8 essential checklist for buying property by a real life architect

Today, a real-life architect is going to share with you some of the most essential things investors should check before buying property in India. Do you want to know what are the topmost things to look into the property before you take that big decision of booking the property?

Do you want to know what are some of the tricks builders employ and how they make decisions? Mr. Abhijeet Patki, a practicing architect, who is also a consultant to a reputed architecture firm in Mumbai has agreed to share his knowledge with all of us.

Mr. Abhijeet is one of the readers of this blog just like you and when I asked him to write an article about this area, he agreed instantly.

Mr. Patki has an experience of more than 11 years in the field of architecture and interior design and has worked on different kind of projects that includes IT Parks, Commercial Buildings, Residential Projects, Heritage Building, and many commercial interiors projects. So I hand over to Mr. Patki to share his wisdom and knowledge with you all.

Checklist before buying property in India

8 important checklist points before buying property

Detailed descriptions of this checklist are done at a later stage.

[su_table responsive=”yes” alternate=”no”]

Checklist #1

Project site or Land

Checklist #2

Approvals from statutory bodies

Checklist #3

Flat Layout

Checklist #4

The view outside your flat

Checklist #5


Checklist #6

Luxurious and Affordable homes

Checklist #7

Fire Safety (In tall buildings)

Checklist #8

Big versus Small Developers


At some point in time in our life, everyone feels of owning a house. It may be for their own stay or as an investment. Depending on the stage of one’s life, buying a home is associated either with ambition or necessity or influence through various parameters.

It is taken for granted that it is THE ultimate investment to secure one’s future. Surprisingly, despite not having a regulatory body, an investment in real estate is assumed by many as a safe bet – safer than Equities, maybe because most of them are fortunate enough to not have faced any issues with their properties. However, the risk factor in this investment is equally grave like any other modes.

Without proper diligence, your dream investment certainly comes with a potential risk that can have lifelong repercussions on your livelihood. By no means I intend to say that all buyers are ignorant about the property survey before finalizing it; it is just that their analysis about their ‘to be’ property is limited to generic factors.

Usually, any Indian buyer looks broadly into the following parameters while selecting a property. Interestingly, a buyer buying property for his stay would look into the aspects in an order as mentioned below, while an investor will reverse the order except point #2 which will be on top of the list.

  1. Location & convenience factor.
  2. Rate of the property in comparison to the market trends in the vicinity.
  3. Surrounding neighborhood.
  4. Amenities offered by the builder.
  5. Building aesthetics.
  6. Expected rate of appreciation in the future.

What about Flat Layout?

You may be curious to know as to how I could not include an important factor – ‘Flat layout’.

Indeed, it is one of the most important factors while buying the house, but the price of the property generally takes precedence above the layout. Here the typical Indian mentality comes into mind – “Our budget is Rs. X Lakhs & we shall buy the best (bargained) property within our limits”.

Thus, in order to stay within their planned budget, many people let go of a flat that has a good carpet area or a better layout.

While it is a debatable topic about increasing a budget for a better property or buying a suitable property within a planned budget, all that I want to say is that in most cases, the price of the property governs the selection of the flat and not the layout.

8 factors every investor should check before buying a property

Anyways, moving ahead, I am going to make you aware of some very important factors that should be considered while buying the flat which is usually overlooked or is unfamiliar to the common man.

1. Project site or Land

The very first check that one needs to do is about the land on which the project is planned. The land should be a Non Agricultural land (often called NA) and should be registered with the local municipal body.

Each property comes with a ‘Property Card’ which mentions the details of the current owner of land and its status. Apart from the type of land, one should check in the city ‘Development’ Plan whether the land is earmarked for any reservations such as – playground, police station, public welfare amenities, religious structures, slum rehabilitation, etc.

For any city development plan, you will generally get it from the website of the municipal corporation. For example, in the case of Pune, you can get it from here.

Below you can see a snapshot of how it looks like

Pune development plan

No residential development can be allowed on lands that have reservations other than that for residential projects.

If the land had reservations & the developer claims that land usability has been changed with local authority permitting the same, then please ask for the proof for ‘Change in Land Use’ from the local body & State ministry of Urban Department, supported by valid approvals / NOCs covered in subsequent point.

Further, inquire if the land is a freehold land or leased one. If it is a leased land see the contractual documents relative to lease – lease tenure, usability, other conditions etc.

2. Approvals from statutory bodies

If there is any parameter that is of utmost importance while choosing a property, then it is this. Your property has no value if it has not got required approvals from the local authorities (municipal corporation or likewise).

Sellers advertise in a most generic manner in one line “All approvals in place” as they are aware that nobody will go deep into the investigation of the approvals.

I am located in Mumbai and I can tell you that any project that is planned to be executed in Mumbai requires more than 100 permissions / NOCs from various bodies and during different stages of the construction. This document gives you a good idea for these permissions and NOC required in various states

Ask for approvals form builder

As indicated earlier, the list of approvals / NOCs is not exhaustive and varies from cities to cities. It is recommended to investigate the status of the approvals with the builder, see the original documents before you make any monetary transaction. Yes, it is a bit complex to understand the approval process, inquire about the permissions, etc.

