List of Best Equity Diversified Mutual funds for 2010

Want to invest in the best mutual funds in India? Read on. I have compiled a short list of Mutual Funds which are top mutual funds in the Equity Diversified category. These are long-term winners in their categories and have proved their performance over the years by beating their benchmark and category average by a good margin. These are non-tax saving Equity diversified mutual funds that are large-cap oriented. Remember that I am giving a list of funds. These are funds that have more than half allocation in large-cap oriented companies and around 50% of their money in the top 3 sectors they hold. Based on these criteria, I am putting 7 best mutual funds along with analysis, some of these are very old and some are relatively newer. (last year list)

List of Best Equity Mutual Funds


Portfolio & Sector Allocation

All the above funds have returned around 20% or more in different time frames consistently, which is very encouraging when you want to invest in these funds. However our concentration this time is large-cap oriented mutual funds, we are not including funds that have a high concentration in midcap or small-cap funds. Let’s look at these mutual funds share in Large or Giant Companies. My criteria were to have at least 60%+ in Large/Giant Companies and around 50% allocation in the top sectors they invested in. We also have funds expense ratio which is around 2% for each of them. Read Magic of SIP


Fund Manager and a Brief Overview of Mutual Funds

Past performance is just one of the criteria we can look at, but it’s not enough and not a guarantee of how it will perform in the future. Let’s also look at who manages it and how these funds have done so far overall as per their mandate and investing philosophy. Please note, that we are talking about the Growth option here and not the dividend option.

HDFC Top 200

HDFC Top 200 is one of the most well-known Mutual Funds in the country. It’s an amazing performance of 26% CAGR in the last 14 yrs is proof. 10 lacs invested in HDFC Top 200 since Inception is worth 2.54 crores (non-taxable) today compared to 30 lacs in FD (taxable). Some achievements of funds are that in the 2008 bear market, HDFC Top 200 was able to restrict its fall to 45% only, which was 11% less than its benchmark and 8% less than its category. Prashant Jain is the Fund Manager of HDFC Top 200 and one of the best known and famous Fund managers in the country with a long term experience.

Prashant Jain’s Investment Approach: “The criteria that go into selecting stocks/sectors are quality, our understanding, growth prospects, valuation of businesses and the composition of the benchmark – BSE 200.”. The fund has good 20% allocation in Midcap or small-cap stocks which gives a kicker in returns.

How to look beyond short term returns in Mutual Funds

DSP BlackRock Top 100 Equity

DSPBR top 100 is not a decade old fund, but its performance is strong enough to say that it’s one of the best in the category as of now. The fund has given enough proof of its performance like even in the first year of its launch it gave an amazing 129% return beating its benchmark by an “oh my god” 29% return:). It also showed its capacity to restrict loses in the bear market of 2008  by falling by only 46% compared to its benchmark which fell by 55 %, thereby giving a better performance by 9 %. The best thing I liked about this fund is that this fund has provided very strong performance by mainly focusing on large-cap companies, the fund allocation in Large-cap companies stands at 94% which is outstanding. This clearly shows the competence of Fund manager Apoorva Shah who is managing the fund for the last 3 yrs.

Birla Sun Life Frontline Equity A

This is another winner in the long run. Over the years Birla Sun life frontline equity has consistently outperformed its benchmark by a good margin. During the market falls of 2004, 2006 and the big crash of 2008 and early 2009, This fund was able to restrict downsides better than its benchmark. The fund is largely Large Cap oriented, however the fund is known to take some risks in Midcap space and hence has seen one-quarter and its first year lagging behind its benchmark, but that was not a prolonged behavior, over all it has done great. The main reason it came to top in performance was the entry of Mahesh Patil as the fund manager in Nov 2005.

HDFC Equity

This fund is for long-term investors because HDFC Equity does not hesitate to take risks. Having a good allocation in midcap/small-cap companies, Its performance comes by being invested for long-term, which means short-term volatility in its performance. Being 15+ yrs old fund, have shown its performance over and over again, this one is for people who really like to play with mutual funds on a long-term basis. The fund manager is again star performer Prashant Jain, who took over this fund in 2003 and the fund has never looked back. Just to give you a flavor, the fund in 2009 has given 30% more than Nifty Index and in the last 1 yrs itself, it has given 42% return compared to just 15% from Nifty. You can count this one as an aggressive large-cap fund for investors with a strong heart and long-term vision

UTI Opportunities

As the name suggest, UTI opportunities are for you, only if you a risk taker and like to bet on different opportunities available in the market. As per the mandate of UTI opportunities it looks at the gaps available in the market and the sector and pics the stocks which are really undervalued and might outperform in the future. As per the fund mandate, the Fund manager dynamically shifts between sectors depending on the macro economic outlook and opportunities available in the market. This means the potential of a huge upside as well as the risk of getting wrong. After Harsh Upadhyaya took over in 2007, the fund has done wonders and has given returns double than its benchmark, which is impressive. So if you a kind of investor who likes to take chance on opportunities, UTI Opportunities should be in your Portfolio.

Reliance RSF Equity

Reliance RSF has shown some impressive performance over the last some years. However the fund is fairly aggressive in nature and is known to take risky calls whenever it finds good opportunity, despite being called a large-cap fund, Reliance RSF has large amount (45%)  of portfolio in small and mid-cap stocks at the time of writing this article, The fund did not really do very well when it started, but within a year it came on track and then showed good performance. Remember that this is a risky fund and can be actually compared to mid-cap funds in some sense given its nature of taking risks. So it might not suit you if you like to take long-term calls and want to be on the safe side. The fund is also known to churn its portfolio faster, so be cautious.

UTI Dividend Yield

This fund is really special. UTI Dividend Yield is another gem in the basket of Diversified mutual funds with a different style of investing. This is one fund, which has a woman for a fund manager in Swati Kulkarni, who has done a wonderful job in managing the fund till now. As per the mandate, the UTI dividend yield fund should make an investment of at least 65 percent of the portfolio in equity shares that have a high dividend yield at the time of investment. The fund has managed to successfully deliver on its commitment and has never deviated from its words. That’s called ethics and focus. Due to this, the fund has given a strong performance and because of its nature of strategy, the downfall is always restricted well. Ladies would like to invest in this fund given they like to play safe and it also comes from a lady fund manager 🙂 (Women & Personal Finance in India)

Which one should you invest in?

Remember that you have to take a call based on what your time frame is and which fund suits your requirement, Overall, if you are too confused in choosing the fund, I would say the best thing would be to choose any, randomly and invest rather than delaying your decision because of confusion. Another thing which you should understand that this is not an exhaustive list. There are enough funds other than these which could have been here in the list, but I have not included them as these 7 funds were the one which came on the top as per my criteria and also because I wanted to limit the number of funds to a single digit so that one can choose with less confusion. Also, make sure your asset allocation is correct

Disclaimer:  Note that these funds are pure equity funds and just because they have performed excellently in history does not make them future star performers. This is just an assumption, that they will keep doing great even in the future given their investment style and integrity in management till date. Also, you have to make sure you review your investments every year so that you throw out the laggards and pick better funds. Expect around 12-13% in the future even though they have high potential. This article should in no way be treated as an encouragement to invest in these funds. Your decision is purely yours 🙂

Comments: Which other funds did you expect in this list? Do you have other funds’ names which deserved to be here according to you? Do these funds suit your requirements?

New Direct Tax Code disappoints Investors

Update Aug 30 ,2010 , 5:00 PM   : This post should be now considered as post with old information as after DTC was tabled in Parliament , there were many changes in DTC.

