Chennai real estate bubble has burst

This statement may be applicable to all of the metros in Chennai, but more specific to Chennai real estate-
More than first world prices quoted for worse than fourth world infrastructure!


The following is my short take on the current Chennai real estate scenario.

At the outset, if you make web enquiries or talk to a broker you may get a feel that the prices have not gone down. But the reality is different.Look at the following stories that I know of

1. Many apartments launched on the OMR almost /. 7 years ago are still not fully sold and they are not fully complete in terms of construction either ( in terms of the amenities promised).The prices quoted are almost 50% down if you adjust for inflation.

2. In a building that I know in Adyar, a new 2 BHK apartment (1100 sqft) is quoted at 1.8 crores for almost a year now. The rental yield for this price is 1.5% at the max. There is a big garbage dumping place and a sewage stream within smelling distance of this apartment. 4 of the 6 flats in this building are waiting for sale for more than a year now. ( For this price you may actually find apartments in New York, Singapore, Malaysia, Dubai or even some European countries!)

3.One of my friends who bought an apartment in the city for 51 lakhs ( 5 years ago) wanted to sell his apartment for 90 lakhs. Finally he had to settle in for 65 lakhs and he was lucky enough. This apartment was flooded till the first floor during the Chennai floods. After the floods, the price could have gone down further.

4.A suburb which was flooded ( built in a lake bed) like hell is seeing exodus of tenants while the owners are left with their house along with huge mortgage payments for the next 10, 15 years.

5. Couple of my friends are frustrated as the possession dates of their apartments have been pushed indefinitely ( from 2014->2015-> 2016 now)

2015 has seen the beginning of the down fall.With state elections coming up in 2016, a lot of money locked by politicians need to be taken out.This might also pull down the prices further.

The reality will get more apparent to all  in 2016! 

Oh my God! Look at these investment advices..

One of my friend called me to ask for my second opinion when he had these investment options offered to him.

First my friend was visiting his auditor ( Chartered Accountant) for some income tax advise. the Chartered Accountant suggested him to avail some good investment options from LIC ( pension plans).He also offered that it can be done through an LIC agent known to him.( His wife???)

Second my friend visited his bank to get a tax saving fixed deposit for his mom. The Manager of the PSU bank almost pleadingly forced him into buying a policy where he had to pay some amount annually for 5 years and after that he would get pension from the tenth year onward.

Last he visited a well known financial service provider for investing in an ELSS scheme.There he was lectured on the virtues of a pension policy from a private sector insurance provider.

In all of the cases, people were force selling him some insurance policies just for the sake of some hefty commission!

When the true RO (return on investment)was calculated for all of the schemes . it was less than savings bank interest currently being offered.

In none of the cases, the people selling these schemes were aware of the underlying securities in which the premium will be invested.

None of the parties who were selling these products had any true personal finance knowledge. All of them (except the Shattered accountant) were genuinely doing their job ( for what they were being paid for).

My friend at least had the guts to ask some basic questions and asked for a second opinion. if someone blindly makes an investment based on such random advises, they get tied to poor quality products due to their financial illiteracy.

God only can insure the investors from getting trapped by the insurance agents and insurance companies.

Happy New Year 2016 !

The best seller she wrote - Book review

This book is from Ravi Subramaniam who has published thrillers based on banking industry in the past.Similar to Ravi's other books the story revolves around a banking industry executive with an IIM background.

Here's an excerpt from the book , before the review 

The following are review comments provided by a publisher to a new author in the book.

"Suggested alterations to Shreya Kaushik's untitled book

a) Change Aditya's name to something more rustic . The name does not suit the character.
b) Detailing of locations in the book needs to be fleshed out. As of now it is very elementary. the average reader will have to be told what those locations stand for. Take a look at pages 4,89,112, and 165
c)The book is short. Can we look at adding another 15,000 words? We need to have a book of at least 200 pages. Readers will hesitate paying a good price for something less than that.
d)Reduce the gore in the rape scene. While it is very hard hitting, it might put off many.

