Real estate - insider story

My uncle works for one of the real estate companies in Chennai. The company has a strong political connection and so Public Sector Banks were the primary source of funding for this company. 

As sales slowly started drying up , the company borrowed a second round to pay interest for the loan initially taken. (You should not ask how these loans were taken:-) )

While this situation continued, interest rates rose and sales almost came close to zero.In normal circumstance you would have expected the builder to reduce prices. Now they have gone in for  another round of financing from a private financier with double the amount of property as collateral.

Just imagine the margin of this builder, if they are able to pay "Sooooo muchhh" interest and still sell their properties for a profit.

"Property prices keep going up " is the mantra that is held to sell property to the middle class. So, these companies don't want to bring down the prices at any cost.

Moral 1:- Builders will never want the price to come down.


One of my friends had bought a flat from this company 3 years ago for 75 Lakhs. He wanted to dispose this of for 92 Lakhs. But after trying out for 6 months, he has come down to an asking value of 80 Lakhs ( of course a big loss- considering the interest paid). Still no takers. 
The builder is still maintaining the prices of unsold flats in the apartment to market value. My friend is not able to sell his flat , the builder has many unsold flats. But my friend ha not been able to hold to his selling price for long.

Moral 2:- Selling real estate may not be that easy for an individual as you may imagine.( Brokers, Builder, Bankers manage the game)

real estate burst in inida, OMR real estate prices bubble burst, property prices down in chennai, big bubble waiting to burst.when will real estate prices come down in India chennai. real estate prices correction after 2014 elections.

Did you know ?- Facts on PPF

1) Interest rate for PPF is now pegged against the long term ( 10 year) government securities yield. ( which is 8.8% as on 30 Mar 2014). So, going forward the yield on PPF will vary with the G-sec rate . The days of fixed returns is gone.

2) Interest on PPF is calculated based on the lowest balance in your account between 5th and last day of the month. Interest is compounded annually and is credited at the end of the year. But the interest calculation is done based on the monthly balance rule stated above.( so ensure you deposit your money before 5th of every month in your PPF).

PPF- Public Provident Fund account.

Mutual funds - difference in dividend declaration- Regular and Direct plans

Of late, may mutual fund have declared dividends. If you have been wondering that your scheme ( direct) was treated differently from the other for dividend declaration, here's the reason.


No dividends in yourdirect plan?
Don't worry on this count, as thereare valid reasons regarding realisedgains; look at other factors, too

Investors of the HDFC Prudence Fund direct plan received a
dividend of ~1.25 a unit in March. But investors in the regular
plan of the same fund received a dividend of ~3 a unit. Similarly,
in the ICICI Prudential Tax Plan, the direct plan declared a dividend
of 1.5 per cent a unit, while the regular plan declared a dividend
of two per cent a unit.
HDFC Mid-cap Opportunities Fund declared a dividend of
~1.75 for the regular plan in February but did not declare any
dividend for the direct plan. Similarly, in January, ICICI
Prudential Discovery declared a dividend of ~2.14 for the regular
plan but none in the direct plan.
Data from Value Research says this is not a trend across
mutual funds and schemes. It is specific to some schemes. The
reason why some direct MF plans did not declare dividends or
declared less was because of a Securities and Exchange Board
of India rule that dividends can only be paid from realised
gains, says Dhirendra Kumar of Value Research.
For instance, if the net asset value increases from ~10 to ~13,
the gain is ~3. Earlier, funds used to pay a dividend out of these
gains. Sebi has now said the dividend can be paid only out of
the profits the fund makes, by selling shares and booking profits.
So, if the fund makes a profit of ~1, it can pay dividends only
out of that ~1.
Credits :- Full article on link - 

Know your #PSU banks- how responsible are they with your deposit money ( #FD)

"According to a August 26 (2013) finance ministry note, the NPAs of public sector banks (PSBs) have gone up by 4.39 per cent with the total amount clocking over `1,76,000 crore. The amount is equal to the total budget of health, education and rural development of the country put together. The government owns majority stakes in PSBs and it is responsible for the money deposited in their accounts. If we add the NPAs of the nationalised banks, including the SBI group, the total figure is a whopping `3,50,000 crore, which could easily finance India’s military and internal security expenditure." ( Did you know this???)

The finance ministry has pointed out four major reasons - current macro economic situation, increased interest rates, lower economic growth and aggressive lending by banks - responsible for increase in NPAs. Among the measures to recover money from defaulters, the ministry has advised PSBs to appoint nodal officers for recovery at each zonal office and Debts Recovery Tribunal (DRT). The banks were directed to conduct special drives for recovery of toxic assets and to constitute a board-level committee for monitoring of recovery process. “The government has instructed public sector banks that write-offs should not be more than recovery,” the ministry said.

"Banking" on an engineering degree.

When I was driving out of Chennai towards a temple town suburb ( early monday morning), there were huge traffic blockades. Most of the vehicles occupying the road were the buses transporting students to private engineering colleges.

The boom of the last decade and the massive recruitment by India's biggest body shoppers ( oops! people call them IT companies) had ensured a steady inflow of "customers" to these private engineering campuses.

 A retired senior banker was travelling with me in the car.He had just returned after a week of interviewing for a PSU bank recruiting clerks.He told me that at least 60-70% of the candidates interviewed by him over the last week were engineering graduates. 

While this was initially shocking for him, he got accustomed to the idea over the period of  selection week.He narrated tales of candidates who couldn't clearly explain about their choice of engineering education. Many had gone through the degree for their parents sake and most of them had even borrowed heavily to enroll for the "coveted" engineering degree.The person also narrated tales of people working for IT companies who were willing to join the bank as clerks.

The salary paid for bank clerk's  ( which is not huge by today's living standards) was a big draw for the candidates who had applied for the job.

The banker said that while he had nothing against engineers becoming clerks, he said that they could have been wiser with their educational choices instead of falling in line with the crowd.

This career jam seemed much more severe than the hurdles that the sub-standard engineering colleges create on the road!





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