However, one can always appoint or seek advice from a local municipal leasing consultant at a nominal cost to carry out an assessment for you. It is a small price that you pay to safeguard your big investment and you can rest assured about the legal intricacies.

Many investors/buyers fall for the lucrative offers during ‘Pre Launch’ of the project. The attractive prices make the buyers hasty in buying the property. However, buyers should be aware that the Pre-Launch offers are marketing gimmicks and generally approvals are in the process during this stage, thus posing a risk to your investment.

3. Flat Layout

This is another important aspect to think about before you finalize the property. This becomes a family’s habitat for years to come. Regardless to say, the flat should provide you comfort, joy and a sense of complete satisfaction.

Taking all members of family in confidence, it should become a unanimous choice and one cannot leave a chance to regret the choice at a later date.

Important points one should remember

a) Your Life Style – First and the foremost thing you need to evaluate is whether your current lifestyle or routine would remain as it is or get better OR you would have to compromise on certain aspects.

If you anticipate a well-informed compromise & are still ready to buy it, then you may take that in your stride for a few days or even months. But deep inside, you would start regretting that compromise as the years go by and as you get used to it.

We buy a property for our betterment but if that is not happening then it becomes a liability. This point is more important for ladies in families because, in India, houses are run by our mothers and wives. If they are not happy, no member of the family can be.

b) Do not fall for the saleable area figures – Saleable area includes the common areas of the buildings in addition to the carpet area of the flat. Generally, the saleable area is additionally 35% to 60% over the carpet area.

For example: If you are planning to buy a flat with a carpet area of 700 sq ft, then the saleable area is generally between 1000 – 1300 sq.ft. which includes the common areas like – lift lobbies, terraces, clubhouses etc which is proportionately divided among all flat owners.

The cost of the flat is generally projected in a saleable area which is actually wrong. Carpet area should be of primary importance to you as you are going to use this area for your habitat, hence try to do dealings on carpet areas instead of saleable areas.

c) Carpet area is important – Check the room sizes and the carpet area of the flat you are choosing. A carpet area is a usable area measured from wall to wall. In a layman’s language, it is that area where you can lay your flooring or carpet.

Room sizes should be adequate for us to maneuver comfortably after all the furniture is placed. Room shapes should be ideally rectangle or square.

At times developers concentrate more on building elevation/form to make it prominent in the locality but that can result in odd shape rooms or acutely angled corners were placing furniture is not possible. It just becomes a waste of space; yet paying for that area is inevitable since it gets counted in the carpet area.

In the adjacent image, you may note how tricky or difficult it would be to plan furniture in the odd shape bedroom and the living room. Also, the toilet is of a funny shape. To ensure that room sizes and shapes entail you to use each and every inch of the space.

bad flat layoutd) Vaastu compliance – Many buyers are stringent about Vaastu compliance of the flat – whether it is east facing or west facing, whether or not the entry is in south etc. This is again a subjective factor with opinions varying from buyers to buyers.

Although being an architect, I am not an avid follower of Vaastu principles for an apartment flat, just because I am not convinced with the principles of Vaastu in a mass housing scheme. Vaastu was applicable then when people had their own dwelling unit on their own land.

So, if you are buying a plot or a bungalow, applying Vaastu principles can be convincing, but applying to an individual flat just doesn’t look convincing. Imagine for a moment, that you find a Vaastu compliant flat and choose to stay in it.

However, you later come to know that the plot, on which your building is built, is not Vaastu compliant. Further, in such mass housing schemes, it is extremely difficult to apply and comply with Vaastu principles.

So it all boils down to your ultimate choice – whether you want an apartment flat that is very good in layout but not Vaastu compliant or whether you are okay to compromise on layout and be satisfied with Vaastu compliance.

e) Deviation of room size – Further, it is very necessary to check the actual sizes of the rooms that are constructed. Brochures indicate room sizes uniform for all the units. However, they vary a bit as per the construction. A deviation of 1-2% is accepted as a standard norm because construction is never 100% accurate.

There is always a construction tolerance of 15-20 mm applicable. So ensure that you pay for the carpet area that you get.

4. The view outside your flat

This is a selling point that is hot favorite by the builders. “Sea facing flats”, “Flats overlooking the green fields/hills” and similar panoramic views become a USP of any project.

With the help of advanced software’s & computer-aided renderings, developers even showcase you during the sale inquiry, the view that you would get once you occupy the premises. We all become excited and we get emotionally attached to the property. While a good view enabling adequate daylight & ventilation is absolutely necessary, one has to be very careful of the ‘view’ aspect.

While you would be certainly happy with the view that you may get, you just need to ensure that you would enjoy it permanently or at least for the long term.

There have been instances where the customers have paid a premium price to achieve a great view from their windows but within couple of years, their view got obstructed permanently because of a new building getting constructed on the land adjacent to their building/premises. Here you can’t blame the builder too because things outside his plot, is not under his control.