There were a few more easy to manage points on the list................"

Now the review of the book on similar lines

1) For God's sake please stop using the name Aditya .The banking industry could have been left aside in this book.The theme is more towards publishing and a few Indian author's share this background. But some creativity could have been shown here instead of trying to resemble some real life authors and take some mileage out of it.

2) Will someone who has good writing talent and confident, with a decent background stoop so low for getting a book published ??? or to win a chairman's medal at IIM ( I don't know, The plot seems to be too weak)

3)The story can actually be written on the back of a bus ticket.( that's the reason for not talking about the story in this review) But did the author make it to 350+ pages because of the fact that readers need value for money. God. The story line is very much predictable once you read the back cover. Sanjay's conspiracy plot doesn't fly beyond a point and his ultimate motive is not very convincing..

4)All of these writers with a banking background seem to rely more on "Steamy" scenes in their book.Should really try to come out of this typecast and write something neat.

5)References to ebola, iphone backup, etc seem highly unconnected to me. Not enough research has been done to get into some interesting aspects that can keep the reader hooked.

The only thing that I liked in the book was the fact - " Indian MNC banks have to simply comply to the orders of HQ and cant quite stand to any decision made by them.( ref. closure of national bank -wealth management division in India ). Probably this is the reason that a lot of high profile bankers find time to write and eventually become full time authors.

In short , a below average book with a weak plot and a very very thin story line written with a lot of words!

I am reviewing ‘The Bestseller She Wrote’ by Ravi Subramanian as a part of the biggest Book Review Program for Indian Bloggers. Participate now to get free books!

Cash back offers ! Not so transparent!

I am not a great fan of cash back offers. But during this year, I made some purchases online for which some cash back offers available.

1. The first purchase was on Amazon for a cash back tie up offer with SBI cards. The offer was about 5% cash back and the cash back was to be credited my my card account after a certain period.
I did this purchase in may and I was supposed to get this cash back by a certain date in August. When I checked my account after the stated date, there was no cash back,. 
I wrote a mail to both of them and my cash back got processed in a couple of days.

2.The second purchase was on Makemytrip with an Amex card. Here a cash back was promised within a certain time frame. Got an SMS stating that cash back has been processed. But there was no real cash back in my card account for 15 days after the SMS.
I wrote to the card company and got the cash back into my card account.

You may ask, so what?

Is this a standard industry practice that cash backs are offered only to those who "remember and ask"?. How many people will track down the cash backs due to them after 30-90 days of their purchase?
Why cash backs aren't offered instantly?

Please track down your cash back offers until you get the "cash" into your account.!

What do I see in the real world? # retirement planning

When you read a lot of material on retirement planning, financial independence,personal finance, etc- You actually end up being scared ( At times, Your fear is used to sell unnecessary products to you),

Not deviating from the topic , the intention of the post is not to say whether you have to do your retirement planning or not!. But to present some real life cases of retired people that I have seen in my circle..( No inferences or lessons learnt at the end..:-) )

 1. Mr. R

 Mr. R was working in a industrial estate in late 90s. He had migrated to metro city for a living. His salary was low and was only enough for a hand to mouth existence. So, there was no question of making any investment. 
During the recession of late 90's , he lost his job ( around 50 years of age). There was no real "financial settlement" from the company when he was laid off.
His son was around 18 years of age at that time and managed to get government job  which coincided with Mr. R's job loss. Mr R has been doing some odd jobs from then on. But his Son continues to do well and supports his father.
Mrs & Mr. R continue to live with their son. 

 2. Mr. S

Mr. S is 96 years old now. He retired almost 4 decades earlier. Didn't have any real savings at the time of retirement ( No house, No financial asset). But he is well supported and taken care of by his children ( who are actually senior citizens now!),
Mr. S depends on  his children and grandchildren for his small indulgences.
Mr. S continues to live with his son.

