Spend, Save and Invest Smartly

Growing Rich One Step At a Time

Invest Invest Invest.....This is a saying which one hears all the time. An investment in stocks is like a rising tide which lifts all boats. When that tide rises your boat better be in it. Isn’t this an age old saying drilled in our head? Land appreciates like no other investment in India The population boom is on and India will always have a shortage of land."As The Landlord Sleeps He Grows Rich". One has heard this saying so many times that one can remember this even in ones sleep. But are these investments really that easy? Should One Just Buy Whichever Stocks One Wants? Should one Wear His Heart On His Sleeve and invest heavily in sectors towards which he is highly biased. What about an investment in land? Should one just buy whichever land one sees based solely on emotions or should emotions take a backseat to sound logic. This is a dilemma which worries each of us day in and day out. Is there a solution to this problem? "Yes" Financial awareness and an investment in financial knowledge is the solution to that never ending problem. An investment in knowledge for oneself is the greatest investment one can make. Another investment equally important is time."Time Is Money". An investment in financial knowledge needs to be made at the right time. What Better Time Can This Investment In Financial Knowledge And Awareness Be Made Than In Ones Youth. I would like to remind you that the team of Financial Planners at Moneymindz.com are always there for you to plan your financial needs in a most effective and efficient manner. You can explore this unique Free Advisory Service just by giving a missed call on 022-6211-6588.

Don’t Dance On A Volcano

One notices an extreme volatility in the stock markets in recent times. On one day the Bse Sensex crashes by 500 points. The next day it rises by 500 points. What Can One Do Under Such Extreme Volatility? Doesn’t one need to ring fence ones portfolio against volatility in the stock markets in order to protect all that hard earned money invested in the stock markets. Of what use is filling a leaking bucket with water. All ones pursuit towards the goal of immense wealth will come to nought. Can One Adopt A Defensive Strategy In a Highly Attack Oriented or Growth Oriented market such as an equity market? The answer to this is a resounding “Yes” .This is similar to conquering enemy territory and holding this territory against the enemy counter attacks. This provides a cushion or a fence around our hard earned investments and this helps to protect them in times of volatility. This prevents a hard landing on rocky ground. One should always invest part of one’s portfolio in defensive sectors such as Pharmaceuticals and Fast Moving Consumer Goods. An investment in these stocks leads to very less fluctuations in periods of drastic fall in the markets as is what is happening a lot in recent times. Similarly in periods of a spiking in stock market indices the rise is not very high. This is a trade off which one has to make. In difficult times which are the first purchases which are shelved. Isn’t it that expensive chocolate, costly perfume, purchase of a new car or laptop, or expensive furniture? It definitely isn’t the toothpaste. So Why Does This Happen? One cannot cut down on medical spending and basic purchases like toothpaste, soaps, cosmetics, cooking oil and washing powder just because there is a recession. This is a reason why these stocks are termed as defensive stocks as they hold up in hard times .Let us consider an investment in interest rate sensitive stocks such as infrastructure, automobiles or banking. If one were to notice a few months back in rising markets these stocks hit the roof. Nowadays they languish at the bottom. Cyclical and commodity stocks such as metals and capital goods move in a direction opposite to that of the defensive sector stocks. The metal stocks in India have been severely hit in recent times and coupled with Political factors mining and metal stocks have hit rock bottom. The defensive stocks have a Beta value less than 1.0 and are classified as less risk and less return stocks. This Helps One To Easily Identify A Defensive Sector Stock.

Follow The Heart But Heed The Mind

So how does one navigate the deep waters of the stock markets. One should go for a combination of both attacking and defensive sector shares. In periods of great boom in the stock markets one will notice that stocks with Beta more than 1.0 or stocks of high risk, high returns will rise rapidly. These could be automobiles, Infrastructure, Metals and Banking Stocks. These stocks are very necessary for one to enrich oneself and become a Millionaire."A Single Day Of Sorrow Can Make One Forget Many Years Of Joy". It is in times like these that one remembers those defensive stocks. A healthy combination of both growth and defensive stocks is necessary for a good portfolio. "We Are What We Repeatedly Do. Excellence Is Not An Act But A Habit".

A Single Plot Of Land Is Greater Than Furlongs Of Sea

Companies in Real Estate mainly focus on luring customers towards the purchase of Apartments and Villa’s. There is very little focus on the purchase of land parcels or land plots. No doubt the demand for apartments is very high in Metro’s and is seen rising in Tier -2 cities where the focus is on Nuclear Families. However the demand for individual homes is still high and that land plot or site can contribute to a heavy appreciation in one’s profits. However can one take a leap without a look? No definitely not.

  • One needs to see if the seller has the right to sell the land or property. The land should be in the name of the seller and he should possess the title deed a document which shows details of rights, ownership and mortgages on the property. The sale deed needs to be transferred to the buyer of the property which confers absolute ownership of the property to the buyer. Always check the title deed and the sale deed with a good lawyer.
  • Always check the encumbrance certificate which is a very important document in property transactions. This is mainly issued for the purpose of mortgaging a property and one can realize if the property is already mortgaged .Always verify if the layout has been approved by the necessary City Development Corporation.
  • A central locality defines the appreciation value of a property. However affordability plays a very large role in procuring that dream plot. Doesn’t one know of the thousands of investors who have purchased plots of land with the hope that the next great highway, airport, Mall or some great Infrastructure project would develop in the vicinity of the plot providing supporting infrastructure. Many a time no great Infrastructure comes up in the vicinity and the plot of land’s value stagnates. Never invest in the blind hope of Infrastructure projects coming up which will boost the value of the land and property. Many Infrastructure Constructions face delays and since the plot is bought at a very high price in anticipation of an appreciation, a failure of upcoming supporting Infrastructure can be the provincial death rattle.
  • Many a time in India land plots suffer from disputes ranging from lack of clear ownership, problems related to mortgage, multiple owners, boundary demarcation issues and fights related to financial discrepancies and inheritance .Land under litigation is a common issue. Lack of digitalisation of land records in India poses great problems in India.
  • Thoroughly research the land for any discrepancies in ownership of land which might pose a problem in future and study the past ownership of the land. Also check and see if it is possible for the construction of a road to the property. Many properties are purchased in a hurry and there is limited road connectivity due to disputes leading to right of way.
  • Always remember that there are no tax sops or benefits for purchasing that piece of land. Loans are available for the purchase of land plots but at higher interest rates. However if land is purchased with the purpose of construction of a house then one can take a loan on the combined amount and that amount is available for tax deductions.

Caution Is The Eldest Child Of Wisdom
Invest In A Seasoned Campaigner

Why is so much money spent on purchasing great footballers or cricketers for clubs in India and Abroad. Surely it is the reputation. The boom in real estate in India has led to the sprouting of a number of players in the real estate industry. Many of these are unscrupulous elements who are in for a quick buck. Check the track record of the builder and opt for a seasoned campaigner. Check the current prices of good developers past projects and do a thorough research online on a new developer’s project. Take time to meet up with current customers of a project as well as local builders. A Small Investment In Time Can Lead To A Saving In A Lot Of Heartburn At A Later Period.

Finance Is The Name Of The Game

Financing of a project is another prickly issue involved in the real estate market .It is not easy to procure information related to financing of a developers project .Many developers are not so forthcoming when discussing their modes of financing as well as their financial liabilities. Let us consider a developer owns a parcel of land and makes a pre-launch in which he advertises for the construction of a residential housing complex. Buyers flock and take up apartments in this complex. Even before construction commences 20% is demanded up front from the buyers. This amount lands in the kitty of the developer .The banks see a great demand for the project based on the flock of buyers signing up for that project. Banks fund the remaining 80% of the project. The loan is routed through the buyer from the banks to the developer. The developer gets the whole amount even before the construction starts. There is a tripartite agreement between the three parties in which the developer pays back EMIs to the bank. The loan is obtained at competitive interest rates as it is in the name of the buyer. The developer agrees to pay the full EMI (Pre-EMI mainly the simple interest component of the loan) to the banker in the name of the buyer. This amount is paid from the up front of 20% obtained from the buyer .This can easily finance the interest component of the loan for a couple of years. The whole amount or the finance required to fund the construction is now in the kitty or lap of the developer. So What Happens Now? Does The Developer Commence Construction? The developer dilly dallies as he has the full amount in his kitty. No construction comes up on this land. The loan is in the name of the buyer and banks harass the buyer to repay the loan. The buyer suffers doubly as he has to repay the loan for a building which is taking an infinitely long time to get completed and there is no collateral as there is no apartment being constructed. So What Does The Developer Do With This Money? The developer buys another parcel of land with the funding amount and repeats the process. Why Does The Buyer Need To Be Vigilant? The buyer has to monitor the construction being done on a continuous basis and see that the stages of construction are done on time. If he fails to do so he is left with a huge debt which if he does not repay to the bank his CIBIL score is severely impacted.

What Is Meant By CREST?

  • Crisil Real Estate Star Ratings provides important information required for decision making for the buyer about projects in a standardised manner. The financial liabilities, essential documentation as well as the track record of the builder is given prime importance. This is an unbiased rating of the developer.
  • The quality of the project enables a good rating for the project which enables one to make an informed decision on the project of the developer and in some cases even an opinion on the project is provided.
  • It enables real time tracking of a project especially if the project is in other cities along with photographs updated on its websites.
  • These ratings might present a project in a favourable light leading to a demand for these projects.
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