Month: September 2013

5 major changes in life insurance policies from Jan 1, 2014 – How it affects you ?

Posted on by Jagoinvestor

Some major changes are going to happen in life insurance industry from Jan 1, 2014, especially in traditional policies like Endowment Plans, money-back plans and even ULIP’s. You will surely have a LIC policy or any other private sector traditional plans or might buy them in coming times. Here are 5 major changes which you should be aware about and they will come  into effect from Jan 1, 2014.

1. Service Tax introduced in LIC Policy Premium

Till now LIC was not charging the service tax of 3% from the customers and paying it to govt from the pool of money collected itself, but now the service tax will have to be charged separately from policy holders. Which means that if your LIC premium was Rs 50,000 per annum, now it will be 3.09% higher in first year, which is Rs 51,500  and after 1st year, it will be 1.545% as per moneylife article.

While customers see it as additional burden, note that its not the case exactly, Earlier – LIC was paying the service tax from the pool of money collected from investors only, which reduced the bonus amount given back to them. But now because it will not be taken out from the funds, that means the bonus declared each year will go up by that much margin and will come back to investors only. Note that Pvt companies were charging the service tax already, so nothing changes on their side. Only LIC was not charging it separately, which they will have to do from Jan 1, 2014 deadline.

2. Increase in Surrender Value

One of the major changes which has happened, is the change in surrender value for policy holders. The rules of surrender value depends on the premium paying term of the policy. If the premium paying term for policy is less than 10 yrs. Then the policy will acquire the surrender value after paying premium for 2 yrs (earliar it was 3 yrs), however if the premium paying tenure is more than 10 yrs , then the surrender value will be acquired only after paying 3 yrs premium.

In both the cases, the minimum surrender value would be 30% of the premiums paid without excluding the first year premium. Note that earlier, if you used to surrender after paying 3 premiums, you got 30% of premiums paid MINUS first year premium, but now as per new rules, the first year premium will not be deducted. Learn everything about LIC policies working before Oct 1

Another good change is that, from 4th-7th year, the minimum surrender value would be 50% of the premiums paid, and has to reach 90% of premiums paid in last 2 yrs of policy paying tenure.

3. Possible Decrease in Premium on LIC Policies

There is a great possibility that the premiums on LIC policies will come down by some margin, because the mortality rates will now be revised by LIC in calculating the premiums.

Mortality rates are the rates at which the insurance company deducts the fees for insuring you based on your age. LIC had been using old mortality rates till now, but now they will have to use new mortality rates . Just to give you an idea on reduction of premium, when I check the mortality rate for a 40 yrs old person in old table, its 0.001803 . But in new rates its 0.002053 . Which is approx 10% better. Lets not go into detailed calculation at the moment, but your risk premium part should go down by 10% (not the full premium, because only some part of whole premium in traditional policies are risk premium and rest is investment part) .

4. Higher Death Benefit

If the policy holder is above 45 yrs of age, then the Sum Assured has to be more than 10 times the annual premium, and for those who are less than 45 yrs old, it can be minimum 7 times the premiums. Note that for claiming the tax exemptions, your sum assured has to be 10 times the base yearly premium. So when you buy the policy in-case, you need to keep it in mind. BasuNivesh has done a great point by point notes on each aspect of regulation, in-case you want to go into details.

5. Agents’ incentives have now been linked to the premium paying term

Now agents commissions is linked to the premium paying tenure. Earlier a lot of agents used to sell the policies which had higher maturity tenure, but limited premium paying tenure (like 30 yrs policy with 10 yrs premium payment) . Here is the new commission structure taken from Moneylife article 

In case of regular premium insurance policies, a policy with a premium paying term (PPT) of five years will not pay more than 15% in the first year. Products with PPT of 12 years or more will have first year commissions up to 35% in case the company has completed 10 years of existence and 40% for the company in business for less than 10 years.

The funny aspect is that a lot of LIC agents tried to mislead many new investors by projecting date Jan 1, as the deadline when a lot of LIC products will stop giving good features using the official notification. LiveMint has even captured it in this image.

misleading ads by LIC agents

What should you do ?

The insurers have to refile all their products to IRDA and already lots of products have been approved and many are still waiting for approvals. So if you have a insurance policy, then you will get the communication from your insurer about any changes if any. Right now, for sure the traditional plans have got better, compared to their past avatars.

If you are adamant on buying endowment plan, better wait for some time and let things get more clear. Let me know about your thoughts on this change ?

Merchants can’t charge 2% extra on Debit Card Payments – Says RBI

Posted on by Jagoinvestor

Have you ever faced this situation, when you were making payment through your debit card or credit card?