 3. Mr .L

Mr. L worked in private sector. He got an house constructed during the fag end of his career. The retirement settlement that he got was only enough to pay for the home loan and pay off wedding loans (daughter).
Mr.L continues to live in the house built by him. His children continue to pay a token pension for Mrs & Mr L month on month. 

 4 .Mr. N

Mr. N worked for the government and had built an house in a suburban area during his mid age. His investments were primarily in FDs and in Post office instruments.His retirement benefits also went into Post office instruments.
Mr. N gets an inflation indexed pension from the government. Mrs. & Mr . N live using the pension (Manage to save some portion of it) and they are not really dependent on their children for their basic needs.

5. Mr . P

Mr. P worked in a senior position in a private sector. Had purchased a few plots and some blue chip shares ( they were not blue chips when he bought them) apart from his primary residence with the savings. ( Mrs. P was also employed). With the Equity/real estate boom of 2002-2008, his net worth shot up and was able to make some decent profit .
Mrs & Mr.P comfortably live in a suburban villa. Mr. P continues to hold some of the investment he made during the mid 90s.

Are equity oriented balanced fund safer bets??

Based on valueresearchonline screener, I filtered the top  "Equity oriented balanced funds" and top "Equity funds excluding sectoral funds" based on last 10 year returns as on 15oct2015. Here are the results.

Considering the risk reward proposition, I think Balanced funds are safer bets ( as they are should supposedly be a able to give a better downside protection, apart from automatic asset allocation benefits between debt and equity plus same tax treatment as equity funds).

The returns from equity funds don't seem extremely superior to balanced funds. My take- unless we see a 2003-7 kind of a bull run, the performance differential between these two categories may be minimal. In a downward/ side ward market, balanced funds might even do better!

# Note:- This is not a recommendation to buy balanced funds. Investors are supposed to consult a financial advisor or do their own research before investing. Past performance of funds cannot be extrapolated to the future ! :-)

Thank God it's Monday #TGIF

Yes, you read it right - Do you thank God on mondays??.

I attended a talk in a professional forum today, it was on the topic "Holistic workplace".During the presentation, the speaker quoted some survey that said 66% of the employees around the world are "disengaged" and are not happy to go to work.( Rest 34% ,would be those who had miserable lives outside office and would have preferred devil over the deep shit, I thought :-) )

Coming back to the topic,I have had at least 10 -15 people who had told me over the  last couple of years  that they hated the job like hell. At least 60% of them had HUGE portion of their net pay being paid as EMI ( Car loan, Home loan, EMI for the latest gadget, personal loan to buy an unapproved plot, etc,etc). The latest conversation I had on EMI ...
(EMI = Easy Money from Idiots for the business people)

Ms. J: Hi IM

Me: Hi, How are you doing

Ms.J: Just finished a meeting with the CFO, he was all rude. Once I complete the Home loan EMI ( around 60 lakhs) outstanding, I would quit this job and mostly stop working thereafter.My husband's income is more than enough for us ( except for the loan)

Me: Oh is it??

Ms. J: True

Me: How much is the house worth?

Ms. J: 1 crore 

Me: Then why don't you sell that house ( where Ms J doesn't stay and it was fetching 15k ( EMI  > 60 Kpm) as rent per month- she never ever plans to get there), Short close your loan, Invest 40L which will provide you a monthly income if you need or let it compound.

Ms. J : Oh no! that sounds like a stupid idea. I will loose rental income, tax benefits, appreciation, blah,blah, blah...

Me; Fine , then why you feel that EMI and loan is a burden then?

Ms. J: Oh shit, I forgot ... I need to run to a meeting.

If you are a shareholder of a GOOD bank that lends to retail, you can very happily proclaim- "Thank God , it's Monday" . #TGIF. 
What constitutes a GOOD bank is a bigger story :-) and would need to write a book on that!!

Things I wish I had known 15 years back!