So, if you are vouching for that great view at a premium price, ensure that there are no chances of development that could obstruct the view and even if there are any in the future, see that the daylight, ventilation & privacy will not get compromised.

In the image below, you can see how the new building on the right has blocked the view of the building on the left. Fortunately, the natural daylight & ventilation for the older building is still intact.

building blocking view

5. Specifications

When we intend to buy an electronic gadget, say a mobile phone, we tend to go deep into its specification – Operating system, processor, storage capacity, battery life, etc. All this study is carried out for a gadget that costs mere thousands of rupees and is with us for a couple of years.

Contradictory to it, a purchase like a property, which runs into lakhs and crores of rupees & which could be with us for decades, is finalized on the aesthetics and other generic factors mentioned earlier. Little do we get into the details of the specifications.

We seem to be satisfied with just the high-level things which are provided to us – wooden flooring, granite kitchen platform, wooden doors, vitrified tiles so on and so forth. But we ignore the specification of those materials.

For example, what type of wooden flooring, can it remain durable with daily floor mopping, what type of wood is used for wooden doors & frame, what brand of vitrified tiles is used, how the waterproofing is done & what is the technique used. All such questions need to be asked to the developer.

Yes, one has to first get appraised with the knowledge in some way, but that shall do a world of good to you. With Google providing answers to any question, it does not seem impossible for you to get into details of materials.

Developers generally limit their capital costs incurring on the interior finishes or items that become a part of the customer’s possession. They simply ignore the aspect of operational costs as the money goes out of the resident’s pocket.

Real-life example – My personal experience

Let me give an example of this. I was involved in a design scheme of bungalow projects in the city of Pune. The bungalows were meant to be of high-end finishes providing luxury to the owners.

All interior finishes were selected accordingly to meet the expectations of a luxury villa. Buyers went crazy over the finishes and it became a strong selling point. However, there were few other items which were equally important but went unnoticed – one of those was the glasses that were used for windows & facades. Everyone knows that Pune has a hot climate and the summers are extreme.

Needless to say that people do require ACs in their rooms. Now the tonnage of an AC depends on the size of the room and size of the window openings. Bigger the window opening more is the tonnage required as there is a considerable heat transfer.

There are glasses available in the market which cut down the solar heat getting transferred through it, without affecting the vision. If such glasses are installed, then there is a significant saving in the AC tonnage requirement which eventually saves the electricity.

But these glasses are a bit expensive compared to standard glasses. Needless to say, that builder chose standard glasses as his capital cost was involved and he was least bothered about the AC requirement and its consumption. You must have now got an idea of how important it is to have materials with appropriate specifications.

To conclude, the materials that are used as finishing items of the flat costs are always bargained to fit in the budget and hence may not be of the highest quality or the one that cut downs its maintenance.

They are all standard products that the developers get at a very low rate due to bulk ordering. Assess the items that have been proposed and if that would require frequent maintenance / periodic replacement etc.

6. ‘Luxurious’ and ‘Affordable’ homes

Developers have started a new trend of marketing their schemes like the one that provides ‘Luxurious flats’, ‘Ultra-Modern flats’ and even ‘Affordable homes’. While it is an individual’s choice of deciding how should be his lifestyle and gaining luxury with hard-earned money is no wrong.

But buyers have to be prudent in knowing what ‘Luxury’ is being offered. Understand whether the luxury is being offered as a spacious flat with a large carpet area or a standard / compact size flat with finishing items with high-end specifications.

If you ask me, luxury is having a spacious flat which will satisfy your needs & also give you good resale value. The other aspects included in luxurious schemes are amenities, spas, concierge services and many more.

While this can be a treat for people who really desire such facilities, for middle-class buyers it can become a big liability because once the builder hands over the scheme to become a society, then the overheads in maintenance can shoot up much folds.

So luxury will always come at a high cost and one has to decide about it with a long-term financial implication.

On the other hand, affordable homes are marketed with a certain attractive price tags. But they are located far from the city center. So the purpose itself gets defeated. Flats can be termed ‘Affordable’ if they are within the municipal limit of that city with good public transport & convenience factors.

But that is generally not the case. It is located far away in areas that have good low rates if you buy resale flats. Further, the specifications used for building materials can be substandard to reduce the overall construction cost. So it is better to check the specifications of all the materials.

7. Fire Safety (In tall buildings)

Tall buildings are sprouting up because of a lack of space in the city. It is also an economically viable option for a developer to go for tall buildings within a city where the development charges are high. Buyers too are excited to live in a tall building where they can enjoy great views, daylight & ventilation.

But what one doesn’t take seriously is the fire safety measures or evacuation strategy in case of emergency.

Below is a nice presentation giving the full specification of how a high rise building should handle various things at the time of construction to combat the fire safety issue. If you live in a high building, please check if your building has things mentioned in the presentation or not.

Builders do provide the fire fighting equipment & fire egress stairs since they are to be provided as per the building codes. However, one should ask the developer, the evacuation strategy envisaged in case of an emergency.