“Sir How are you making payment ?

Debit Card or Cash ?”

“Card”

“Sir, There will be 2% extra charges if you pay by Debit Card ? ”

“Why extra charges ? I use it at every place and no one charges any thing extra ? ”

“Sorry Sir, this is our Policy. You can take out the CASH from the nearby ATM if you want to save that extra charges”

“Huh ! .. &^#$^&*J#^&&#%$&*N”

You often face the above situation, when you buy things like jewelry, Laptops, Mobile phones etc. I faced this 2-3 times myself, but could argue well with the shopkeeper, because I knew this is just a tactic used by shopkeepers to save on the charges they need to pay from their own pocket. Hence I never paid that extra 2% or just left the shop.

Merchants Cant charge extra on debit card payments

Merchants cant charge any extra charges on Debit Card Payment – say RBI

Now yesterday, RBI has openly cracked down on this unfair trade practice and issued a notification saying that Shop Merchants can not charge any extra charges from customers, if payment is done through Debit Card. Below is the exact wordings from RBI Notification

4. Levying fees on debit card transactions by merchants – There are instances where merchant establishments levy fee as a percentage of the transaction value as charges on customers who are making payments for purchase of goods and services through debit cards. Such fee are not justifiable and are not permissible as per the bilateral agreement between the acquiring bank and the merchants and therefore calls for termination of the relationship of the bank with such establishments.

Why Shopkeepers Charge extra 2% on Debit Card payments ?

When you swipe your debit/credit card  for purchasing some item, the merchant has to pay some fees (1%-2%) to the Bank or the rental fees for the swipe machine. The charges goes out of their own pocket, as the cost of running the business and convenience of taking the payments (more customers will come, if card payment is there). If its a small payment like Rs 500 or Rs 1000, then its a charge of Rs 10 or Rs 20, which is fine. But when it becomes a payment of lets say Rs 30,000 (imagine buying laptop or iPad), then its around Rs 300-600 and to save that big charges, they discourage debit/credit card payment.

They often ask customers to pay by CASH and point them to nearby ATM. Almost always, customers could not refuse, because they have already made the buying decision, and dont want to argue for the small charge, and a lot of times, they finally believe that may be its not illegal, and finally give the CASH even if they do not want, or just allow the merchants to charge additional 2% charges.

But, as per RBI, its not a fair practice, because merchants already have agreed in the agreement with the card swiping machine bank that they will not charge anything extra from the customers. Here is one example of asking for 2% extra fees by some Geeta Ramani on rediff website

My worst experience was when I intended to purchase a Tata Sky card worth Rs 1000. The shopkeeper said 2.5% = 25 rupees extra. I told him — you give 10, I will give 15 rupees. He spoke quite roughly — hum kyon den? I told him it was because he was supposed to pay the bank, not I, and that I was doing him a favour and not the other way round. He said he did not earn anything from the transaction. Anyway, I did not give in. I didn’t purchase from him and purchased the same from Indiaplaza instead online without any transaction fee

What you should do, if Shopkeeper does not agree ?

RBI has clearly asked all the banks to break their relationship with those merchants who are practicing this. So, when any merchant asks you for extra 2% charges and even after the debate they do not agree, you can complain to the RBI about this and also complain to the bank. Each Bank has a “Merchant Services” section on their website and when you mail them or complain in personal to their branch, mention that you want to complain about Merchant Services. Example for ICICI bank is here and Axis Bank is here. But

When you take this step, at-least some merchants might fear the consequences and oblige!, but now the problem is how many people will go to this extra mile . It would require some time and effort from your end.

So next time you are asked to pay extra 2% on debit card payment, you can clearly tell them about this RBI notification. If required better take the print out of the notification and keep it with you in your wallet or as an image in your smartphone.

Have you ever faced a situation where you were asked to pay extra 2% charges on debit card payments and were pointed to a near by ATM, and what did you do in that situation, please share !

3 parameters to look at before you pick your mutual fund house !

Posted on by Jagoinvestor

There are more than 40 mutual fund houses (AMC) in India and every investor has his own favorite mutual fund house to pick. We hear about best mutual funds on various websites, hoardings and even look at their performance on valueresearchonline and then choose them for lumpsum investment or starting our SIP.

But on what parameters do you choose these mutual fund houses (not mutual fund) ? Will you pick Birla Sunlife or DSP BlackRock ? Will you choose HDFC or SBI mutual funds? Will you pick Quantum Mutual funds or PPFAS ? Or will it be Reliance Mutual Funds or ICICI Prudential ?

how to choose mutual fund-house

Image Source

In this article I want to talk about 4 parameters which were discussed by a Financial Planner – Dinesh Jain in one of the articles comments section. I am expanding them for the benefit of readers.

