Real estate bashing

It has been quite a while since I posted. What would be a better way to start out than providing a link that bashes  current real estate prices. ??


"Anmol Choubey, 35, a general manager in a media company, has lived in Malad, north Mumbai, on rent for five years. Despite pressure from his parents and wife to “settle down”, he has no plans to buy a house in the foreseeable future. To him, it adds up. “I want a certain standard of living, certain amenities, certain kinds of people as my neighbours, certain kinds of children to play with for my son. I get that here for a rent of R
s. 20,000. The 10% hike in rent written into my contract gets covered by an average 15-20% hike in my salary every year. To buy the same place, I’d be spending Rs.80k as EMI on a housing loan, apart from exhausting my savings on down payments. If I try to lower my EMI, I will end up moving to a place I don’t really want to live in,” he explains. He first rented the place in Malad when he worked in that area. Today, he works in south Mumbai. “Tomorrow, I may move closer to work, or out of town, or out of the country. I don’t see why I should be tied down by a large financial commitment,” he says."

 Another one..."The sense of ownership of 850 sq. ft has come at a price: “I do not remember the last time I went to a pub. I do not own a credit card. I dine out sometimes, but I do not go to a fancy restaurant. I live a simple, hermetic life,” he says. With a 

 57 lakh loan, he even questions the cost of his food. To what end? “I don’t foresee myself living here 10 years from now—infrastructure, water, traffic—this is not the dream. Imagine having children in this state! I can’t even think about it"

Read the full  article at Livemint

Impact of raising interest rates.

RBI has been increasing the base for interest rates quite often in 2011. This measure is primarily aimed at containing inflation.

Inflation has already had a severe impact on the middle class. If one is paying a home loan under floating rates, their EMIs are bound to go up.

If the impact is severe  on you and you are wondering what to do, here are some possible suggestions.

1) Have a look at your budgets and actual expenses , determine the areas where you can cut down your expenses ( nice to have expenses). If you have not been budgeting or recording your expenses , this is the right time to start doing now.

2) If you have had any decision to purchase some electronic gadget or a home appliance, pull of the purchase under the carpet for some time.

3) If you are using a credit card, put that in a locker for few months , so that your impulsive purchases can be avoided. Moreover, you tend to spend less when you pay through cash ( when compared to a card or cheque payment).

4) Pre-pay your loan as much as possible . Spare money ( except that kept aside for contingency) should be used to pre-pay your loans and don't even think of investing with an idea to make quick returns.

5) Finally, be prepared for another hike and make a provision for that too.

One simple question

I was being followed up regularly by a company (where I hold a demat account) for an attractive investment option. When I asked for details, I got to know that ' It is a single premium product' and the returns from the product has been around 16% last year.

One more ULIP sale. I asked them one simple question. How much of the premium would actually be invested in the scheme??. The answer was that regulations on ULIP have changed and the invested amount has actually gone up. I wanted a quantified answer. If  I am say investing 1 lakh rupees into the scheme, for what portion do I get NAV allotted?

The answer was 94000. 

i.e. Out of the 1 lakh , I would invest ......The units allocated would actually be 94,000. Based on past returns , If the fund manager provides 16% returns next year then I would actually get the return of 16% in 94,000. (((6,000 gone somewhere immediately on investing  and my investment actually starts growing form 94,000)))

So, when you are sold any product ask this simple questions.

" How much of my money will actually be invested ??"

Ensure it's somewhere around 100%.  :-) and never club insurance with investment.

Addicted to subsidy !

 Pre logue :- I know, many of the readers may not like this post !!!

Whenever diesel, petrol, kerosene or gas price increases, there is a hue and cry created in the media. People talk about, how government is insensitive to the burden of the common man.Many want the government to roll  back all the taxes that the government charges on petroleum products, some talk about how cheap oil is in other countries and many tell that cheap fuel is their fundamental right!!!.

The world has been running on this fossil fuel for quite sometime now. The demand for this is increasing in leaps and bounds in a growing economy like India. The prices to the consumers should actually reflect the international crude prices. I do not want to comment on tax structure of petroleum products alone ( we need a separate article to talk about taxation in India).

The international crude prices increase not only based on demand but also on speculation. If we tag our retail prices in tandom with international prices, then the high price would automatically pull down demand. The cure for 'High prices' is always high prices. We should follow examples of countries like Denmark where petroleum products and vehicles for personal use are taxed heavily., This  in one way would reduce the ever increasing traffic :-)

Good public transport systems, Penalising single person driving (a car/four wheeler), Encouraging cycling in cities ( again Copenhagen has > 30% of population commuting by cycles), Heavy investment on alternate source of energy ( esp. Solar power for India) are the need of the day. We need to fight for all this instead of crying about increasing prices. We need to make our growth GREEN and SUSTAINABLE.

I would strongly suggest the reader of this blog to read the book "Hot, Flat and Crowded" by Thomas Friedman, If you have not already done so.  ( In the context of oil prices).

Finally , Never ever expect any SUBSIDY from the government in the long run. It is not good for the progress of the nation.

Advertisement and product/service quality

Most of the purchases that we do or services that we avail are determined by the brand image of the product/service. Brand image is primarily built by advertising, the feedback that we hear from others , brand ambassadors, our previous experience with the product/service, etc.

However when we haven't had personal experience about a product or service , or do not have someone who can share their experience reliably with us, we may get carried away by the advertisement image.

There is a corporate chain from the health care industry who advertise about their " caring " attitude towards the patients . Their advertisements are flamboyant and they promise 'heaven to earth' of possibilities and 

' Why worry , when we are there' kind of an image in their advertisements.

When one of my relatives availed their service, it was pathetic. The 'care' displayed by their staff was not even basic and the staff weren't well trained to live up to the image created by the ads. The treatment ended up being substandard and the person had to shell out 200% extra over what a normal competitor would charge.

So never ever get carried away by the advertisements alone in making a decision. This is just a sample ( "We have ads promising to make children 'tall', Guys get girl friends at the whisk of buying a deodorant and so on). Of course, it's the job of the advertisers to create a larger than life image of the companies to the masses.

Be a prudent customer. Don't fall an easy prey to the BIG advertisers. Well, it is easier said than done in a world which revolves around on advertisements ( including this blog :-)