Ask them the fire rating of the walls and concrete structure. Fire rating means the time taken by materials to succumb under the event of a fire. Ideally, it should be rated at 1-2 hours.

Check the refuge area, where in case of emergency, residents are supposed to gather and stay safe till the fire personnel come and evacuate them.

Do take a look at the fire staircase & if possible, do descend by it. This is because, in case of fire, you are supposed to use the staircase & not lifts. A few months back only, there was a case of fire in a high rise building in Mumbai, where people died because they were stuck in an elevator

death in elevator due to fire india

So you should feel comfortable while getting down. Ideally, the builders should provide the fire fighting gadget – water sprinklers in individuals flat too so that in case there is fire, it is arrested by sprinkler burst.

But very few builders are committed to such precautionary measures as they understand the importance of safety. Others limit their scope only in common areas like lift lobbies and foyers.

If you are opting for a resale flat in such a building, ensure that fire fighting equipment is operational & that the society is committed to maintaining it. Also, ensure that all egress paths are free from any obstructions enabling comfortable progress.

8. Big versus Small Developers

It is a general opinion that one should buy property from big, reputed developers as their schemes & construction quality is superior. Someway, buyers feel more reliable on them and are willing to pay more expecting superiority, timely possession, transparency etc.

Let me be very clear that – this is a myth.

There are many small developers too who give equally good service. In fact, prices of the reputed developers are high to cover their marketing cost & branding. You are certain to get equivalent quality of flats from small or medium-sized developers.

The most essential thing is to check their past records irrespective of their stature. So before investing in their property check out the projects they have completed. Get in touch with the residents living in their old schemes.

Inquire with them if they got possession & occupancy certificate on time. Ask whether the process of builder handing over the conveyance deed for society formation was smooth or rough. See how the buildings are looking after a few years – whether they still look decent or have deteriorated rapidly.

Check the monthly outgoing of those societies and if it is high what are the reasons for it. After this survey, you will surely get an answer as to how good the builder is.

I believe with all the points that I described above, you must have got a fair idea about how complex it is to choose the right property and how one needs to be cautious, appraised of all the intricacies involved for selection. The above list is certainly not exhaustive and can be extended further but till then, this should hold good.

By no means am I discouraging anybody from getting into the real estate investment, but it is just a word of caution for buyers & investors.

Quick Checklist while buying the flat

  1. Information about the Land – to confirm if it is NA plot, non–reserved plot, freehold / leased, etc.
  2. Approvals for the projects (Varies from cities to cities)
  3. Infrastructure around the project/building – electricity, water line, telecommunication line, sewerage disposal line, stormwater drain line, etc.
  4. Potential development around the project.
  5. Facilities around the project – Public transport, hospitals, schools & colleges, markets, police station, etc.
  6. Track record of the builder – visit past completed projects
  7. Availability of funds for the builder to complete the project – whether it is a self-funded or bank-funded project.
  8. The overall scheme of the project
  9. Evaluate the probable outgoings once society is formed. More the facilities, the higher the outgoings.
  10. Carpet to Saleable area ratio – Prefer to carry out a transaction on the carpet area.
  11. Flat carpet area
  12. Flat Layout, Room sizes, and shapes
  13. Availability of adequate daylight & ventilation.
  14. Does the planning of the building/project provide comfortable access to senior citizens & handicap people?
  15. Good quality of finishing materials – flooring, kitchen platform, bathroom fixtures, windows, doors, paints, etc.
  16. Guarantee on waterproofing for bathrooms & flats below the terrace.
  17. Fire fighting systems and evacuation strategies.
  18. View from the building / flat.
  19. Do periodic site visits to check the progress and workmanship quality.
  20. Ensure a safe handover of the project from a builder to make a cooperative society.
  21. While buying a resale flat, ensure that the property is a freehold property & that the seller provides access to NOC from the society, Chain of all old registered agreements, Occupancy certificate, share certificate, Maintenance Bill, Electricity or Telephone bill, Property Tax receipt and Registered Sale & development agreement of Builder, Conveyance Deed.
  22. While buying a resale flat, ensure that the water supply is provided by the corporation / local authorities and not by tanker water. If that is the case, then either OC is not available or the water supply line to the area is not available. That will shoot up your monthly outgoings.

Hope you enjoyed reading it and let me know if you liked it. Thank you.

Disclaimer – The information and views expressed in this article are those of the author to create awareness and does not necessarily reflect the official opinion or guarantees the accuracy, completeness, currentness, validity in any way.

Neither the author nor any person acting on their behalf may be held responsible for any errors, omissions & delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

checklist for buying property
About the Author

Architect Abhijeet Patki is a practicing architect and a consultant to a reputed architecture firm in Mumbai. Graduated from the University of Mumbai, Ar. Patki has experience of more than 11 years in the field of architecture and interior design. Ar. Patki has worked on different kind of projects that includes IT Parks, Commercial Buildings, Residential Projects, Heritage Building, and many commercial interiors projects.