3 questions to ask before choosing a great fund house

1. Is asset management the core competency and passion for fund house or just another business ?

One of the things, you can look at is – “Is Asset management just another business for the fund house to make money ?”, Or is it also their passion and core competency? Will they close down the business or sell it to some other AMC, just because the revenues are down ? What kind of message do you get when you look at the fund house advertisements or their videos on internet? Take an example of Birla Sunlife mutual funds and Quantum mutual funds, do you see any difference in the way they operate or communicate ? Which fund house do you feel is more focused on asset management ? Or look at DSP BlackRock Mutual fund and Reliance mutual fund , do you get a different kind of feel in both or same ?

The first level filtering of this parameters will clean out some fund houses from your mutual fund shopping list. Note that its up-to you to decide which fund houses you think do not pass this test. You have to do your own study on this.

2. Does Fund house focus on Quality or Quantity of funds ?

The second important parameter to look at how many funds an AMC launches and for what reasons? Now, I am not saying that the fund house should not launch new funds, but do they do it, because of the demand and opportunities in market or just to cash on the market sentiments and mood ?

There are so many fund houses, who came up with new and useless NFO’s during stock market boom, just to cash on the market sentiments and named their funds in such a fancy manner that gives a feeling that the fund is so awesome ! , but when the market was bad, and they could not handle so many funds, they merged them with their other better performing funds.

So some fund houses are really an ASSET MANAGEMENT COMPANY and some are kind of ASSET GATHERING COMPANIES which just want to launch funds and their focus is on increasing the AUM, so more charges can come to them and increase their profitability. Nothing wrong in making more profits or thinking about it, but at what cost is it done is the question? Now its up to you to decide if you want to avoid these kind of fund houses or go with them.

3. How transparent and Honest is Fund House

One of the parameters you can look at is the transparency and honesty of the fund house. Look at their website, and see what kind of disclosures they have made? Do they do what they say ! , or both are different things ? Do they do their investor education program just to sell their products and schemes or genuinely they want to help investors ?

Conclusion

Picking a right mutual fund is important, but you should also do some background check on the parent fund house also before you pick your funds. Note that these 4 parameters are just for reference and it might happen that for someone these parameters does not make sense.

Can you please share what parameter you think is important one !

How Identity Theft can leave your financial life paralyzed !

Posted on by Jagoinvestor

I do not want to sound like a scaremonger, but it is possible that there is a personal loan or a credit card taken under your name by someone else and you are completely unaware about it. I know you must be thinking that I wrote that just to pique your interest in this article and give a good start to this post, but trust me – I am not kidding, I ACTUALLY mean that it might be the case. There is a huge possibility that someone has taken a loan by using your documents and KYC Documents and you will come to know about it only years from now.

This is called – Identity Theft

identity theft documents cibil

4 Measures to Avoid Identity Theft

  • Do not handover your documents to anyone without strong reason. There are many cases where someone trustworthy has used the documents for wrong usage.
  • Always Write the purpose on the Documents itself. If you are giving your document for Home loan purpose , write down “ID PROOF – FOR HOME LOAN at HDFC BANK – Should not be used for some other purpose” .
  • if you have given your documents to some one for some reason and they are not used, take them back.
  • Whenever you are getting xerox or giving your originals to someone, dont just be very casual and better be a little careful about whats going on

Two real life incidents on Identity Theft

Praveen shares how his cousin got a credit card using his documents

There is a credit card on my name which was taken on my name without my knowledge by one of my cousin who used to work with Barclays Credit Card Company at that time& was also a freelancer for some other banks. So at that time (2008) I signed few personal loan forms with him & which I took it for my personal purpose, but I was not aware that I also signed a form which was for Barclays Credit card and which was used by my cousin.

All this matter came to lime light recently only when I re applied for credit card & home loan, both got rejected because of poor credit score (573), we had a big fight in our family, finally he agreed to return the actual amount of the credit card which was Rs.23000 at that time, but now in my cibil report it showing as Rs.44000 amount due. Now it’s my headache to clear my cibil report, so I’m ready to pay remaining amount due from my pocket

Akash shares how his CA misused his identity and broke his trust

I follow CIBIL v diligently and regular take out my CIRs and score. My last score (1st August 2013) was 806 with 1 settled secured loan a/c. i have one PL running for last 8 months with only bounce (which was paid up within 15 days). I had applied to the same bank for a top up. Now the bank has come reported about the existence of a 2nd Pan Card with a score of some 400+ and also default on 1 PL and CC. The bank also informed that there were other PLs but all closed. I had received a PAN Card from my CA (who is my 1st cousin) who asked my to kindly apply me to close it was a duplicate wrong card which i duly did some 6 months back with NSDL.

