By Accommodation Times Bureau
‘When ménages become wealthier in India, they tempt to gravitate more
towards real estate attribute’, reveals a report of the Household Finance Committee
published by the RBI lately. "Rich households trade off gold holdings for real
estate. (Like others) They do not increase their wealth allocation to either financial
assets or retirement accounts," it said, adding, "This stems from the general lack of
trust in financial products and their complicated structuring."
Indians throw caution to the wind when it comes to the savings for their old age.
Few go with the pensions, some buy gold etc, but most of them rely on "informal"
arrangement between themselves and their progeny.
The report stated that mortgage penetration among Indians is low early-on in life,
despite of unusually high real estate holdings. Indians incline to borrow late in life
and reach their retirement age with debt on their head."Social arrangements, in
which households bequest housing wealth to future generations and, in turn,
receive support during retirement are an underlying determinant of these
(dependence on children) patterns…We note, however, that these traditional
structures are increasingly under pressure from shifting demographic patterns,
social norms, and changing economic conditions, introducing risks to economic
well-being especially as households age," the report warns.
It has also stated that the elderly population is poised for a 75% growth in the
coming decade and a half, and that only a small proportion of the population use to
put money aside for retirement, that represents the apparent validity of "adverse
shocks" later in life.The report further warned that if this sort of pattern is
maintained, there will be definitely a significant pressure on gold and real estate
assets in the coming decades.
This report prophesize that households who are investing at least a quarter of
their amount away from gold to financial assets ,will also move themselves up in
the wealth chain, in next decade.