Update your Aadhaar card details online in 5 min and download a new one [VIDEO inside]

Do you want to know how to update aadhaar card details online? Yes – It’s possible. You can easily update your details online without any offline documentation and then download your new aadhaar card online and start using it.

Recently, I wanted to change my address details in my aadhaar card and I completed the whole process online by visiting the website of UIDAI. It was just a few minutes task and very easy. I have also created an online video tutorial with all the steps. Below is the video if you want to refer to it.

8 step process to update your aadhaar card details online

  1. Go to https://ssup.uidai.gov.in/update
  2. Enter your aadhaar card number and text verification code to generate the OTP
  3. Enter your OTP and then on the next screen choose the details you want to change
  4. Enter the details which you want to change and then proceed to upload the documents
  5. Choose the supporting document which you want to upload. Make sure the document is self attested and signed by you and scanned back.
  6. Note down the UTR number which can be used later to check the status

update aadhaar card details online

How to Check the status of your Aadhaar change ?

Once you have submitted the change request, you will get a UTR (Unique request number), which can be used later to check the status of the change. Here is how you check the status later

  • Visit https://ssup.uidai.gov.in/check-status
  • Enter your Aadhaar card number and the UTR number (without slashes)
  • You will get the status. It might be awaiting approval or might have approved already in which case you can then download your new aadhaar cared online and start using it

check status of aadhaar card details change

How to download your new aadhaar card after the update is complete?

  • Visit https://eaadhaar.uidai.gov.in/
  • Choose the option to enter your aadhaar card and enter all details
  • Generate the OTP and enter that to proceed
  • A PDF will get downloaded which can be opened by entered your pin code as the passport
  • You can now start using this new aadhaar card by taking a color Xerox

download aadhaar card online

Cases where you might want to change the aadhaar details

  • Your address might have changed after your aadhaar card was made
  • Incase of name change after marriage in case of female
  • Your mobile number or email id is changed
  • You have changed your name or your name was wrongly captured at the time when you applied for aadhaar card
  • By mistake your gender or date of birth was wrongly captured

I hope this tutorial was clear and easy for you to follow. The process to update aadhaar card details just takes 5 min of your time. Try it and let me know if it worked for you or not. Also do not forget to share this article with your friends circle; it would be very useful for them.

Why most investors struggle to save money every month & how to fix it?

Recently, I came across one interesting short story on quora, which I found interesting and worth sharing with all the readers. This story will help you understand why you are not able to save enough money by the end of the month. You will get to know why your hard-earned money is spent into useless things and you don’t have enough control over it.

Lady: Do you smoke?
Guy: Yes I do.
Lady: How many packs a day?
Guy: 3 packs.
Lady: How much per pack?
Guy: $10.00 per pack.
Lady: And how long have you been smoking?
Guy: 15 years
Lady: So 1 pack is $10.00 and you have been smoking 3 packs a day which puts your spending per month at $900. In 1 year, it would have been $10,800. Correct?
Guy: Correct.
Lady: If 1 year you spend $10,800, not accounting for inflation, the past 15 years puts your spending total at $162,000. Correct?
Guy: Correct.
Lady: Do you know if you hadn’t smoke, that money could have been put in a step-up interest savings account and after accounting for compound interest for the past 15 years, you could have by now bought a Ferrari?
Guy: Oh. Do you smoke?
Lady: No.
Guy: Then where’s your fucking Ferrari?

The story above sounds funny. The lady did not smoke, so that money must have got accumulated and she should have owned a Ferrari as per the logic. But that did not happen in reality.


The answer is – “Ferrari was never on her mind”

Her money was not put on the purpose of buying the Ferrari someday. She did not spend the money on a cigarette but then that same money kept getting consumed on some other things which came in small chunks.

Life kept throwing small and tempting desires and she fell for it without realizing it. And finally at the end, did neither have the money, nor the Ferrari.

You are the biggest enemy of your financial life

If you leave your money in the saving bank account without giving it a strong purpose. Then the lifestyle today is such that no amount of money is enough to meet your short term desires.

Life will throw all kinds of requirements and if your money is available right in front of you, you will keep trying to handle those requirements without much analysis.

Justifying the expenses becomes very easy when you have the money sitting in front of you, waiting to spend. Investors are generally over-confident about their saving abilities and there are tons of research to prove that.

Take out the manual mode of investing from your life

Here is the rule – “Lesser the money available in front of your eyes, higher the chances that you will restrict your useless spending.”.

You need to take out the manual mode of saving money out of your life and take the help of automation. There has to be some way, where some part of your salary leaves your bank account and gets invested on its own. Because the more you leave the decision making to yourself, it’s not going to happen on a consistent basis. Humans are designed to take the path of least resistance. Machines don’t make mistakes.

Let some automated way to save your money, and it will happen consistently, without fail. No one will

The best example of this is your EPF

Your employer deducts a part of your salary and that gets accumulated over months and years. That small deduction becomes a very big amount, if you leave it just like that and don’t disturb it. EPF does not earn very high interest, but still, it accumulates a decent amount.