On getting this report from the bank i figured out the the no was same as the cancelled card. Morever my cousin admitted to having used my PAN card and payslips to get the wrong card made and take PLs and CCs. As he was my CA he had all relevant papers like payslips and bank statements with him. However he has now committed to close all O/S within this month. My queries is how do i get the CIBIL report in the wrong PAN closed and all reporting transfered to my existing and authentic PAN card ? Any other solution

Conclusion

Always remember that prevention is better than cure. You can take the matter of identity theft casually, believing it will never happen to you. But once it does, it can severely affect your financial (and personal) life and you might find yourself stuck in a situation, which you want to get out of as soon as possible.

What is “Undivided Share in Land” and why it should be in mentioned your agreement ?

Posted on by Jagoinvestor

You bought your “Dream Home” and you are on top of the world. The joy and pride you have after buying your home is amazing. The property is at great location and the prices are appreciating, and you feel you are the Hero ! . Now you want to sell your flat for some reason and you are more than confident that you will get a buyer and the deal will take just few weeks and you will be bathing in cash from top to down.

undivided share in land india

Prospective buyers have started meeting you and they want to buy the property, but they are all rejecting it. They are “informed investors” who take care of every single detail and they ask you that killer question –

“Everything is fine, but where is your undivided share of land (UDS) in agreement?”

You are wondering whats going on, quite amazed only to realize later that you were only sold the building which is depreciating each moment, but “LAND” , which is the real thing is not owned by you.

You are SCAMED or FOOLED ! or both ! . Let me introduce to the term “Undivided Share of Land” or UDS as its called generally in real estate world and why you cant ignore this at any cost while purchasing properties.

What is Undivided Share of Land (UDS) ?

I will keep it short and simple. Undivided Share of Land is the share of land owned by you when you purchase the property. Basically when you buy a flat or apartment, you are buying two things

1. The constructed building – where you actually reside
2. The proportionate share on the land, where the whole property is built

The Price Appreciation in real estate actually is the appreciation in land prices, because technically the building will depreciate overtime. Its not that cement and concrete structure which is the prime thing, but the land. Have you ever thought what will happen if there is an Earthquake and the building collapses ? What is in future, the govt wants to acquire the land for some national project and wants to give compensation to you ?

Leave all that, imagine in future your building after many years needs to be redeveloped and a new construction has to happen. At that time, the amount of land you own will matter. Note that incase of co-operative societies, the Undivided Share of Land might be on the name of society and not on the home owner name, because they are share holder in the society, which is fine.

The sum of all the flat owners UDS has to be equal to the property land size. You should also know that the undivided share of land will be proportionate to your property area.

Example 1 – If there is land measuring 1,000 sq and there are 10 flats or equal size is constructed on that land, then each owner will have 10% of the land as his/her share.

Example 2 – Lets say there is a big township where 100 units of 2 BHK flats of 1,000 sqft and 50 units of 3 BHK measuring 1,500 sqft . Then the total constructed area is (100 units * 1000 sqft) + (50 * 2000 sqft) = 2,00,000 sqft . Anyone who owns a 1,000 sqft flat will have 0.5% share in the total land (Because 1000 is 0.5% of 2,00,000) and anyone who owns a 2,000 sqft flat (3 bhk) will have 1% UDS .

There has been cases where the builder has allocated less undivided share to flat owners and kept some part of himself and the original land owner (a lot of times, builder buy the land from someone else). Here is one such example

Current apartment which I am staying is 10 years old apartment. Building having total 24 flats. Whereas builder made total 26 undivided share. Other than 24 flat owners one share for builder and one share for Land owner. In the share of builder and Land owner they constructed few shops in building cellar. SOURCE

Important Point – The above example is for apartment system . If its a co-operative society, then the land share is equal for each member, irrespective of their property size.

What to check in Agreement ?

When you buy the property, your builder will give you a date when you have to come to registration office and all the agreement work will be done. Most of the times, builders are reluctant to show you the agreement copy. But they will be ready to share someone else agreement copy at their office or at the main site.

Just have a look at that agreement which is like a specimen or the format, on some of the page, you will see “Details of Undivided Share of Land” and it will be mentioned in percentage terms like “0.45%” or exact area in sqft terms. Just read the whole thing carefully.