( Warning :- This article is loaded with  "Hindsight bias")

I have been an avid saver and investor over the last decade. I have immensely benefited from my saving and investment habit. Looking back, I think I could have done better in these areas. ( Not an exhaustive list but the things that are on top of my mind at this point of time)

1. I should have "fully loaded" my  PPF  account from first year.

I opened a PPF account 15 years ago( good decision). But I didn't fully invest into it every year. During the initial years, I kept PPF account active by doing some minimum investment. NSC or ELSS was my preferred choice for parking the money. The reason being "15 years in PPF" looked "too long " for me.
I probably didn't understand the power of compounding and also that PPF is more tax efficient than NSC.
This mistake was corrected a few years back and now the PPF account is extended for the next 5 years :-).

2. Choosing growth option in Equity fund.

During initial investment years I thought , Dividends from equity funds was the most efficient way of "profit booking"  a.k.a risk mitigation and it was better than growth plan. But didn't realize that in effect , dividends also broke compounding and selling units of growth option was the best way to book profits , if at all needed.

Now, most of my Equity MF investments are under growth option ( Direct plan- learn more)

3. Should have avoided more money in tax inefficient FD.

Bank FDs were my favourite investment to start with.
FDs are the least efficient way of investing for people in higher tax bracket. It doesn't help to beat inflation and no indexation benefit is available for FD investments.Having all your debt investments in FD is tax inefficient.

Of late, I use debt vehicles that defer taxation till withdrawal.

4. Having too many accounts.

I  used to open one SB account whenever I switched jobs and wanted to hold all the five star funds ! Attractive bank FD rate hoardings led to many banks for opening FDs.

Having too many accounts eother it be SB, FD, demat or MF folio makes life difficult for you. Simple is always better!

Realising this, started closing  many accounts and consolidating folios. Still some more work left here!.

Real estate debt levels #simply_scary

Real estate euphoria is slowly dying and the developers are facing some sort of difficulty- Most of us know this from the reports that we read.

Today, I happened to have a conversation with a person with a RE insider during my train journey and it was nothing less than scary!
  • One of the RE company is having debt up to Rs 1000 crores while the paid up capital as per books is below 20 crores( the actual capital got in by the promoter is far far less --- :-( , that should be another story)
  • The company has been using one bank debt to pay another cyclically and so on and they are managing this through their "contacts".
  • One famous private sector bank which is the darling of the stock market is keen on re-financing one of their loans on the condition that they will be the preferred partner for retail loans if and when they sell the flats. The logic being that retail loans seldom go bad!
  • Also got to know that the company had previously "pleased" a lot of people to get the loans.
  • Even if the company manages to sell all their existing stock and WIP at current prices, they will be able to manage only 50% repayment of the debt. 
Not sure what if the RE bubble burst, a few banks may actually go bust. ( But for all retail investors,Fixed deposit seems the safest investment ;-) )

NPAs from real estate and infrastructure sector can play out more differently than what we can predict.

Fingers crossed on what will happen and how stock market would play out eventually.

At least, I feel very very scared!!

Multibagger stocks of tomorrow

1.Which is a good stock to buy?. 

2. I want to do SIP in quality stocks as a long term investment, which are the good stocks to choose from?

3. Please help me identify some good stocks to buy.

These are some of the commonly asked questions that is being asked in some of the  web forums that I have been visiting.

There are many enthusiastic people who reply with answers like 

1. Choose L&T, HDFC bank, Asian paints , etc. These stocks have multiplied many times over the past decade, so they will continue to grow

2. Buy Eicher Motors, this stock has been a multibagger and Vanguard or someone has recently bought a stake in this company 

3. Buy Company XX because ace investor YY has acquired stakes in it.....

such answers go on!....

This takes me to some discussion a few years back (2006- 2007/08) like

1. Reliance power IPO is a great investment because the stock of the group companies have always made investors wealthy.

2. Unitech has yielded X times return in short span of time. That has been a jackpot!.

I am not trying to say that the answers mentioned above  are correct or wrong. The post is  not to compare the quality of stocks mentioned here and do a performance analysis of the past or prediction for the future.