Now just imagine this, Your employer tells you that they will not deduct that amount and you have to save money each month. It’s fully in your control now.

You should feel great that you have EPF and some form of automatic saving. If you were given the freedom to choose the EPF, it would be a bad thing. Because most investors won’t have chosen it. Here is a similar study from the US, where employees were asked to enroll for the 401K program (similar to EPF in India). However, the catch was that they had a choice to not opt.

When the enrollment was made a compulsory thing as a default choice, with an option to opt-out if one wants, the enrollments more than doubled. Why did it happen? Because enrollment happened automatic!

power of default saving

So coming back to EPF example, Will you save money equal to your EPF each month if it were not taken out of your salary automatically?

Are you really confident that you have the determination and commitment and control over yourself to save that money month after month, year after year without fail?

Are you understanding what I am trying to tell you here? The point is, YOU are your own enemy when it comes to saving. Take your manual judgment and your decision making out of saving each month. Let it happen on its own, automatic.

My personal Experience

Around 6 months back, my wife wanted to start a recurring deposit.

She started a recurring deposit of Rs 15,000 per month for 1 yr period. After 8 months, when she checked the bank accounts, she could see the 1.2 lacs in the deposit account. Suddenly she felt – “How this money did came there?”.

The point is – it was automatic saving. It all happened in the background and didn’t give her any scope of judging the decision again and again. She always saw her salary minus 15k in her bank account.

All her expenses, shoppings, indulges, bills had to happen out of the money which she saw in her account and it happened. The expenses fit themselves in the amount available. It’s the nature of money, and I will share more about it in some time.

Don’t trust yourself for saving money

Don’t trust yourself, when it comes to systematic saving. Your intelligence can be your big enemy. If you decided that each month you will carefully set aside some part of your money yourself, after all the expenses are done, then it’s going to be a tough time for you.

Do this simple exercise

Take a sheet of paper (or open an excel sheet). One the left side write down your income each month and one the right side, write down all the expenses per month.

Now subtract your expenses out of your income, and you get your monthly surplus. So each month after all your expenses are made, you should be saving that surplus amount. Correct?

Is that happening? Did I hear NO

do you really save enough

Why does it happen? Why are you not able to save the money equivalent to your surplus each month?

MONEY is like flowing WATER

Have you ever wondered why you are not able to save enough money, even though your salary has kept increasing in the last many years? Your expenses keep on matching with your expenses.

Even if you are saving some money, are you reaching your full potential? I guess NO


It’s because money is like flowing water. If you do not give it some direction, then it will find out its own direction.

When you do not automate saving money, then all the money will get consumed into “something”. Life will keep throwing various kind of expenses, desires and requirements, and if money is easily available in your bank account, then trust me, you will always come up with strong reasons why you can’t avoid those expenses.

money is like water

Some of our clients get shocked when they fill up the datasheet we send them. The most common complain is – “I am not saving anywhere close to what my income – expenses is showing up”, where is it all going?

The answer is – “Its getting consumed into things which looks important and urgent in short term, but in reality, they are not”

My friend real life case

Few months back, I was talking to one of my close friends. He told me how he is not able to save anything by the end of the month. He was very confident that it’s very tough for him to save anything. After all, if he had any surplus, why it’s not there at the end of the month?

I asked him a simple question – “If his income increases by Rs 1,000 per month. Will it remain in the bank account after all his expenses?”

This one single question was a game changer.

He told me that he is very sure that even if his income increases by Rs 1,000 per month. His life would be same, it will surely get consumed somewhere.

I told him – “In that case, if your income drops by Rs 1,000, your situation will be same”

So why not set aside that Rs 1,000 in the starting of the month itself, and see fewer months in the bank account. Trust me, your financial life will figure out something, it will adjust. It will surely try to fit it.

And that’s exactly what happened. I helped him in starting his first SIP of Rs 5,000 per month.

Just a few days back, the first auto debit happened. I can almost guarantee that by the end of the year, these Rs 60,000 which was getting consumed somewhere, will “automatically” get saved in mutual funds.

So what is the worst case?

Ok fine, your financial life is really in bad shape & you can’t save even a penny. Let’s say, you show some courage and start a recurring deposit of Rs 1,000 per month, even though you know you will need that 1k later.

What is the worst case?

You would need that money back in some time again? Right?

Solution – It that happens, then break the Recurring deposit and use the money …

Or you could start a SIP of Rs 1,000 and incase you needed it, you can always redeem it and take back your money.

But you know what, you will not take it back. You will not redeem it. Because like most of the investors, you are lazy when it comes to money. It’s easier to adjust rather than take that pain to go to the bank and sign that paper for redemption.

We humans take the path of least resistance. You don’t know how amazing human laziness can be for your financial life. Ask those who bought IT stocks and never cared to think about what to do with it. Its only their laziness, which has made them millionaires, because they still hold the stocks

Most of the people are living with this myth that they will not be able to save even a penny by the end of the month. It’s not true. For 95% of investors, it’s a self-created illusion.

They have just not tried enough in the right manner. Let me share with you this in detail

Income – Expenses = Saving

For most of the investors, the default equation each month is “Income – Expenses = Saving” . This equation looks very natural and logical. First, you take care of expenses because they need to be handled NOW, and then if something if left, you will save it. This is how any normal person will think like. But that’s the root of the problem.

If you are not able to save enough money each month, I am ready to bet that this is the equation that is destroying your financial life. Let me guess how it looks like.

Each month, you must be earning some money, then you take care of various expenses, some fixed and some random surprises and if you get lucky, you must be having some surplus money in a bank account each month.

But wait, The money is still in your bank account. It’s still “easily available”. You decide that you will do something about it very soon. You decide that once it becomes a big amount, you will create an FD out of it.

Next month, again you have some surplus and more money got accumulated in your saving bank account. Suddenly in the third month, your spouse tells you that she wants to upgrade the washing machine. After all, anyways its Diwali time and she deserves it.

And why not? After all, you have the money available in your bank account. What’s the problem then?

Your timing is also perfect, the thought of upgrading the washing machine has come up just when Flipkart sale is round the corner. I am sure it’s a coincidence.

How expenses take shape

No , it’s no coincidence.

The point is – the money found its own direction and that’s because you didn’t gave it any direction beforehand.

For a moment, think what would have happened if the additional surplus was not available easily. It was there in a recurring account or was into SIP in some mutual fund or ELSS (locked for 3 yrs). It’s hard to imagine that you would have said – “Let’s stop our RD or SIP in mutual funds and upgrade the Washing Machine”.

Can you see how everything changed in both the situation?

Or imagine you would have created an FD out of that money before hand for paying the school fees for your kid at the of the year. Would you break your kid’s related FD to upgrade the washing machine? Generally not.

I am not against the expenses

Trust me, In no way, I am judging the urgency of your needs or desires. They might be genuine and very much reasonable. Please go and upgrade your washing machine, if it’s really needed. I am not even against taking a loan for that, but just assure that your requirement is genuine and not a made up one.

Just 1 yr back, I bought a sports cycle out of impulse and you should have met me just before I purchased it. I would have convinced you that I need the cycle more than I need oxygen. Plus, I had the money with me at that time. Today I am not using it enough to justify my buying decision.

I can tell you – this false belief of “I need it so much” and the availability of money in your bank account is such a deadly combination.

So what do you do ?

Change the equation to “Income – Saving = Expenses”

Few changes in life give a new direction to life. Everything changes.

Trust me, this is one such change if you really understand it well. If you decide to change your saving equation to “Income – Saving = Expenses”, it can drastically impact your financial life in positive way.

Here is now you implement it.

  1. Find out what is the minimum amount you think can save each month. Is it 10%, 20% or 30%. Take a lower amount at the start, else it won’t be sustainable in the long run.
  2. If your salary arrives in your saving bank account on date X, then, setup a recurring deposit or a SIP in mutual funds on date X+2 or X+3
  3. Trust automation, it will do wonders for you
  4. And in the worst case, if you really need the money, you can redeem it back and use it or stop the RD or SIP.

If you can take this first step, then you have already won the big part of the battle. Other things like great returns, advice, controlling risk, finding the best financial product and all that will be taken care of later. But the first step it this – changing the equation

If you can spare 20 min, you should watch this amazing video by Shlomo Benartzi, on the topic of Saving for tomorrow, tomorrow. You will understand the impact of automatic saving in a better way in this video

And you don’t have to compromise

Don’t confuse automatic saving with compromising on your expenses and fun. We are not asking to stop eating out or cut on your entertainment in life. A lot of investors live in this myth that financial planning is all about compromising your desires and spendings. No, it’s not.

It’s all about giving a meaningful structure to your financial life and exploring various possibilities to make your financial life awesome. That all.

I would love to hear what you think about this idea of changing the equation. Do you think that this single thing is really a very important parameter to live a good financial life? Please share your own saving habit in the comments section

Update your FATCA declaration online in 2 min, if you are an existing mutual fund investor

Are you an existing mutual fund investor? If YES, then you must have got an email from the fund houses where you have invested to provide some additional information about yourself and about your tax residency related questions in the name of FATCA declaration.

In this article I will quickly guide you about what is this FATCA Compliance and how you can update this information with AMC online in 5 min.

What is FATCA Compliance?

Foreign Account Tax Compliance Act or FATCA was passed in US in the year 2010 to make sure that the financial institutions across the world share some basic information of their US based clients.

A lot of investors from US (US citizen and NRI’s residing in US) were supposed to disclose their investments outside the US, but it didn’t happen the way US govt was expecting.

So finally, US govt passed this FATCA law and signed treaties with various countries across the world. India is one of them. So now various financial institutions based in India are asking all their customers to give a declaration about their tax residency, place of birth and if they are paying taxes in any other countries. I am not going into too much of detail here, because you can read it in detail in this moneylife article here .