Then when the actual agreement has to take place, you can then read the agreement in detail and make sure you look after this point in your agreement copy. A small tip here is that when builder calls you for registration, tell him you would like to come before 1 hour from the scheduled time and have a detailed look at the agreement, if possible also get a lawyer with you and have him look at the agreement.

So did you check your agreement copy and see how much Undivided share of land you own ?

Rs 10,000 Income Tax Exemption on Saving Bank interest – Sec 80TTA

Posted on by Jagoinvestor

You can now save tax on an additional Rs 10,000 that you earn from savings bank interest. In the financial bill 2012, A new section called 80TTA was added to the Income Tax Act – 1961. This section allows an income tax deduction of up to Rs 10,000 to an individual or a HUF for interest earned on the savings bank account held with a Bank, Post Office or a Society.

Note that it’s not applicable on Fixed Deposits or Recurring Deposits. It’s only applicable to a normal savings bank account. The section is applicable with effect from April 01, 2013 and will apply from AY 2013-14 onwards.

Few Clarifications on 80TTA (Amendments)

  • If the interest earned out of saving bank account is more than Rs 10,000 . You will have to pay tax on the remaining amount over and above Rs 10,000
  • This tax deduction is over and above Rs 1 lac deduction under Sec 80C.
  • Rs 10,000 is the total deduction allowed by combining all the saving bank accounts interest. If you earn Rs 6,000 from each of 3 different accounts (Total Rs 18,000) , you will get deduction of Rs 10,000 and pay tax on remaining Rs 8,000.
  • The filing of income tax return would not be mandatory if your Gross Total Income is below the applicable basic exemption limit even though interest on saving accounts exceeds Rs. 10,000/ . (For example , if your saving bank interest is Rs 40,000 , but overall income is still Rs 1,60,000/year, you dont have to file income tax return)

Relief from tracking Small interest amount

The best thing I love about this tax deduction is that for tax purposes, investors will no longer have to worry about considering small amounts of interest that they earned on their savings bank account. It was a common occurrence to get a few hundred rupees as interest multiple times a year and it was a real pain to include them while computing taxable income. Almost all investors avoided including them, and thus were officially coming under the scanner as tax avoiders. With this tax deduction, they can now breathe a big sigh of relief.

Will fixed deposits give better returns ?

The answer is YES, in almost all cases, Fixed Deposits (despite being taxable) will give better returns than a normal savings bank account. However, there is a special case where Fixed Deposits are going to only marginally beat a normal savings bank account. It’s for those who come under the 30% tax slab and those whose saving bank interest rate is close to 6% (like Kotak or YES Bank).

I know this is a small percentage of investors, but if they invest some money in Fixed Deposits, the net returns are going to be very close to those of a normal savings bank account. Assuming they want to invest Rs 1 lakh or 1.5 lakhs for a year, returns on a 1 year Fixed Deposit after tax will be very close to interest earned on a savings bank account, because the latter will not be taxable. The table below explains this in more detail

saving bank fixed deposit sec 80TTA

Huge Balance in Saving bank Account ?

If you are earning 6% from your savings bank account, it takes Rs 1.66 lakhs to get Rs 10,000 interest in a year and if you are earning 4% interest, it will take 2.5 lakhs balance through the year to get the full exemption. However in our experience, we have seen a lot of our clients, as well as other investors, who keep a huge savings bank account balance – as high as 20-30 lakhs in some cases. In that case you will be earning a huge amount of interest on your savings bank account and it will all be taxable. So it is always a good practice to create a Fixed Deposit for the excess amount and only keep about 1-2 lakhs in your savings bank account.

Is your saving bank account interest more than Rs 10,000 in a year ?

The Scam called “Sample Flat” – Learn how builders trap property buyers

Posted on by Jagoinvestor

One of the biggest traps for real estate buyers are “Sample Flats”. When you visit properties sites to inquire about any under construction properties or ready for possession flats, the builder or the sales person there shows you a “Sample Flat”. The moment you look at a sample flat, something happens to you. The sample flat is so beautiful and mesmerizing that, you feel like you are in love again, some kind of beautiful music starts playing in your head and for a moment, you visualize the future with your family living within that same sample flat and how you and your loved one’s are enjoying the ambiance and premiumness the sample flat offers.

You are delighted !

But – This is trap, set by Builder

Sample Flat Example

Why you get trapped ? 

Because you are human, you have emotions and you have lots of dreams for your family and yourself. Because in this competitive society, you have to grab your share of status and show to the world, that your time has come finally! .