The message is to say that nobody knows how any stock will perform in the future. Saying that investment in a particular company "can never go wrong" is foolish .

Making an investment decision purely based on suggestions from a web forum can prove to be disastrous. If stock picking was so easy, then you would have had billionaires all over!

Return of capital is more important than return on capital. So, please make right choices with your money.

If you ask me " How to make the right choices"... my answer is " I don't know the perfect answer" :-) !


If you make any decision to buy or not buy any of the stocks that are mentioned in this post, it will be " your decision" and you cannot blame this post for any losses or loss of  profit.:-)

 I am not a SEBI registered analyst. While writing this post, I do not own any of the shares (direct equity investment) that are mentioned in this post.This is not a recommendation to Buy-Sell-Hold any of the stocks mentioned above.

When will sensex reach 100000 ? #sensex@100000

Sensex will definitely reach 100000. This is like saying " you will die one day".

"When will sensex reach 100000? ", this question has been lingering in my mind for quite some time now. 

When I was reading this article in business standard, this morning, the following sentence caught my attention.

“We believe equities will likely be the best performing asset class in the coming decade for domestic investors. We expect the BSE Sensex to deliver annual returns of 14 per cent over the next 10 years, based on our residual income model,” Morgan Stanley says.

Based on the above , I did a linear calculation  which is presented below.

Assumption 1:- Sensex levels of 27500 for 2015 (dont ask me "how", I just assumed the current levels)

Assumption 2:- Sensex level  will grow 14% year on year in a linear fashion- (linear growth  is not going to be a reality - we know about volatility, average return, standard deviation, etc )

Year Sensex
2015 27500
2016 31350
2017 35739
2018 40742
2019 46446
2020 52949
2021 60362
2022 68812
2023 78446
2024 89429
2025 101949

So, by this calculation you can expect sensex to be at 100000 in another 10 years . But  looking at the current trend of EPS growth, 14% pa growth  may remain a dream.
on the other hand, if growth picks up , we may reach there faster (irrational exuberance!!).
In short, no one knows the  correct answer!

Disclaimer:- This post is not intended to advise anyone to invest in equities.Look at it only from an academic/ entertainment perspective.

The Game of Life #Ramayana #BookReview

Shattered dreams is part 2 in the series "Ramayana - The Game of Life".

When I received this book , I had very little expectations in terms of the content. Having read Ramayana multiple times , I didn't expect anything different or fascinating from the book. I hadn't heard of the authors previous work on the same tittle ( prequel). But the experience of reading this book turned out to be positively surprising when compared to my expectations. To put in simple words, this is one of the best books that I have ever read on "Ramayana".

"What do you do when you are informed that you will be made the emperor of a Kingdom one fine day. Do you maintain your poise or jump in joy. Do you worry about the huge responsibility that comes with the crown or look forward to take up the challenge. When you are approaching the situation very positively and give your 100% in preparation, what if there is a reversal of the decision. Do you blame the  people , fate or go around lamenting or Do you accept this decision whole heartedly. And when the decision to take away the crown from you is combined with a decision to send you to the forest for 14 years, How do you handle the situation?"

The author brings across such questions along the story line and in the process reveals why "Rama" is an incarnation par excellence. Rama's " equanimity of mind" is very clearly elucidated by the author in the process of story telling.

The finer aspects of all the characters are brought forward very easily and lucidly by the author. Sumanthara, Dasaratha, Kaikeyi, Kaushalya, Sumitra, Sita, Lakshmana, Urmila, Bharata, Sathrugana, Guha , Bharatwaja, Atri, Anusuya - All of these characters leave an impact on you for ever. 
 Most of the characters do get angry , do get judgemental , emotional, et all but all these turn positive as these emotions are displayed in a pure selfless spirit.The Love for Rama shown by the people of ayodhya and those around him are very clearly put forth by the author.