Also DTC Bill has been delayed by 1 yrs and will come into effect from Apr 2012 , Link

Cabinet has finally approved the Direct Tax Code and now it would go to Parliament for approval and as per tax expert, Subhash Lakhotia is would be easily passed by the Parliament. Finally, the Tax system of our country is going to simplify after The new tax code comes into effect from Apr 2011 next year. The bad part is that the tax slabs have been revised and now it’s much lesser than what was proposed earlier (Link)

Change in Tax Slab

New Tax Slab : 10% for 2-5 lacs , 20% for 5-10 lacs and 30% for above 10 lacs

Proposed Tax Slab earlier :  10% on 1.6-10 lacs , 20% for 10-25 lacs and 30% for above 25 lacs.

Some More Features

  • Deductions from taxable income will be available for interest on housing loans up to Rs 1.5 lakh per annum
  • For women and senior citizens, the exemption limit would be Rs 2.5 lakh per annum
  • Up to 1 lacs could be saved for payments into PF and similar superannuation schemes
  • Deduction of up to Rs 50,000 for life insurance and health insurance premiums or tuition fees.
  • Securities Transaction Tax (STT) and Education cess are out .
  • Life Insurance payments and  mutual fund income are liable for 10% TDS  (source)
  • HRA is no longer available.

You should note that all these changes are going to happen from Apr 2011 (next year). For this current year, everything is same (you will get same old 80C deductions)

Why Public might get disappointed

The biggest blow is the change in the tax slab, especially investors who earn in range of 5-10 lacs per year, earlier Financial minister promised that the tax would be 10% up to 10 lacs , but now there is 20% tax for 5-10 lacs range, which means that effectively the tax paid would be 2 times of what it would have been earlier. Also even for high earning people who make in the range of 10-25 lacs, earlier it would have been 20 %, but now it would be 30 %, which is good enough disappointment:).

Here is a nice video that would give you a good insight into what to expect from the Direct Tax Code.

Comment on how you feel about the tax slab ? Are you happy about it or disappointed? I think it would be a big disappointment for a lot of people, at least personally I am disappointed by that 🙂 .

Dont Declare wrong information while taking Insurance policy

An Agent comes to your home or office and tells you about an Insurance plan. It can be a traditional insurance plan or term insurance. Being an agent, he wants to make sure, you do less work. Anyway most  people feel bored or find it tedious to fill out a long form by themselves. After all, the agent is there to do it. It’s an amusing situation, that in today’s generation, we run around all day to different places to buy our TV, Fridge, Washing Machines. We inquire from a million places, read the reviews etc., and make sure you we find out each and every little detail when we buy such products for our home or our convenience, but sadly we don’t care enough to read financial documents or fill them ourselves; documents which will help take care of our little children or family when we are not around; documents that don’t even take few minutes or an hour to look at.

Coming back to the story, this Insurance agent treats the customer as King and customer also feels great about it. The maximum he will do is sign the document (after having a super quick look at the pages, making agent feel that he actually cares about it !)  The customer is a smoker, but agent doesn’t even bother to ask. Even if customer tells him about it, the agent does not put “Smoker” in the form as it might reduce the chances of getting the policy and hence no commission 🙂

Why Mistakes Happen in Life Insurance details ?

Now tax saving is coming for the year (not the protection of family, mind you !), and the customer is ready to raise his hands for questions like “Who all have Insurance?” or “Who is adequately covered through life insurance” ? The agent get his commission and mostly disappears, and customer is happily living his life under a happy impression that he has life insurance; until one day, he dies…

The family is devastated, but time goes on and once things settle down, they go to the insurance company and ask them for the Insurance Money… and Pow! The family gets sucker-punched! . The insurance company happily tells them that the customer was a smoker, but has given false information in the documents at the time of taking the policy hence by law, they are will not honour the claim! They are correct . Read a case between LIC and one customer on claim rejection.

This happens with a lot of insurance customers. They tend to give wrong information in the documents; as giving correct information increases the premium. (This happens a lot with smokers.) What’s so wrong if company asks for a higher premium for smokers? If you are a smoker, definitely from a business standpoint (and even logically) you have higher chances of dying than a non smoker. So, it’s natural to charge you a higher premium. But, if you give wrong information in the documents or try to misrepresent anything, it means company is covering a higher risk person for a a normal premium and they are very correct to reject the claim. Read this article to understand more on giving wrong or incomplete information in insurance documents.

Comment from Insurance Company Official

Sourav Shah, a senior Manager at Aegon Religare, shares some of his thoughts for claim rejection in comments section.

Hi Manish, To give you a detailed explanation of why the plan ‘iTerm’ is cheap.

The simple reason is ‘There are no middlemen – Agent – involved in selling this product.’ Since this product is sold online there are no agents commission involved and hence the company is not paying anything to the Insurance agent and thus passing on the benefit of the low cost to the consumer. We all know that most insurance products have a commission of 30-40% in the first year premium that is paid to the agent. The reason this product is cheaper because there are no agents commission involved. Secondly, Aegon Religare is the only company that has sought IRDA approvals to sell the product online since we are very keen on providing the customers what a product that they need – a simple term plan – at a price that is affordable.

Regarding the claims ratio, Manish, the 3 customers whose claims were rejected were due to wrong declaration at the time of taking the policy. They had declared themselves as non smokers. I would request all customers who are buying a term plan or any insurance product from any Life insurer, to not hide any facts while taking a policy. The insurers build up the cost based on your declaration, so its always advisable to declare truely in order to ensure that all claims are met. And if any customer faces any issue with any isurer he can contact the insurance ombudsman and he will immediatley look into their issues. Happy buying. Manish this is a beautiful and unbiased platform that you have provided for customers to clarify their doubts. Please keep up the gr8 work.

Sourav Shah
([email protected])


How to correct the false Information ?

In case, you have provided any wrong information in your policy document, it’s almost certain that your claim will be rejected. Don’t try to fool insurance companies. They are smarter than you at figuring it out. So contact your Insurance company and give them factual information . This may lead to increase in premium or rejection of policy, but it’s a better situation than getting rejected at the time when you are in the sky.

Buying Health Insurance Policies Online

Finding a suitable health insurance policy is akin to finding a needle in a haystack. There are 21 health insurance companies in India and many offer more than one type of health insurance product. Joining the bandwagon are life insurance companies that are now offering health insurance policies as well! So how do you buy one? First, make sure you know what you need – whether it is individual health insurance or a family floater you are seeking; how much cover you need and when you need it.

How do I go about buying a health insurance policy?

Traditionally, health insurance policies have been bought either because they were sold or because of awareness among investors through advertisements. And a majority of us rely on the group health insurance cover provided by our employers anyway.

The simplest way to go about buying a policy is to get in touch with the insurers and ask for premium rates. But this has its own limitation – you could easily take a month to get all the details and the insurance agent could really be slow in his response – after all, it’s a health insurance policy he is selling and it fetches him less commission!

Go online: Another easy way is to use insurance comparison sites or aggregators as they are called. Aggregators provide a single window to compare quotes and features from multiple insurance companies and help a customer select the most suitable one. There is a whole lot that has mushroomed in India of late.
The best health insurance aggregator website in our opinion is who gives you the results in a decent interface.

How do aggregator sites work?

Once online, all you need to do is provide your age, how much coverage you need and for how long – typically this is one year with most insurers today. The portal will collect personal information – email id, city and phone number to reach out to you later on – do provide this if you are a serious buyer.

Once you enter all relevant details, you are shown a plethora of policies and you can check each one out before selecting the one you want to buy. Most of the aggregator sites will collect payment from you upfront and liaise with the insurance company who will close the deal with you. Aggregators get a small marketing fee from the insurance companies for policies that they sell online. In response to this article, Deepak Yohannan, CEO, and co-founder of iGear Financial Services says “The process of buying online insurance has been made as simple as buying a flight or a movie ticket online. In the last year, there have been considerable improvements in the online buying process.”