Builders know how to exploit the human psyche and how to manipulate your aspirations. Every person wants to give himself and his family the best housing and the most spacious and premium living conditions – a fact, well known to the builder. When they create sample flat, all these things are kept in mind and the sample flat is constructed in a manner that makes you fall in love with it at the first sight. The builder’s goal is to ensure that your emotional mind is activated and prevents your rational mind from questioning things or think hard. You should be hypnotized! . Check out this guy sharing how his builder did not fulfill his promise

Lets look at 2 important points you know should be aware about the so called sample flats, which can save you from potential disappointment some time in future when you hunt for your dream home.

Trick #1 – Sample Flats are created to look more “Spacious”

Everyone wants a big house at a lower cost. Given there are 4-6 people in family on an average and lots of belongings in home, a bigger house is always preferred than a smaller one. You should have space for all the things you have at home, without making your home look cluttered. So few tricks are used to make sure that the sample flat looks more spacious artificially! . Here are they

  • There are no doors in toilets and bathrooms, and some of the walls are merely glass partitions, which creates a visual illusion of more space.
  • There are no doors between rooms in a sample flat, which makes the flat appear more spacious than it really is.
  • The ceiling is much higher than the real flat and is just increases the volume of sample flat, thus giving a feel of space.
  • The lighting using in sample flat is suggested by interior designers, who are experts in creating optical illusions.
  • The furniture used in sample flat is kept smaller, so that in comparison the rooms and kitchen looks bigger.
  • Even the other things like bed, almira’s and dining table in kitchen are placed in such a way and are of smaller size, to give a feeling of more space.
  • The walls are much thinner in sample flat, compared to the real flat, which again gives more spacing. They are known to use gypsum boards and not the real cemented wall.

What you should do ?

Once you visit a sample flat, the first thing you should do is slow down and stop yourself from getting biased by the spacious feel of it. For a moment, consciously tell yourself that you know its not reality and a kind of trap (remember 3 idiots – “All is well, All is well”) . Visualize the furniture, bed, kitchen belongings, all the almira’s you own at home. Your Sofa, your TV, your Waching machine and Refridgerator and every thing you own and ask where will you keep it ? Also consider those new things you might buy before moving to new property ?

If you are seriously considering buying a house, then actually mark places where you will keep what and check the space it will take (mentally atleast) . Seek help from ladies at home, because they have a better understanding of minor details and can tell you, if the flat will be able to accommodate everything with higher accuracy (and in most of the cases, women are anyways more bothered for those things compared to men).

Note that rather than blaming builder on using these tactics and fooling you, I would suggest being self-reliant, as there is nothing illegal in what the builder has done. Yes, its kind of unethical and the tricks employed here, are just a way of exploiting human psychology and aspirations. But then, there is no law on all these points and anyways, the agreement will mention that the sample flat was just for demonstration purposes and the look and feel of the actual flat may be a little different. I want you to be prepared for this, rather than complaining about things.

Here is one real life experience I found on the net, which talks about the same thing we are discussing here

At the time of booking Builder shown a central park as well as a very huge green area (80% of the project), the same is also shown/mentioned in the Brochure given to me during the time of booking. He also showed a sample flat and did a sale agreement with me.

Now builder is constructing three new towers on the park area and also cutting down the green area as he is coming up with another project on the same green land – Source here

Trick #2 – Sample Flats gives the feeling of PREMIUM

Who does not want a premium and beautiful home? Everyone does!

We want our house to be better than others, we want to make sure we get the best. We aspire to live in premium homes (majority of them, if you dont). Builders do their homework properly and put all their efforts in making sure that the sample flat looks the way most of the people cant actually afford!.

I mean to say that every bit of work, furniture, finishing and material used are expensive and of very high quality and high standards. In many cases, the cost incurred in making the sample flat look premium is more than the cost of the flat itself (Imagine 50 lacs flat having 50 lacs of premium things inside it, just to make it look premium).

  • The fixtures and furnishing used are of world class quality and brand and is so premium that instantly a prospective buyer imagines him selves owning it.
  • The floor tiles used are of high quality and more beautiful than what you get in reality.
  • The view you get from Balcony and Windows is really great (lake view, greenery, beautiful mountains), but in reality your flat might be on the other side of the project, which has all the old buildings and has a crowded road (may be after some years) and you will not get the same view which you saw in sample flat. This is because the sample flat is created first and the location chosen for it is well planned and for the purpose 🙂
  • The furniture used in the sample flat is very expensive and promises high lifestyle. Imagine 5-6 lacs worth of Sofa set, whereas you will buy only 50k worth of sofa in your case.
  • The walls will have beautiful paintings which most of people want, but cant afford .

