lowest in the world, making it a poor choice for investment.
automobile
Personal vehicles are depreciable assets that lose their value once driven out of the showroom. Additionally, they add a significant amount to the monthly budget through fuel and maintenance costs, which actually makes them a burden.
Share ownership: a gift to treasure
Partial ownership of commercial real estate is one of the ways we can secure our child’s future. In many ways, it’s a better option than popular gift options like gold and cars.
The fractional ownership model is intended to enable private investors to participate in the commercial real estate sector, where they have traditionally been held back by a high barrier to entry. It divides the costs of the commercial property into smaller units, which allows private investors to participate in the market.
With an average rental return of 8-10% and capital growth of 5-10% annually, commercial real estate offers passive income paired with a maturity amount.
On the other hand, partial ownership can lead to vacancy risks and is also less liquid than other investments like stocks, mutual funds and gold. Leading fractional ownership platforms select pre-leased commercial properties with top tenants who have been carefully selected after rigorous technical and legal scrutiny to reduce the likelihood of vacancies. They also offer help in monetizing the asset by connecting investors with real buyers.
Use part ownership
Investing in a fractional ownership platform means constant profits for five to ten years. For example, an investment of Rs 25 lakh can generate an initial rental income of Rs 2 lakh per year with an 8 percent rental return. Assuming a modest capital growth rate of 5 percent, the asset will be worth Rs 31.90 lakh even in five years. Thus, the profit is a total of Rs 41.90 lakh (rental income for five years plus the current value of the property after appreciation), which can then be used to finance a house, for example.
Fractional ownership platforms trade prime pre-leased Class A commercial real estate, making them a safer asset with attractive returns – ideal for giving away to newlyweds.
The author is the founder of hBits
DISCLAIMER: Views that are expressed are the author’s own views and Outlook Money does not necessarily subscribe to them. Outlook Money is not liable for any damage caused directly or indirectly to any person / organization.