The "Notes" at the bottom of the page as the story unfolds is one of the key attraction of this book. 

A few samples.

"The gift of health, fearlessness, talent, beauty and experience of joy is the result of grace. But real grace lies not just in possessing these qualities but laso in being grateful for these qulaities. The highest manifestation of gracefulness is gratefulness"

"Past mistakes are like a man dressed in black running after you with a knife.No matter how fast you run away from the past, it catches up with you.And when it does, it plunges the Knife right into you, causing suffering.When you know that your present suffering is related to a past mistake, shame is replaced with guilt"

"Uncertainity becomes a joy when you welcome flexibility instead of set expectations"

The author has done extensive research on Ramayana and that is clearly visible in the output.
Overall the book is a must read for all . I definitely plan to read this book again.!

I would give the book a 4 star on a scale of five :-)

This review is a part of the biggest Book Review Program for Indian Bloggers. Participate now to get free books!

Benefit of #direct mutual fund #investing

From 1st of January, 2013 SEBI introduced the option of investing in the "Direct Plan" of  the existing schemes of mutual funds.( When you send your application to the fund house directly without a "broker code" or transact online without a broker code - it is called a direct investment)

Wanted to check how the "direct" schemes have fared over the "regular" schemes. Roughly for the two year period, the following difference is seen in NAV between direct and regular schemes of randomly chosen equity MF schemes.

Please note that although the percentage difference might look small,the benefit will be seen more" clearly" depending on the absolute sum of corpus invested in the schemes.Example, investor having more than 1 crore in a scheme would have saved more than 1.5 lakhs in two years.( savings till date- not looking into future savings) 

If you know to choose the right schemes ( it is not as complicated as knowing the right "stocks"), you should try and opt for direct investing in mutual fund schemes.

Fund- Growth Scheme Regular Direct Diff* %
HDFC Top 200 352.025 356.157 1.17%
ICICI Pru Dynamic 188.7277 191.4078 1.42%
UTI Opportunities 49.2846 50.0483 1.55%
Franklin India Bluechip 347.7465 353.3355 1.61%
Reliance Growth 786.723 797.0294 1.31%
Sundaram Select Midcap Fund 323.8099 327.5543 1.16%
Birla Sun Life Frontline Equity 161.57 164.3 1.69%
* Difference in returns for the period 1 Jan 2013 to 16 Jan 2015
Direct schemes were introduced on 1  Jan 2013
Wishing you a successful "direct" investing.

7.5X in ten years

How my first equity (mutual fund) investment has fared?

  • Almost ten years since I made my first equity mutual fund investment, the amount is now more than seven times the original investment after a lot of ups and downs. ( CAGR- 22.7%- tax free)
  • This was an NFO investment and the product was "sold" to me. In recent years, I am not a fan of NFOs.
  • Even if the markets fall by half now, the investment would have grown 3.5 times, which is not bad
  • Key learning during last 10 years
    • Direct equity investment is not easy for an individual investor . Need a lot of time, research and also luck to beat the market.
    • Investing through  diversified equity fund or balanced funds with a track record ( through SIP) is one of the easier option available to retail investors.
    • Dont track market news on a day to day basis.
    • Have very reasonable expectations from equity market in terms of returns (inflation + 2-5%).
    • Time in the market is more important than timing the market- but if you buy any asset with a high valuation ( including blue chip shares or equity MF), you may have to wait for a very long time to even  recover your capital. So, try to practice low P/E or low P/B investing which is easier said than done.
    • Understanding risks involved is very important before investing in equity - Volatility, average return, standard deviation ,etc.
    • Finally, Power of compounding is amazing. Experience it- to realize it :-) .
  • Happy new year and happy investing!
This post is not a recommendation to buy any mutual fund.


Simple Indian Food - Feel @home ( Best veg food blog )

" A Ship is safe when it is in Harbour, but the ship was not built for that"


These are just opinions/ ideas exchanged. No one can claim us responsible for any investment failures /losses based on the ideas expressed here.

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