Tip – This startup called ArtSquare sells ART and Paintings at affordable price to common man. Boy! , they also have the feature which shows you, how it looks on the wall. check out this example.

Difference between Sample flat and real flat

What to do ?

Incase of under-construction property, you cant do much, you can only rely on the builder words and do some research on how truthful they are by talking to their old project buyers (actually go there, and talk to some flat owners about their experience). Before booking the flat, you need to get all information from builder on the materials going to be used, which brand they will be, what kind of wall paint , which fittings ? which wires ? what kind of tiles ? everything in detail ! .

Note that, you are going to get unfurnished flat, and then you have to put everything from fan, AC, bed, sofa and everything else you have at home. So its important to check out the unfurnished flat apart from sample flat, but its possible only when you are buying a ready to move in property. Check out this debate on Under construction property VS Ready for Possession Property if you are considering which is better than other.

Conclusion

As buying home is one time decision, its always better to be more present (physically and mentally) to reality and not take the decision in hurry. Sample flats are not reality and you have to get that. You also should control yourself and your family members emotions (a lot of real estate buyers complain that ladies fall for the beautiful looking flats and get excited by beautiful wall colors, premium kitchen and the wall texture giving wow-experience and then do not comeback to reality from the unreal world they reached after looking at sample flat. Slow down and take the right decision.

I want to hear your views now ! . Have you seen sample flats in past or recently ?

Now you can Buy all 3 Jagoinvestor Books in Ebook Format

Posted on by Jagoinvestor

Me and Nandish were deligted yesterday when we got an email from our publisher CNBC18, that all our 3 books published with them is now available in ebook format at flipkart. So all those who wanted to buy our books in digital format and read it on their smartphones, tablets and even PC , its now possible. Note that very soon the ebook version might also come on Amazon (kindle), Infibeam and other platforms, but it will take time and is only expected (no guarantee)

All our books are doing well good and readers are appreciating them a lot. You can read the reviews for all books on flipkart.

How to Buy the Book in Ebook Format ?

Step 1 – Buy the Book on Flipkart

Go to book page on flipkart and make the payment for the book. You will have to be Logged in while buying the book because the ebook gets stored in your account in “My Library” section. Below are the links for all the 3 books (Book 1 , Book 2, Book 3)

Here do our book readers say (Titles from the reviews from our 3 books) !

  • Must read for beginners to personal finance
  • A Brilliant Book To Kick-Start Your Financial Planning
  • Excellent if you want to know how to take care of your finance
  • Great Insights for achieving Financial Freedom
  • A book written in a very simple language but its results will be humongous
  • Teach a man to fish and you feed him for a lifetime!!
  • Book that not only makes you think, but also provokes you to take action instantly!!!
  • A Must have book for anyone who earns and wants to accumulate wealth
  • Awesome, must read action book on personal finance!
  • Transforming Your Relationship With Money & Achieving Financial Independence

Step 2 – Download the Flipkart eBooks App on your Phone/Tablet

Step 3 – Login to your flipkart account on your app and download the ebook

You can then log in to your flipkart account and go to “My Library” section, where you will see all your ebooks purchased and then you can download the book on your phone and start reading (Note – you can also download the ebook on some other phone where the app is installed)

Read more FAQ here

Read the Sample of the Book

You can also read the sample of all the ebooks on your app. It will give you access to some starting pages of the book which you can read and get the feel.

Why to buy the Ebook instead of Hard Copy ?

Reading a book in hard copy format has a very different experience than reading it in ebook format, both have their own pros and cons. Here are few reasons why some one might want to buy our books in ebook format.

Reason 1 – Because it stays with you all the time on the go , you can open your tab/phone and start reading it from the point where you left it last time.

Reason 2 – If you are an NRI, staying outside India, it was really a tough job to get the book in hard copy. Now with ebook version available, you can just order it and start reading it on the fly!

Reason 3 – No waiting time or delivery charges . Books less than Rs 500 worth have delivery charges of Rs 50 on flipkart. you dont have to pay that.

Let us know if you have already read our books and learned lot of things please write the review on flipkart also. Also we would like to hear from you ! . Also let us know if any questions !

Dont get fooled by High CTC offered by your employer

Posted on by Jagoinvestor

It was campus placement month, and although everyone declared that they wanted to do quality work once they were placed, they also harbored a secret desire to get placed at the highest salary. When we used to look at our pocket money and compare it with the salary “package” offered by companies, we used to feel we would sleep on bundles of notes.

