Good afternoon sir. I have a flat which I bought for 62 lakhs and the property is 14 years old now. I wish to sell this for around 95 lakhs. Where can I reinvest my money to save long term capital gain. Shall I buy a new flat or invest in fd or plot ? Also I am bit confused to not to sell and put the flat on rent approx 35k I will be getting but since the property is 14 years old I feel the selling value might decrease with time? Looking forward for your guidance sir.

Ans: You are thinking in the right direction. You are asking the right questions at the right time. Selling or holding this property is a big decision. Let us evaluate it from all angles.

Property Holding – Key Numbers and Facts
You bought this flat for Rs. 62 lakhs.

The property is now 14 years old.

You expect to sell it for Rs. 95 lakhs.

You are unsure whether to sell or give it on rent.

Expected rent is Rs. 35,000 per month.

This is a common situation many face after holding a property for a long period.

Evaluate the Rental Income Option
Let’s assess the rent-first approach.

Pros of Renting:
Monthly rent of Rs. 35,000 is regular income.

Total yearly rent is Rs. 4.2 lakh.

You still own the flat and can sell later.

But consider these limitations:
Property is already 14 years old.

Rental income will not grow very fast.

Maintenance costs and repairs will rise every year.

Vacancy or tenant damage may reduce income.

Finding good tenants regularly is not easy.

Emotional stress in property management is real.

Rental returns rarely cross 2%–3% of property value. This is very low.

Rs. 4.2 lakh rent per year on a Rs. 95 lakh property gives poor return.

That too before tax, maintenance and vacancies.

Expected Depreciation In Value
Property value does not increase forever.

Older flats often see price stagnation or fall.

New buyers prefer newer buildings with better amenities.

Older buildings face legal or structural repair issues.

Government redevelopment or road projects may also affect value.

It is wise to exit before the property becomes harder to sell.

Capital Gains on Sale of Flat
You are selling a flat held for more than 2 years.

So, long-term capital gains (LTCG) will apply.

Sale price: Rs. 95 lakh
Indexed cost: Higher than Rs. 62 lakh
Gain: Sale price minus indexed cost

Capital gains above Rs. 1 lakh are taxable at 20%.

But you are eligible to save this tax if you reinvest under the correct rule.

How to Save LTCG Tax Smartly
Let’s understand the available options and their implications.

Option 1 – Reinvest in a New Residential House
Under specific section rules, you can save LTCG by buying a residential house.

You must reinvest only the capital gain, not full sale amount.

Property must be in India and completed within specific time.

You can only invest in one house.

This locks a large sum into another immovable asset.

But you already feel real estate may not grow well.

If you buy again, you repeat same cycle of low rental return and poor liquidity.

Option 2 – Invest in Specific Capital Gains Scheme Bonds
You can invest LTCG amount (not full sale amount) in notified bonds.

These bonds have 5 years lock-in.

Interest is very low (around 5.25%).

Interest is taxable every year.

After 5 years, capital is returned.

But these bonds don’t beat inflation or give real wealth growth.

It only helps to defer tax, not build financial strength.

Option 3 – Invest in FDs
Fixed deposits are not tax-saving instruments for capital gains.

You will still pay 20% LTCG on capital gain.

Also, FD interest is fully taxable.

Returns are not inflation-beating.

Not good for wealth creation or retirement planning.

FDs serve short-term needs or emergency use only.

Option 4 – Invest in Plot
Buying a plot does not help in saving LTCG tax.

You must build a house on plot within 3 years.

Plot gives no rental income.

Again, no liquidity and low flexibility.

Plot is not a wise option. Capital gets locked without returns.

Recommended Strategy – A Balanced and Growth-Focused Path
You are at a critical decision point. Here is a holistic approach.

Step 1 – Decide to Sell Now
Property is 14 years old. Maintenance cost will rise soon.

Price appreciation will likely stagnate or decline.

Rs. 35,000 rent is not attractive on Rs. 95 lakh value.

Selling now locks in gain and gives liquidity.

Exit now and don’t wait till market or property condition worsens.

Step 2 – Use LTCG Exemption Smartly
You have two options to save LTCG.

Either:

Reinvest only the capital gain (not full sale value) into a new flat.

Or:

Invest only the capital gain into notified 5-year capital gains bonds.

If you don’t want another flat, go with bonds.

Accept that bonds will give low return, but save tax legally.

You can use remaining amount (after reinvesting capital gain) in growth investments.

Step 3 – Deploy Remaining Money Into Mutual Funds
This is the key move.

Don’t invest in direct mutual funds. They have no personal support.

Invest in regular mutual funds through MFD guided by a Certified Financial Planner.

Use active funds, not index funds.

Index funds copy market and can’t avoid losses in fall.

Active funds protect downside better and seek higher returns.

Start SIPs and also use lumpsum investing smartly over phases.

This gives both safety and growth.

Step 4 – Split the Reinvested Amount Into Buckets
Don’t put all money in one place.

Split your funds into three parts:

Short term – Liquid funds or short-term debt mutual funds

Medium term – Hybrid or balanced advantage funds

Long term – Diversified equity mutual funds with SIPs

Each bucket serves a specific need and timeline.

This method gives liquidity, growth and protection.

Step 5 – Review Your Insurance and Emergency Plan
If you don’t have health insurance, take now.

Don’t depend only on cash for health issues.

Also, keep Rs. 5–10 lakh in FD or liquid fund as emergency buffer.

Emergency plan must be separate and untouchable.

Step 6 – Don’t Lock Into Real Estate Again
Flat resale market is slow and uncertain.

Rental yields are poor and taxable.

No liquidity, and selling is slow.

Property transfer has costs and legal work.

Mutual funds are faster, flexible and manageable.

Step 7 – Plan For Goals With Purpose
If you are planning for retirement or child education, link funds accordingly.

Don’t invest randomly. Purpose-driven investment brings clarity and focus.

Mutual funds offer customised plans for each goal.

Align investment with specific goals, not just returns.

Step 8 – Get Guidance From Certified Financial Planner
You are dealing with Rs. 95 lakh.

Tax law, mutual fund selection and risk balancing must be handled properly.

Take professional help from a Certified Financial Planner.

Use an MFD with CFP credential who understands your life needs.

Avoid decisions based on hearsay or internet shortcuts.

Finally
Selling your flat now is a smart decision. The age of the property, low rent, and poor growth make holding it less sensible. You can reinvest capital gain part in bonds to save tax. Don’t buy another flat or plot. Use mutual funds with guidance from Certified Financial Planner. Avoid direct plans and index funds. They don’t offer support or customisation. Divide your investment into short, medium and long term. Keep emergency buffer and buy proper health insurance. You can grow your money and protect it too. With proper planning, you will gain both peace and financial strength.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment