Today is National Parents Day. It is usually celebrated on the fourth Sunday of July. Being a parent is a blessing that comes with a lot of responsibilities. As a parent everyone wants to provide their children the best in everything in the world. Until they become self-reliant and independent, we have to prepare in advance for their life needs. Education is one of the most important aspects in the growth and development of children, and as the cost of higher education increases, a lot of planning is required; Providing the best education to our children has also become a difficult task.
Education has become one of the major expenditure items for Indian households. Today sending your child to a good private school means spending around Rs 2 lakh per year. Higher education is even more expensive.
According to statistics, the cost of higher education is increasing at the rate of about 10-12% per year. This means that an engineering degree which used to cost Rs 6 lakh in 2015 will cost Rs 16 lakh in 2025 and Rs 25 lakh by 2030. Similarly, an MBA degree that cost Rs 16 lakh in 2015 is projected to cost Rs 42 lakh in 2025. and 67 lakh in 2030.
To plan better for our children’s education, we need to start investing in the right tools. What could be better than “Parents Day”. To keep an eye
The best way to accumulate the required amount for your child’s education is by investing in a suitable property. The selection of asset and amount allocation should be done after considering factors like target amount, investment horizon, risk appetite etc. Some of the popular investments in this regard are PPF, Mutual Funds and ULIPs.
PPF
PPF is one of the safest investments offering tax savings and guaranteed returns. The interest rates are announced by the government on a quarterly basis. Its key features include a lock-in period of 15 years and an investment cap of Rs 1.5 lakh per annum. This limits the maturity amount from the product and limits its usefulness as an education fund.
mutual funds
The markets are flooded with mutual funds that promise good returns for children’s education. These are generally good products, but they are more suitable for investment purposes as they are subject to market risk. But if you are planning to invest in mutual funds, do not limit your choice to children’s schemes. Choose the best fund overall keeping all the factors in mind.
ULIP
ULIPs provide another way to secure your child’s education. Despite the bad name they have earned in the past, the products have been revamped and now they can be compared to mutual funds. These new age ULIPs are especially useful for single-earner families where the child plan is in force for the remaining policy term even after the death of the policyholder.
Can Fractional Ownership Provide a Solution?
Partial ownership in commercial real estate is generally not counted among regular options for an education plan. But the fact remains that it can be a useful tool to secure your child’s future. It is a relatively new concept in India and is designed to enable participation of retail investors in the profitable commercial real estate sector.
Investing in commercial property has traditionally been out of reach for retail investors due to the high barrier to entry. Partial ownership overcomes this limitation by dividing the cost of the property into smaller portions to allow retail investors to participate in the market.
double returns from assets
Double returns in the form of rental income and capital appreciation make it an attractive investment option. Commercial real estate offers rental yield of around 9% and capital appreciation of 5-10% p.a. which is ideal for the purpose of discussion.
Let us understand how it works with the help of an example. Suppose you are planning to create a corpus of Rs 50 lakh for your child’s higher education. For this you have to invest a lump sum amount of Rs 25 lakh for 5 years with the fractional ownership platform. Even if you assume capital growth at a nominal rate of 8%, it will give you a total return of about Rs 48,00,000 which is approximately the target amount. The double return from fractional ownership makes it possible to fund your child’s education through school and college. In this sense, it is better than products like PPF and mutual funds that offer lump sum payouts. The rigorous scrutiny enforced by the partly owned platform assures investors of quality investments with good market value.
Disclaimer:Shiv Parekh, founder of Hbits, a fractional real estate platform. Views expressed are personal.
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