Can I set aside my real estate property as a resource to meet my child’s marriage
Many have financial goals which are very focussed, an important one among them being building funds for children’s marriage. However many people tend to have higher exposure to real estate and lack a corresponding exposure to financial assets and have not invested in growth assets to meet long-term goals Hence they are asset rich and cash poor. They are however alright with building EMIs towards repayment of house purchase and this leads to a mounting debt burden- much higher proportion of debt skewing it to sometimes 65% of their income. This puts a strain on their cashflows and could be very risky, in case the income earner who is servicing the debt, looses a job or becomes incapacitated. A high investment in real estate is not desirable as these are relatively iliquid assets, have constraints on the legal side and the market is often volatile.
Property investment in any part of India gives between 4-7% per annum returns on the current market price. It is too low, hence unworthy nowadays of being kept as investments. One needs to pay society charges, property tax and income tax on the rent and pay the amounts needed to maintain the property from the received rent. Besides, for properties that are vacant there is deemed rent considered and added to the income of an individual.
Also one needs to consider the current market price, which is the opportunity cost. Furthermore, the appreciation potential is going to be rather limited. One can expect average returns. Thus people will not meet the desired price while selling the real estate assets to meet marriage costs.
The ideal portfolio mix for children’s marriage goal
Hence, selecting the ideal portfolio mix (Equity, Debt, Gold) with regard to saving for child’s marriage is necessary to reach the marriage goal without any hiccups. Many investors are hesitant to put their savings in the stock market due to volatility. But, if one has a good understanding of equity markets, insights about stock-picking strategies, and sufficient time at disposal for analysis, one could invest in equities through stocks or use mutual funds specific for creating a corpus for the long term
Equity investments should be the staple of the portfolio instead of relatively illiquid real estate assets. And one is also advised to review it and rebalance the portfolio periodically, preferably every year. In the long term equities as an asset class largely helps to create the corpus required to meet the desired financial goal – even after adjusting for the rising cost of living in the form of inflation.
Marriage in India: What does an average wedding cost?
Nowadays, a grand and lavish wedding function has become a desired necessity. The Indian wedding industry currently accounts for over Rs. 1,00,000 crores and is growing at a rapid rate of 25-30% each year. A lavish Indian wedding could cost between 20 lakhs to 5 crores. Middle class weddings may cost between Rs 5 lakhs to Rs 20 lakhs, depending on the caste/community the families belong to, and on the city, the wedding hall rentals, the number of guests, and extent of pomp and show and decorations at the venue.
Listed below are a few noteworthy essentials that determine the cost of wedding ceremonies:
Be it a destination wedding, or in the heart of the hometown, the venue accounts for a major percentage of a child’s wedding expenses.
Especially during peak marriage season, when the demand for locations is high, prices tend to go up. An average hotel ballroom could cost one around 1 lakh for a day whereas special destinations and resorts could easily charge several lakhs of rupees.
Venue decorators may charge anything between Rs 30,000 to 2 lakhs for decorating the hall as per preferences.
One of the most important aspects of a wedding is the catering . A reputed caterer, providing an assortment of cuisines can charge anywhere between Rs 1500 – 2500 per plate or more.
A bridal wedding saree or lehenga may cost up to Rs 50,000 and a designer sherwani or suit for the groom can be picked up at around Rs 30,000.
An average Indian wedding is generally a three-day affair with different ceremonies and rituals lined up. Each ceremony requires its own set of apparel, set-up, and materials. The average cost of a single ceremony may range between 6 to 10 lakhs. Apart from these, there are innumerable other costs such as the band, photography, wedding cards and presents etc., which may add up to the expenses.
Debalina Roy Chowdhury