The top students of my batch were placed at extremely high pay packages, and they were proud to have “cracked” it. However the average students and other not so lucky ones had to settle for lower pay packages.

The “Very Happy” and “Only Happy” students left for the next phase of their life. The bitter truth however, only emerged after a year or two – that the take home salary of most of the students was not that different from the rest. While the students who got high packages were obviously earning more than the others, the difference was only marginal.

The CTC (Cost To Company) numbers had fooled us!

CTC vs Take Home salary

What is CTC (Cost to Company)

What was happening was that the companies were exploiting our human craving for “Instant Gratification”. Job Seekers want big salary numbers – its’ a benchmark which they use to compare themselves with others. It feels nice to say, ”my package is 12 lakhs per annum”, even if you only get 58,000 per month in hand.

CTC or cost to company is what a company spends on you. If something is an “Expense” for a company because of you, its part of your CTC, as simple as that. So starting from the air conditioning you use at office, to the food you eat at office, everything can be part of CTC. Here is one how one of our readers Nandan feels

I fell for a similar trap while joining an IT MNC recently (from another which was equally good at inflating its VP compoment). It’s been only 3 months now since I joined this company and the worst part is that the take home I get now is almost same as that I was getting in my earlier company (though on paper the CTC is having 35% hike over the previous company CTC) – Link

5 tricks to increase CTC numbers and give wrong impression to employees

There are several ways companies can inflate the CTC Numbers and give you an impression that you are getting the best deal, only for you to realize later that the other job was better. Let me now show you some ways companies increase the CTC numbers.

Trick 1 – Including their EPF share inside the CTC itself

The first time I saw my salary slip, I was somewhat shocked to see that my employer was deducting the ‘employer’s share’ of EPF from my salary. I was wondering – “If it’s the employer’s share – why are they deducting it from my salary?” It was only later that I realized that this was merely a simple trick to inflate the CTC. They could have just reduced my CTC by an amount equal to employer share of EPF and could have paid it separately, but then my CTC would be lower– even though I would have been getting the same salary at the end of the day.

Trick 2 – Adding One time Bonus in CTC at the time of joining

When I joined my first job (and the last one), I was very pleased to hear my CTC; it was amongst the highest packages on campus. But then my salary in hand correlated poorly with the CTC figure. In my mind, I had divided my CTC by 12 on the day of placement and was on the top of world. Though what happened in reality was that I was supposed to get a one time joining bonus (that too after many months), and that figure was added to the final CTC – inflating the number substantially. It was only for first year, not a regular thing !

Trick 3 – Adding Stock Options in CTC

Another simple trick employers play is to add your Stock Options to your CTC. Stock Options again are not a regular payment source, however they do increase the CTC considerably. You can learn about stock options, RSU’s and ESPP here in this article.

Trick 4 – Adding Insurance Facilities, Food coupons, Transport Facilities to CTC

At the end of every month, we used to get food coupons from our company. We also had payments made by the company towards yearly life insurance and medical insurance. The thing is, you do not get these things as CASH, but instead as benefits. However, the company adds all these to your CTC figure, as it is paying for it.

Trick 5 – Putting Large chunk of variable component in CTC

Another famous trick played by companies (especially those in sectors that are performance based) is to add a considerable amount of variable component to the salary and keep the fixed part small. The CTC number is then provided based on an average performance assumption. For example if your CTC was Rupees 10 lakhs, it could happen that 4 lakhs of the CTC would be FIXED and the remaining 6 lakhs would be variable. The part of the variable component ultimately paid to you could go down or up depending on your performance or some parameter that supposedly would be under your control. It could be sales, the number of clients you bring in etc. etc.

Start-ups vs Giant MNC companies – Difference in Salary Structure

In my limited experience, pay packages offered by startups or smaller companies are more or less transparent, and artificial increases in CTC are limited. Dividing the CTC figure offered by them into a monthly number will get you very near to your take home salary – though it will obviously be lower. However, in the case of larger companies, the CTC number is inordinately inflated and your eventual take home salary might give you the feeling – “Seems like there is some mistake in the calculation”.

Joining other company for higher Salary ?

Just because you are getting a higher package in some other company, does not automatically mean that your take home salary will increase by the same margin. It may happen that your take home salary increases by very little, or in the worst case scenario, stays exactly where it was. What you should focus on, while moving to another job, is the additional increment in your take home component and not just the change in CTC.

In the image below you can see how a job with low CTC can lead to a higher take home salary – all because the package with the higher CTC was inflated by injecting various components.

High CTC vs take home salary

I hope from now on, you will focus more on the final take home and not be fooled by CTC numbers.

Any personal experiences?