Suppose you are 30 years old and need health insurance for Rs 3, 00,000/- for a year. The following is a sample of the health insurance covers that are on offer. Let’s just talk about individual health insurance plans for now.
Health Insurance options in India
Imagine the time you would have spent on collecting this data and comparing it if you were to do this offline.

Filtering the unwanted

How do you select what you want to buy? Remember that the aggregator site provides you comprehensive information on each policy and even lets you compare them – some sites will allow you to compare two policies at a time while others will allow you to compare more. The comparison feature compares side by side almost everything an insured would want from a health policy – this way an aggregator site is very powerful to help you decide which policy scores better. After you have compared and selected your policies, all you need to do is apply the same filtering techniques one would use when buying a policy offline to select the best one that you will finally buy. There are a host of parameters that one could apply.

In the example above, with so many policies available with such a wide range of premiums, a best practice could be to pick a policy with the highest, lowest and midway premiums for comparison and then apply the filtering parameters. We apply two of the most important comparison parameters first. Firstly, start with the maximum renewal age as the first option – select the insurer which allows you to renew the policy till maximum age. If you want to change to a new insurer at an advancing age, this will be looked at as a new policy and will come with a higher premium. It’s best to stick to a policy that can be renewed till the maximum age. Secondly, check when all the insurers will allow pre-existing illnesses to be covered. The earlier they start covering all pre-existing illnesses, the better. Usually, there is a waiting period of a couple of years before which expense incurred on pre-existing illnesses starts getting covered.

The waiting period varies from company to company. Filter more by checking on what are the special features that are on offer and go through the exclusions with a comb. Exclusions are most important as far as a health policy is concerned – you don’t want to get a claim rejected because you did not know what was not included in the policy. Does the policy cover maternity expenses or ambulance expenses? Generally, there will be sub-limits for many of the expenses within the overall limit, for eg, room rent could be 1.5% of sum insured per day. So if you are staying in expensive cities like Mumbai or Delhi, for a cover of Rs 3,00,000/- the room rent charges come to Rs 4500/- per day. Think whether the hospital you want to go to will have a room that can be accommodated in this range. If not, you would be better of settling with a no sub-limit policy.

Its worth noting that most of the policies will cover expenses incurred a month before and 60 or 90 days after hospitalization; free annual health check claims and a 24 hour helpdesk among a host of other common services which generally should not be used as key comparison parameters.

Here is how the data looks like in our example for the highest, lowest and mid-way premium figures.

Health Insurance comparision at different premiums

Which one would you buy from the above? It’s clear that the first policy is better as pre-existing illness are covered from the third year onwards and there are no sub-limits on room rent and doctor fees – so if this meets your criteria, go for it irrespective of what the premium is.


After having selected a policy that suits you best, all the aggregator sites are pretty friendly in terms of helping you check out to buy the policy online after you have registered with them. The insurance company will contact you for paperwork within a week of payment.

Issues buying online

  • Firstly, there are many aggregator sites available in India. Not each one will cover all the 21 insurers and you could lose out on some of them. The best way around this is to use maybe 2 or 3 of them and compare and buy from one that best suits your requirement.
  • Some aggregator sites might not have the correct data! It’s best to re-check the details of the policy you have finalized with the insurer, either on the insurer’s website or offline at a local office, before buying.
  • You still need to undergo medical tests if you are 45 years of age.

Advantages of buying online?

“For starters, buying online has now become a very simple process. You do not have to go through the hassle of going through an agent, who would have a tie-up with limited number of insurance companies and may not be able to get the product that you want. The agent may try pushing a product which they want you to buy. Also, there is complete transparency in the process when you buy online – everything is there in front of you and then you can make a decision. With an agent you really do not know if some facts are being hidden and only the good part of the policy is being highlighted to you. You realize the worst when the policy document comes to you or when you start the claim process. Having said that, if the agent is a completely trustworthy person, buying online and offline are the same,” says Deepak.

So, here are the advantages:

  • You save time – everything can be done at the click of a mouse.
  • It’s cheap, you save the costs for the insurer. This is passed onto you.
  • You don’t have to make a trip to the insurer’s offices and wait for time from the agents.
  • Most of the aggregator sites are easy to use and compare – it’s a one-stop-shop to buy policies.
  • Most of these sites are safe to operate and buy a policy using card details.
  • Most aggregators have an FAQ section and “ask an expert” section which helps you reach out on queries you might have.

Quick Bites

Keep the following points in mind when buying health insurance:

  • Ask insurers for premium rates or dig the figures out for yourself on aggregator sites.
  • Do not base your decision on the premium alone – remember, the policy with the cheapest premium might not be the best one for you. Also, there is no one policy that can be termed as best for everyone. Select one that meets your criteria, lifestyle and family requirements and buy it irrespective of what the premium is.
  • If you live in a metro, take a cover of 4-5 lakhs; in a smaller city, 2-3 lakhs of cover will do.
  • Check whether your policy will guarantee long term insurability.
  • Check whether a floater plan is more beneficial for you.
  • Most importantly, check the policy wordings on what the exclusions mean to you.
  • Opt for a cashless plan.
  • Take health insurance even if you have one from your employer.
  • Reveal all your family illness history; if you hide anything, it will only come back to hurt you.
  • Buy from a health insurance and not from a life insurance company.
  • Buy a critical illness policy separately than as a rider to your basic health insurance.

Disclaimer: The views and analysis expressed are those of the author and should not be construed in any way to be the sole reason of buying a policy online. Please do adequate research yourself before buying.

This is a guest post from TheWealthWisher, a personal finance blogger who writes on

Review of ICICI iProtect Term plan

ICICI Prudential has recently launched its online Term Insurance Plan called iProtect . iProtect is extremely affordable online Term Plan whic has some very good features. Last year Aegon Religare launched its online Term Plan iTerm , but it had some limitations like no riders attached and the company didnt had much trust factor . However iProtect comes with some really great features like Accidental rider, Term upto 30 yrs , wide coverage of cities and apart from being completely online, it can also be bought by agents, corporate agents and brokers , So it you are not net savvy or dont like pure online product, you can still buy iProtect Term Insurance through offline means , however the premiums in that case can be higher compared to when you buy online,because of agents commission involved in between.

The best thing I liked about iProtect was the user interface . It was easy to operate , asks less things in the starts and you come to know about your premium just by providing basic information like Age , Term , Sum Insured etc in the start, unlike iTerm from Aegon Religare where you had to provide all the medical details and finally after some hard work it shows you your premium. Personally for me (age 27 , policy for 30 yrs) , the iProtect premium for 1 crore was just Rs 9,400 .The ICICI iProtect comes with two different Plans, one with accidental rider and one without accidental rider

Why Term Insurance is not a waste of Money

iProtect Premium Calculation Interface

Two Different Plans under iProtect

  • iProtect Option I : In this option there is pure life cover without any rider, you get the sum assured only when you die, else not .
  • iProtect Option II PLUS : In this option , along with pure life cover , you also have accidental rider , which is equal to the Sum Assured (subject to a maximum of Rs. 50 lacs) will be paid out in the unfortunate event of death of the Life Assured only if due to an accident

Other Features of iProtect Life Insurance Plan

iProtect Term Plan features

More at Document Brochure

When does the Life Cover Starts in iProtect?

The best part of the policy is that your life cover begins immediately once company receives the premium in case of non-medical cases (incase there is no need of medical examination) , However,  In cases where medical examination is  required, cover will commence from the date of issuance of the policy. Calculate your Insurance cover

Freelook up Period

A period of 15 days is available to the policyholder to review the policy. If the policyholder does not find the policy suitable, the policy document must be returned to the Company for cancellation within 15 days from the date of receipt of the same. On cancellation of the policy during the freelook period, They will return the premium paid  subject to the deduction of:

a) Insurance stamp duty paid under the policy,

b) Expenses borne by the Company on medical examination,if any

iProtect Premiums Illustrations

A) The table below provides annual online premium (exclusive of service tax and cesses, as applicable) for various combinations of Age and Sum Assured for a healthy male (non-tobacco user), opting for a policy term of 25 years.

iProtect Term Insurance premium exmaple from ICICI Prudential

B) The table below provides annual premiums (exclusive of service tax and cesses, as applicable) for various combinations of Age and Sum Assured for a healthy male (non-tobacco user), opting for a policy term of 20 years, where policy is sourced by tied agents, corporate  agents, brokers or direct sales.

iProtect Term Insurance premium exmaple from ICICI Prudential

iProtect vs iTerm Comparision

I Let us look how iProtect fares in comparision to iTerm plan. I found out that iProtect beats iTerm in all the areas.

ICICI iProtect vs Aegon Religare iTerm Comparision

What is covered under Accidental Death ?

Accidental Death Benefit: This benefit is payable subject to the conditions mentioned below:

1. The death due to accident should not be caused by the following:

a) Attempted suicide or self-inflicted injuries while sane or insane

b) Engaging in aerial flights (including parachuting and skydiving)

c) By the Life Assured committing any breach of law

d) Due to war, whether declared or not or civil commotion;

e) By engaging in hazardous sports or pastimes

2. Death due to accident must be caused by violent, external and visible means.

3. The accident shall result in bodily injury or injuries to the Life Assured independently of any other means. Such injury or injuries shall, within 180 days of the occurrence of the accident, directly and independently of any other means cause the death of the Life Assured. In the event of the death of the Life Assured after 180 days of the occurrence of the accident, the Company shall not be liable to pay this Benefit.

Premium Comparision with other Cheap Insurance Policies

Who Should Buy ?

If you dont have Term Insurance : If you havent bought term insurance till now and were still waiting or I must say “delaying” because of your laziness , this is the time to act and finally buy term insurance online .

If you are UnderInsured : You know that you are underinsured , who still not taking the additional cover, now its your time to go and buy additional cover .

If you already have sufficient Cover : Situation changes , and so does in Personal Finance, even if you are adequately insured , It would be a good idea of explore an option of shifting fully or a part of your cover into iProtect term plan , as its a cheap plan .

Open Question, This is a new plan , we are not sure of the customer care support and how well its service is, What do you think about it ?

Comments , Do you like this iProtect Plan ? Please let me know your reasons and what you think about this plan . Are you going to take this policy ?

Making sense of the market through Sensex at MRP

In the previous article, we looked at Stocks@MRP and how a stock can have a price tag. Moving further, we now discuss how the concept of Stocks@MRP has been extended even to the benchmark index :

Sensex . Also there is an example of one stock each considerably above and below its MRP. The inherent volatility in the stock markets makes stock investing to be perceived, by many, as a gamble. However, the Stocks@MRP can help us get a very good idea about the worth of a stock.

Once we know the MRP of a stock, we should buy it at a 50% discount to its MRP and sell it if goes considerably above its MRP. Then, how does Sensex@MRP come into the picture? And why do we need to find out the worth of the benchmark index as well?

Sensex markets india

Going back to History

Let’s jump back a bit in time. It’s December 2007. The Sensex is close to 20,000. The media is going gaga over the Indian economy and the movement of Sensex (up by 55% in just 9 months) and is saying that the next stop is 30,000. Everybody is eager to jump onto the bandwagon.

Fortunately, you have been a part of the rally since the beginning and have seen a considerable rise in your holdings. So, what do you do? Do you sell off and book your profits? Or do you wait? After all everyone is saying that this is just the beginning.

You wouldn’t want to look like a fool selling too early and missing out on the further upside, would you? You stay in and within a few months, you regret your decision.

The market crashes (falls by 50% in 1 year), your stocks tumble and a large portion of your wealth is wiped away. All your companies are still doing well, they are still fundamentally strong. Yet, you have suffered because of the market’s over reaction to the sub-prime crisis.

You may have not lost your capital, if you bought your stocks at a discount to the MRP, but your profits have definitely vanished!

Sensex@MRP concept

Warren Buffett, one of the greatest investors in the world has said, “Be fearful when others are greedy and be greedy when others are fearful”. But to do this, you need to be aware when the others are being greedy and when the others are fearful. And this is the quest that exactly led us to finding Sensex@MRP.

The market represented by Sensex is known over react, to both positive and negative news. Be it national or international politics, capital inflows or outflows and favorable or unfavorable monsoon forecasts; the Sensex fluctuates widely because of these.

Even though Sensex is comprised of just 30 stocks, chances are that if these big names get hit, a majority of the other stocks also get clobbered. This thought led us to the logical extension of finding Sensex@MRP so as to enable investors to enter stocks at bargain levels and help them exit when things start getting over-exuberant!

The Sensex companies are some of the biggest and most well known names in the country. They are amongst the favourites amongst the institutional investors and hence are highly liquid. One can then expect these stocks and as a result the Sensex to trade close to the fair value i.e. MRP.

However this has seldom been the case. On quite a few occasions, the market has become irrationally exuberant or highly depressed. Knowing these phases of the market can help you become better investors. The graph below gives you a comparison of Sensex@MRP values plotted against actual Sensex values for a period of 10 years beginning March 1999.

Click on the graph below to have a look.

Sensex at MRP

Movement in Sensex along with its MRP

  • March 1999 to December 2000 saw Sensex quoting consistently above its MRP. Many of us will remember this time as the Technology boom. During this time Sensex was trading at a multiple of 30 times earnings. As the Sensex was clearly above Sensex@MRP, this was a good time to ‘Sell’. As expected a correction took place and within a year, Sensex was trading 15% below Sensex@MRP.
  • June 2000 to March 2003, saw the Sensex trading at around 30% discount to its MRP. The earnings for the Sensex companies were stagnant during this period but clearly the market was undervaluing them. In hindsight, this was a good period to enter the market.
  • Post 2003, earnings of the companies entered a high growth phase and this continued till March 2008. This is evident from Sensex@MRP which increased from 6000 levels in 2003 to 19000 levels in March 2008. But the market seems to have over reacted during this phase with the Sensex crossing the Sensex@MRP in September 2007 and December 2007. Infact December 2007 saw an over valuation of as much as 15% – a clear sign to Sell and get out.
  • As the sub-prime crisis and the fears of a global meltdown spread, Sensex crashed and reached 9000 levels in December 2008 and March 2009. What is interesting to note here is the fact that earnings of the Sensex companies had not suffered much. Sensex@MRP, which is driven primarily by earnings, was in the 17000 levels. Thus the market was without a doubt over-reacting and Sensex was quoting at almost 50% discount to Sensex@MRP. This was the buying opportunity of a lifetime.
  • Within a couple of quarters, Sensex zoomed up and traded close to its MRP. Considering March 2010 quarter results, Sensex@MRP comes out to 18,996. This means currently Sensex is just about 4% below its MRP. Thus, Sensex is close to its fair value and as investors we need to tread with caution. Quite a few stocks are creating 52 weeks highs and it is difficult to find value picks at the current moment. Infact, some stocks are currently trading well above their MRP and one can consider selling them.

Reliance Infrastructure Example

An example of a company quoting considerably above its MRP is Reliance Infrastructure. In 1999, Reliance Infra was quoting at a discount of 20%. It crossed the MRP in year 2000 and remained close to MRP till 2003 inspite of an inconsistent financial performance. Its earnings infact witnessed a drop in 2002 and 2003.

The company’s performance improved post 2003 and the price zoomed above its MRP. In 2004, the stock was quoting as much as 150% above its MRP. This seemed like a sell signal but the stock rose further to unimaginable levels in 2007. In two quarters i.e. from June 2007 to December 2007, the stock more than tripled.

The irrational exuberance of the market was visible as the stock quoted at a PE multiple of 50 at Rs. 2130. The price crashed soon and in March 2009, the stock was quoting at a 35% discount to its MRP. Again, the prices corrected and the stock is currently trading 50% above its MRP of Rs.746.

Reliance Infrastructure

However, even with the market at 18,000, there are a few stocks which offer good value. Let’s take a look at a Sensex company which is currently quoting at a discount to its MRP.

Bharti Airtel Example

Bharti Airtel currently at Rs. 327 is quoting at a discount of 44% to its MRP of Rs. 589. Click on the graph below to take a look at Bharti’s historical valuations. Except for the initial years, Bharti has always traded above its MRP.

Leadership in the telecom industry coupled with high growth in the mobile market, helped the company record great earnings growth over the years. However, since March 2006 as competition intensified, the premium commanded by Bharti has decreased especially after Reliance Communication’s entry.

Further, the telecom sector has been seeing all sorts of problems including an intense price war, detrimental policies and very recently audacious 3G and broadband license bids. To add to this, Bharti also completed the acquisition of Zain Telecom which led to questions being raised about its financial position.

All this led to Bharti tumble to levels seen in March 2009. However, over the last few weeks, Bharti has picked up quite a bit. Bharti’s MRP works out to Rs. 589 considering an earnings growth rate of 18% which is substantially lower than its past growth rates thus making it a value pick.

Bharti Airtel
Finally, how effective is this concept of MRP especially as it is based on past data? After all as they say past performance is not a guarantee for the future, is it? But as we saw in the graphs, over a long term, stocks tend to move towards their MRP.

So, the rule of buying at a discount to MRP (ideally 50%) and selling above MRP would ensure good returns. Once the stock crosses the MRP, the probability of a correction increases. There is however always the chance of error. There is a possibility of the stock running considerably above the MRP as seen in the case of Reliance Infra.

You may miss out on the upside fuelled mostly by sentiments rather than earnings. But provided you buy the stock at a 50% discount, you would already be sitting on handsome, riskfree returns and hence would rather let this risky upside pass!

Now, Stocks too have a MRP Tag

Have you ever asked what is the MRP of a stock ? I don’t think so !

The reason many investors shy away from investing in stock markets is because it seems to be a gamble. With the markets fluctuating every day, dropping or rising at the slightest bit of concern or euphoria, one is bound to be wary of putting one’s hard-earned money here.

And most of us experienced the worst of this volatility during the market crash in 2008; some of us are still recovering from its aftermath. So, how can we ensure that there won’t be a repeat of this scenario? How do we ensure that we do not lose our shirt at the market and make our hard earned money grow into wealth?

We all know that it is important to invest in fundamentally strong companies.

But what is equally important, if not more, is to invest at the right price. But how do we find out the right price for stocks?

Whenever we shop for anything, we are guided by a MRP tag on the wrapper or pack. Unfortunately, we do not have such a MRP tag to guide us when we buy stocks, do we? Well, now you can even have a MRP tag for stocks!

Stocks@MRP can be a great tool for investors to make sensible buy and sell decisions based on fundamentals and not on market sentiments. MoneyWorks4me, have labelled stocks with a MRP tag; something which each one of us can understand and relate to.

What is Stock@MRP based on ?

This price tag for stocks is based on the factor which primarily drives the price of a stock in the long-term – the earnings power of a company. The concept of MRP is based on the fact that, while in the short term, stocks might be affected due to news, sentiments, FII movements etc. over the Long term, the market will invariably reflect a stock’s intrinsic value based on its earnings.

MRP is a tool which helps you to gauge whether the market is under reacting or over reacting to these. As sensible investors, we would be well served if we bought stocks at a considerable discount (ideally 50%) to their MRP and sold off stocks if they are priced considerably above their MRP.

To verify whether this method could have worked well during different time periods, good times as well as bad times, we back tested it for the period 1999-2010 and found that the results are quite gratifying.

Let’s understand this concept with the example of Wipro.

The graph below shows two lines. The Red line is Wipro’s actual stock price for the period 1999 to 2010, whereas the green line is Wipro’s MRP for the same period as calculated by us based on its fundamentals.

The graph shows that Wipro was considerably overvalued for the period 1999-2001 during the Tech bubble. The company was quoting great numbers with a 60% growth in earnings (9 year CAGR growth rate) from 1990 to 2000. Add to it the euphoria of anything related to the IT industry during this period and you see Wipro quoting at as high as 400 times its earnings.

On the other hand, the MRP offers a better view on the intrinsic value of the stock based on its earnings. Not surprisingly then, as the bubble burst the price rocketed down and reached its MRP. From 2001 onwards, Wipro’s price remained close to its MRP, thus indicating that the stock was more or less fairly valued.

Wipro quoted above its MRP values from March 2005 to December 2006.

In March 2006, it was trading at as much as 30% above its MRP. Thus, it is evident that the market was expecting above average earnings in the next few quarters; a difficult thing to achieve continuously.

The EPS for the company grew at an average of around 8% during this period on a Q-o-Q basis. This was a good time to sell the stock as the price rise was not supplemented by a huge rise in earnings.

Stocks at MRP from

However, things started turning south for the company post december 2006 with the PE contracting. The company registered a Q-o-Q drop in EPS in June 2007 and it seems the market over reacted to this with the price reaching as much as 20% below the MRP. The company’s earnings registered a drop, again, in June 2008.

Also, after reaching a peak in January 2008, the Sensex started plummeting with the fear of a global economic recession on the cards. Wipro was available at a discount of as much as 60% in December 2008 and March 2009; a clear buy indication.

Within 2 quarters the price of Wipro reached close to its MRP giving an investor, returns of around 50%. Today Wipro is quoting at around 10% discount to its MRP and therefore one should wait for it to come to lower levels to enter. (Read Nifty PE analysis)

Margin of safety

We all know about great value investors like Benjamin Graham and Warren Buffet, who insisted on always buying stocks with a margin of safety. However, it becomes difficult to confidently ascertain what the intrinsic value of a stock is and hence we end up paying a premium for a stock instead of buying it with a margin of safety.

Stocks@MRP helps you to ascertain the intrinsic value of stocks thus ensuring that you always buy stocks which are at a discount to the MRP. As seen in the case of Wipro, following this strategy would have yielded great returns and that too at minimal risk .

Outlook Profit magazine has published a special story on this concept titled “The Right Price” in their issue dated 9th July 2010. The concept can prove to be a very useful tool for investors, enabling them to enter stocks at bargain levels and exit when things start getting over-exuberant!

You can read more about this concept on our blog Stock Shastra. In the subsequent post, we will see how this concept can be extended even to the benchmark index Sensex. We will also take a look at a few stocks which are trading considerably above or below their MRP.

This is the first of a series of guest posts by Nikhil Kale from

Review of Retirement Book “Retire Rich Invest Rs 40 a day”

How important is Retirement ? If you are not asking this question to yourself today, You are bound to pay for this in future. Thinking about retirement in early age is considered Joke in our country, every body is just running around buying cars, home, may be invest in couple of mutual funds without any plan and buy life insurance, but Planning for retirement is still a very untouched activity. With the advent of “Financial Planning” word in our country, Financial Planners are now doing Retirement Planning for clients , however even that Retirement Planning is not proper Retirement Planning is true sense .

Retirement Planning is a much much more complex process than we think and deserves a lot of effort and time if you want to successfully plan for your Retirement years . We are living in a different era, and uncertainity of not reaching our Target in retirement is much more in these times . We need a much well planned approach and systematic planning for every goal of our life and Retirement is a classic case of it.

PV Subramanyam, a CA by Education and a trainer by Profession has written a wonderful book, named “Retire Rich Invest Rs 40 a day” . I bought this book and read it and here are some of my thoughts on the book.

Review of Book

Easy to Understand : The first thing which amazed me about the book was that it was written in very very simple language, It was easy to understand all the chapters of the book. The book starts with a very nice Introduction of why Retirement is more important in these days to plan and how we under estimate our retirement needs. I am reading Subra’s Blog from a long time now and his way of writing is very different than his way of writing on blog . I must say that I consider his book to be very simple than what I had expected 🙂

No Complex Calculations : The book gives all the calculations in a easy to implement “tabular” format and its easy for anyone to actually implement the learning from the book without diving into the complex calculations .

Step by Step Guide for self-planning : The book goes through all the steps of retirement planning in easy way and anyone can easily understand and do their Retirement Planning. It would require dedication to really go through the book and understand the various concepts the author has tried to explain. With some effort and dedicated mind its a great way to plan your own retirement.

Good Examples but lacks Graphs/Charts : The book have good examples in between , which woul be very helpful in understanding the chapters and what they try to convey. But if you are a kind of reader who like to see lots of Images/Charts along with text, the book misses on that part.

Introduction of Investment options : While it might sound that the book is only for readers who already know a lot of stuff , Its not true . In between, there is good insight about various investment products one can invest in and it gives  a fair understanding of what should be the action plan after one plans for his/her retirement.\

Book reading Session in Pune

There is a book reading session conducted in Pune on this coming Sunday on 15th Aug and Subra mailed me personally to invite all the readers of this blog who wants to join them . The entry is FREE .

When : Sun , 15th Aug , 10:30 am – 12:30 pm

Where : Season’s Hotel , Aundh, Pune (Map)

You can meet PV Subramanyam and Deepa Venkatraghavan, Editor there . I would say who ever can go should definately go to the Book reading session and make the most out of it .

Buy the Book

You can now get the book shipped FREE to your Home at Rs 299 , and thats 25% discount on the price, Click to buy , Buy the Book : Retire Rich Invest from

Buy from Infibeam : 30% Discount (Thanks to Rakesh for the link)


I am not an expert on any topic by any means and this review should be taken as my views on the book only. Overall The book is very good and is recommended to all. While the book targets people at any stage of life , Its must have for people who are in early stage of their life.

Tips while Buying House, Real life experiences

Are you thinking of buying your dream house? If yes , then you must be having a lot of questions and you must be looking some guidance from everyone you know, Why not utilize the knowledge of readers here.

Buying House in India

Over the last couple of days I was tying to catch up with readers who have bought flats or other real estate property and asked them 3-4 questions which could give you good understanding/points of what all you should take care while buying real estate.

You will also get to know some basic tips and tricks given by our readers here which they learnt or heard from others while making their purchase in Real estate. Overall see this article as a real life experience’s of readers on real estate and their learning out of it for others.

I hope you had a look at the debate on Buying vs Renting

Tips while buying house in India

Ankur Lakia Experience

Most important thing to take note of while buying the home :

Costs other than quoted per square feet rate. Few of costs like floor rise, parking, stamp duty and registration are fairly well-known. However, I was surprised when asked to pay for value added tax liability and service tax.

Since I bought under construction property and with all payments by cheque, I did not have much option but to pay for these costs. These are substantial costs and buyer needs to be aware of these additional costs while budgeting for the property purchase.

Biggest advice of caution will you give to new buyers :

While buying under construction property, buyer needs to do a thorough due diligence on builder’s track record on completion of property on time as well as quality of work. It is better to buy from a big name builder like Raheja, Hiranandani, Lokhandwala like (as far as Mumbai is concerned).

Even though one might need to pay a bit higher rate, it is worth it as it gives peace of mind when someone accepts all payments by cheques and abide by contractual terms. A good read from Subra on Mumbai vs Navi Mumbai Real estate .

One trick/idea which can help new buyers :

One thing which helps, is to buy little old / used property, may be 3-5 years old property. 3 to 5 years do not make much difference in usable life of property. However, usually one can get such property at much better rate than normal market price for new property.

More important though, buying little old property has several advantages:

1. One gets good idea of available infrastructure like nearby groceries, shops, availability of household help, situation regarding water supply etc which matters more to the lady of the house.

2. One can see whether building is being maintained or not. When I visited a building just two-year old, I was quite surprised to see its shabby look. It turned out that many members of society were quarreling and not paying their dues. One can easily skip such headache if buying slightly old property.

3. You can very well see the neighbours. It might be good idea to just meet them and greet them even if for only little time. It gives good idea on what standard of living is maintained by residents and whether one can easily fit-in.

For example:

my brother skipped a building which was really well maintained, with quite good location and flat available within budget. Surprised, I asked him the reasons. It turned out that almost every one of the residents was having more than one car in family and holiday trip abroad was fairly common.

My brother did not want to be part of such residency as he thought it would not be possible for him to fit in with people having such life styles since he could not afford such life style and, then, he would be odd man out.

4. There are some buildings where there is only one flat occupied on a floor, others being bought by “investors”. One can avoid possibility of living on a ghost floor by buying little old property..

Any other learning :

I am quite amazed by people stretching themselves on floating rate loans while buying property. I think people need to be aware that rates could be headed much higher, and higher enough to make material difference in their EMI obligations.

I think there are a lot of people who do not understand risks of floating rate loans or loans with first couple of years of very low-interest rates.

Meena Sivaram Experience

I will definitely give my inputs based on my experience. My advice will be more geared towards those who want to buy a house for the first time for self-occupancy and NOT those looking for immediate gains and make a killing in the real-estate market.

I am not the right person to advise those people as there are experts in that area. Here are my 2 cents:

Affordability – Do not go for over-priced properties which are beyond your means. Do not be impressed by those fringe attractions that builders dole out to impress the potential buyers like club, swimming pool, golf course, gyms, landscaping and what not…All these so-called benefits inflate the price of the property.

More important than these are the quality of construction and the basic facilities provided by the builder like earthquake-resistance (the richter scale it can withstand), the ratio of super area:built-in area, quality of material used within the apartment, 24 hr backup of electricity etc.

If you can manage your cash flow by reducing some other expenses, go for a size which is bigger than required i.e you need 2 BHK for now, go for 3 BHK and so on.

Location – This is important. I know most people cannot afford to buy a property on a prime locality like South Mumbai or South Delhi but when you are house-hunting in the suburbs, look for the development activities in the surrounding areas.

If there are metros, malls, highways, office or commercial and residential building being constructed in the vicinity, such properties have the potential. Choosing a right property in a right location is like picking up a good stock.

Buy when prices are low but has a potential to go up in the medium to long-term.

Words of Caution to New buyers

  1. The land on which the property is being constructed is not under any legal dispute and the papers are clean
  2. Make sure the builder has taken all the necessary approvals from the municipal and other bodies required for the construction of property. Any slack here will delay the possession.
  3. Previous track record of the builder on the completion of projects on time. Most builders do not adhere to the schedules. Of course such a risk is not there when you are buying an already constructed property but they are more expensive.

One last piece of wisdom: 

Go for your first property when you are around 30 years of age and do not DELAY it. Go for a 15 year loan tenure and aim to repay it within 10 to 11 years. So by the time you are 40-42 years, you are out of the loan liability. CAGR % for Meena house is around 12% and Tenure is 14 Years , She lives in Delhi-Ghaziabad Border

Wasim Sayyadd Experience

1. After identifying the property, look if the builder has constructed any apartment nearby/surrounding that is already occupied. to people find out how genuine this builder is.This gives you a feedback how genuine and chalu the builder is.

That way be prepared based on your questionnaire.

2. Read Agreement carefully before signing it. Eventually, in the process of purchasing Flat we built mutual trust and the builder promised me to give parking, but this was not included in my agreement. He called me to sign at registration office without handing over a copy of agreement in advance.(I also didn’t question being a good relation)

I got the copy after a registration..same day I read carefully all the lines..and noticed parking is not included..called builder he assured to give parking. Am still parking is not yet alloted to the Flat owners yet.

Ratio of parking available to the owners is less. And I am following it get my part.

Manish Jagtap Experience

I am assuming the target audience to be the end-user who will stay in the house, and not a Real Estate speculator.
  • Put max possible down payment. Otherwise Bank interest over long tenure will eat up all price appreciation of the property.Also do not keep EMI more than 40% of husband’s salary. Ladies are most likely to take breaks for kids. Do not consider their income while planning for EMI. If wife continues her job, you can user her money to do partial pre-payments. (Compare different home loans)
  • Check Builder reputation. Also, if possible go for ready possession. These days builders show some garden, play area in brochure (you consider such things at the time of buying) and later on build something else on that land.  You don’t want to see a balcony of some other building that the builder pops up on such land, to stare right into your leaving room/bed room.
  • If possible go for group booking since it gives you a negotiating power. Lots of IT guys do these now a days. Mistake I did was to go for 95% loan even though I had money to pay for the flat. Price appreciation was eaten up by interest on the loan amount. Also, keep in mind the rising cost of children education, your retirement funds.

Robin’s Experience

I will start from the first step instead of the zeroth. A buyer has an option to choose from a ready-to-occupy apartment or an under-construction project. Ready to Occupy projects are priced much higher as the risk associated is far less.

The unit is all ready. An Under Construction on the other hand is cheaper but other than the risk you also have to wait for the unit to be complete. If one has enough fund for the Ready to Occupy option, people prefer it. In our case the Under Construction works better.

We did not have enough funds to actually buy a Ready to Occupy unit. A 2 BHK from a reputed builder was priced upward of 50 lakhs, It would have required a loan of more than 40 lakhs. An EMI of 45k per month was in the uncomfortable zone, plus it meant very little monthly savings.

Remember we had a car loan too.

Under Construction plan has a silent benefit which most people tend to neglect in their calculation. While the project is under construction, we are also drawing our salaries. Since the payments are construction linked, initial EMIs are quite low. This has an advantage.

By the time  we get the possession of the flat we would have easily saved more than 10 lacs (we are considering 3 yrs time frame), something which would have been difficult in the Ready to Occupy plan.Other than the financial aspect we also have the legal aspect to take care off.

The project should be clean and should have all the necessary permissions from various govt. bodies. SBI seems to have the most stringent legal policies. So if a project is rejected by SBI, one should show extra caution. If one is looking for a flat which is Ready to Occupy type, one should consider the second sale option also.

This should be used just before the registration in the original owner’s name. Most of the original buyers are investors, they would like to sell the property before the registration to avoid paying registration fee.

Check Your EMI

Check more Amazing Calculators

Vikram Experience

Most important thing to take note of while buying the house :

The location of the house is quite important. Are their schools nearby if there what are the standards of the school.What are the standards of my neighbors and so on are also. How far are the groceries or provisional stores and other amenities.

Biggest advice of caution for new buyers :

Look before you leap. Think a million times before you buy a house. Check the EMI and see if you have enough on your hand to survive.
If you are on rent and going to pay EMI for an unfinished house, check if whatever you are left with is sufficient for you to lead a decent life. People with kids especially should tirple check before they commit to a 30 or 40 lakh EMI options. The market never remains the same. Have a backup plan just incase you are not able to pay an EMI.

Any other learning you want to share :

If you are planning to buy a new house by selling an old house, ensure that you have the new house papers in place before you sell your old house. I personally was affected by this issue or risk or whatever you wanna call it. Dad had a house and it was planned that that house will be sold and we will buy two new flats for me and my sister.
The sale of the house happened but we never were able to buy a house because of market boom. It was the worst decision of my life agreeing with the sale but I am repenting for it and the things I have to do get some extra money to buy a house is making me die everyday.
With an 8 month old baby now I am really not sure how to make things happen. A single bad decision ruined a lot more than just my finances.

Ashutosh Tewari’s Experience

Most important thing to take note of while buying the home :

Connectivity and basic infrastructure (grocery stores, road/ rail connectivity, safety),  Consider re-sale property (less than 5 yrs old construction is the ideal bet) as there are several advantages of it :

  • More carpet area: In most of the new construction the super-buildup to carpet area ratio is barely 60-65%
  • Better Infra : Most of the older construction already have shops and amenities established around them
  • Lesser Maintenance : This is fixed monthly outflow that most people don’t take into consideration while decision-making. Newer constructions (especially the ones with exotic “themes”) can have a pretty high Maintenance outflow. There are some in Mumbai, where it’s as high as 10,000-12,000 per month.
  • Ready to move :  You can move into it right away, as against waiting for 2-3 yrs in case of newer construction. If you stay on rent then this can be an important consideration.

Biggest advice of caution for new buyers:

  • Before making the buying decision decide on the budget and strictly stick to it.Do not get tempted by up selling.
  • The net EMI outflow should not exceed 35% of your net monthly take home, this will help reduce the stress level substantially. Also set aside a contingency fund which can cover 6-8 months of EMI.
  • Do not get over excited and limit your spend on furnishing and interior designing. This is an emotional decision in which usually tend to go overboard very easily. Also for people living in metros there is a high possibility of their moving to a bigger apartment or a different city, in that case there are things which may not fetch returns while selling.

Sunil Jaiswani Experience

What is the most important thing to take note of while buying the home :

Keeping apart the finance / affordability aspect because it has already been discussed, one important aspect while buying a house is the maintenance expenses,basic amenities and cost of living in the area.Not all places have good water / electricity availability + distance from workplace.

Biggest advice of caution will you give to new buyers  :

To be very careful of the person you are dealing with in case of non branded flats/homes because a new buyer can easily be caught in the nexus of land mafia which are obviously gundas and if something or the other goes wrong you cannot do a thing about it.

In small towns we even have instances of some properties being sold multiple times and also illegal land grabs/kabjas. I was lucky enough to escape such a condition but only after facing a lot.

One trick/idea which if implemented properly can save some good money :

New to this process but if you plan to sell the investment flats or homes in some short time you can save the registration money by holding a POA ( power of attorney ) in your name and save the investment on registration.

Later when you sell you can directly transfer the registry to buyer saving you a good amount. + in case of small town purchases more u bargain ( and more the upfront money ) more the price reduces.

Other learning :

Other than flats /duplex which yield a return of 12-15% CAGR the land prices in tier 2 and tier 3 cities offer much higher and brisk return sometimes.Thus if you are looking to invest irrespective the location , small cities are a good option to consider.

Moreover having been to all major cities and small towns , trust me that living conditions and resources are still much better in small towns with respect to electricity , basic cost of living , proper water and food availability.

Raja Panda’s Experience

  1. Check out the individual flat plan and match it with the actual size of the flat. Take extra care to match(measure) the size of balconies. This is where most of the builder do plan violation by increasing the size of balconies to get extra money. That’s because the expenditure on the balcony for construction is the least but the customer pays the price as part of the Super Built Up Area.
  2. Again measure the exact size(carpet area) of the flat. Most of the customer take the word of builder as sacrosanct when it comes to stated size of flat, but on calculation one can many times find a 2-5% shortfall. Remember that can mean a difference of 80 k to 2 lac rupee difference in a 40 lac flat. Now you get it! right ?
  3. Check out your undivided share of land. Very simply put an unit of undivided share of land equals (total super built area of all flats in the complex)/(total size of land for the complex). So, to reach at the undivided share of land allotted for your flat it should be (your super built up area) * (the unit calculated above). Lot of times this is overstated by builder to attract customers. But remember, if there is a natural calamity like earthquake,fire etc and the building gets destroyed it’s only the undivided share of land which you really own. Don’t leave it for later. Builder which do not allot undivided share of land to buyers are a strict no-no (yes there are such builders).
  4. For under construction flats it’s very common for the builder to give possession of the flat once it’s occupation ready. But the amenities (if any) are given after long gap and hassles. My suggestion would be simply hold the money for the amenities part until it’s really completed.
  5. For ready to occupy building’s insist on occupancy letter which is issued by the authorities. This ensures the plan violations has been checked and regularized by authrities when the consturction got over and it’s really ready to occupy.

My Comments

First thing I would say is dont rush, learn about things, buying a house is one of the biggest decision (atleast financial) you will make in your life and you will commit your lifetime of cash flows in it. Planning things well in advance and doing your investigation will lead to smoother and successful execution.

Your chances of making wrong purchase or a bad purchase will be minimized if you take time and do your investigation well enough.

Just for an example :

You buy a house , you do your basic investigation and the house was available at very very attractive price, and gives you a hope of making 100% profit in 2-3 yrs and suppose later you come to know that everything was fine, however the construction quality is not that great and have been compromised.

You really don’t want to get into that situation because first point is that if its your first home , you probably be planning to get settled there and wont move out once you are in your comfort zone and once things settle down like your office is very near, your children schools are there and you feel good there.

Every decision you take is your decision. Just like Wasim Sayyadd (One of the above), we Indian’s are emotional, we shy away from talking direct and think too much about feelings, relations and how others will think?

We make oral promises and also rely on them many times. There is nothing wrong in asking straight questions and questioning each and every step when you buy anything, because Damn! , its my money and its me who will suffer if things go wrong . So make sure you go through a detailed checklist because you buy a house or any other real estate property .

Here are some from my side.

  1. Patta Verification
  2. Guideline Value
  3. Demand at least EC for minimum 15 years
  4. Check the Property Tax recipt till date & name
  5. if the Seller is a power Agent check weather he has all the rights to sell the property
  6. Check that the plot is approved by Panchayats/CMDA/DTCP/MMDA
  7. Check that the property belongs to which zone (Resi/Agri/Comm/Aquifier/Non-Resi/industrial/Special)
  8. Check that the property had undergone any heir purchase, mortgage, loan, if so NOC from the concern department
  9. Check that the plot can be approved for residential purpose in case of unapproved
  10. Verify the documents with a legal Advocate
  11. Check the documents with a Banker for Loan Possibility (without patta & Approval loan is not possible)
  12. Dont agree for any Oral Agreement , Never !
  13. Check that the Layout has been allotted OSR Area ( temple, school, park, shop ) or else the owner has to pay 10% of the land value to the Government for approval. Only if the layout exceeds 3000 sqm, 32258 sqft, 74 Cents .
  14. Insure that the Plot is minimum 500 meter away from National Highway, Sewage Canal, Sea Shore, River, Pond, Lakes, Dam, Airport, Bus stand, Railway station, Nuclear Power Station, industries.
  15. The Registration Stamp Duty charge will be 8% of land value and 1% as Registration fees and Misc Charge extra
  16. The Road Width defines the no of floor you can build, in case there is Airport near by you can get only G+1 permit
  17. The Zone type and the Road Width defines how much area you can build, in case Aquafier Recharge Zone you can get only 0.8 FSI wherels in residential Zone you get 1.5 FSI
  18. Check the frontage length of the plot.
  19. Check the type of ground soil.
  20. Check the type of ground water.
  21. In case of corner plot check the shortage area
  22. Check the road level height and rain water stagnating
  23. Check for Vastu (it will be better if it is east facing and rectangle in shape), if you believe in it.
  24. Check weather Drainage faculty is there.
  25. Have a detail conversation with the landowners near by and always have touch with them
  26. It is Mandatory to have the complete details of the property seller including his photograph.
  27. If the plot is near by Burial Ground the value will get low.
  28. Other Essential Facility Nearby & Need to Know are Schools , Collages , Bus stand , Railway Station , Ration shop etc. Understand that you need all these for next many decades , so are they 2-3 Km away or 10 Km away can become one of the biggest deciding factors 🙂
  29. Make sure you have address and phone numbers of all the relevant and concerned offices like Panchayats Office , V.O Office, R.I Office, Tahsildar office , Register Office, EB Office , Court , Police Station, Post Office
Source :

Question: What was the biggest or most valuable learning you take out from this Article, If you also bought a home, please share your learning and we can add them in the post.

Tax Deductions from Infrastructure Bonds under 80C

Finally govt gave clarity about the Infrastructure bonds under sec 80C where you can invest upto Rs 20,000 for additional tax deduction apart from the current Rs 1 lac. Look more on Income tax slab .

Infrastructure bonds in India for tax deducations

Who can issue those Infrastructure Bonds ?

  • Life Insurance Corporation of India
  • Industrial Finance Corporation of India
  • Infrastructure Development Finance Company
  • Any non-banking finance company classified as an infrastructure finance company by the RBI also qualifies, for example : L&T Infrastructure Finance

Other Features

  • Lock in period of 5 yrs
  • Mandatory to furnish PAN (Permanent account number)
  • Minimum Maturity period of 10 yrs (you can get out of those after 5 yrs if you wish, but not before that)

Read about changes in Direct Tax Code which will not have these Infrastructure bonds

Where will this money be invested ?

The money invested in these Infrastructure Bonds will be invested in building of Airports, power plants, roads and ports, which is mainly to meet the infrastructure need of the country. This is a good move, where people can invest money for tax saving and even govt can raise funds to improve the infrastructure of our country.

How to exit from the Funds after 5 yrs ?

It depends. If the bonds are traded on stock exchange, then you can sell them after 5 yrs on exchange or go for manual redemption from the issuer (filling form for exit etc.)

Yield/Returns of the Bond

This detail will actually differ from issuer to issuer and has to come from them , but government has notified that the yields from these bonds will not exceed the yield of govt securities of similar residual maturity bonds, as reported by the Fixed Income Money Market and Derivatives Association of India (FIMMDA) .

Who should Invest ?

As the returns from these Infrastructure bonds are not exciting, you should only invest if your risk appetite is very low and security is your top most concern apart from tax saving being one of the reason . If you are looking at growth of your investments , better invest in equity oriented products even if they are not tax saving products.

Note : Even after the govt have clarified about the bonds , they are yet to be issued by the respective companies , I think they would launch them at the end of year when most of the people are hunting for tax saving products .Look at this video where IDBI executive is talking about about Infrastructure bond.

Question : Are you going to invest in these Infrastructure bonds ? Yes/No ? Why ?