The main purpose of this article is just to help you understand, how you can update these FATCA details quickly in 2 min online.

All mutual funds investors are supposed to update their information with AMC’s by the end of Dec 2015.

If an investor fails to update their FATCA declaration, then their additional investments will not be processed in future and any SIP which is currently running will also get stopped. So it’s suggested that you complete the declaration as soon as possible. Note that your existing investments will remain intact and there is no impact on that.

How to update your FATCA related information online?

It’s very simple. All you need to do is visit the following two links and update your information.

I have created a short video tutorial on how to update the FATCA information online. Please check it below

Note that a mutual funds is either serviced by CAMS or Karvy (all funds except franklin Templeton, go this link where you can update FATCA for franklin). So these agencies have come up with the links online where one can update all their information.

When you update your information online, an OTP will be generated which will be send to your email/phone which is registered in their records. If you are invested in mutual funds which are services by CAMS (like Birla, ICICI, HDFC etc) , you just need to update the first link (cams one). If you are invested in mutual funds which are serviced by Karvy like Reliance, UTI or Canara Robeco, then you will have to update the karvy link as well.

Below is the snapshot explaining how you can update the CAMS link 

Update FATCA online

In the same manner, you can update the Karvy link with your FATCA information. The OTP will be generated in that case also and all the information is same. You need to update the karvy link, only if you have invested in any mutual fund serviced by them in past.

In anycase, my suggestion is to try to update both the links. There is no harm anyways

FATCA Impact on US & Canada NRI’s ?

So what is the impact of this FATCA declaration on those NRI’s who are based in US and Canada. Let me be very brief and to the point here. Only 3-4 AMC’s in India are going to except fresh investments from US & Canada based NRI’s. Few of them are UTI, L&T and Sundaram mutual funds. so if you are a NRI based in US and Canada, now you will not be able to invest in mutual funds from HDFC, ICICI, Birla, Reliance and many others.

However any existing investments can be continued (SIP wont be continued, but the current worth in those funds will be as it is) . One can redeem them whenever they wish to.

NRI’s based in other countries can invest in any fund house they want.

Incase you have any question on this FATCA declaration, feel free to ask your queries in comments section

Sovereign Gold Bond Scheme Launched – Here are 6 important Facts

Today I want to share some quick facts regarding Sovereign Gold Bonds which was announced in budget session and recently mentioned by our Prime minister.

RBI is going to issue something called Sovereign Gold Bonds for investors who want to benefit from the movement from Gold prices. It’s an alternative way to invest in gold apart from buying physical gold or through gold ETF or gold Mutual fund.

These bonds issue is part of the market borrowing program of govt of India, where it tries to borrow money from the public for the long term. So to understand it in brief, govt wants to borrow money from those who want to invest in gold and they would return back the money after X number of years which will be linked to the price of gold apart from a small interest.

Sovereign Gold Bond Scheme 2015

10 FACTS about Sovereign Gold Bond Scheme you should know

Now let’s understand quickly what Sovereign Gold Bond Scheme is all about and some high-level important points every investor would want to know.

1. Issued by RBI and hence it’s safe and secure

These bonds are issued by Reserve bank of India and hence it carries a sovereign guarantee by Govt of India.

So in a way its 100% safe and secure and there are no chances of fraud or any issues happening in the future.

However, you need to know that the bond value is linked with the gold prices and hence the value of the bond can increase and decrease in the future depending on the gold price movement.

However, whatever is the maturity value will be paid to you and the guarantee is only for that. There is no assurity for any minimum value payment or any promise of return. One can hold the bonds in a single name or joint name as per preference.

2. First Batch of bonds available from Nov 5-20

As per a report, out of Rs 15,000 crore of bonds, the first batch of Rs 1,000 crore bonds are available from Nov 5 and the last date for application is Nov 20. The bonds are available for only residents Indian and NRI’s cant buys it. The bonds will be available at selected banks and post offices designated under the scheme.

I was not able to find exact locations, but I think all the major PSU banks in every city and some big post offices will be the contact point if one wants to purchase these bonds.

Below you can see a sample form and how it has to be filled. You can also download the form from his link

Sovereign Gold Bond Scheme form sample

3. Amount of investment and Tenure

The minimum one has to buy 2 gms worth of gold bonds and the maximum can be 500 gms. So every normal middle-class person who wants some exposure in gold can buy it. The initial issue price is fixed at Rs 2,684 per gram. Which means a minimum initial investment would be Rs 5,400-5,500 at least.

Note that price fixed is a simple average of the closing price of the 999 purity gold, published by India Bullion and Jewellers Association Ltd (IBJA).

The bonds will be issued with an 8 yr tenure, however, an exit option will be available after 5th year onwards. The bonds can also be traded on stock exchanges if you have it in Demat form. However, I think it’s not going to work for most of the investors because that will get too complicated.

Also, you will be able to trade the bonds on markets only if the volumes are very good, otherwise it will be locked away and you will be able to get back the money only after the 5/8 yrs of time. You can read detailed FAQ’s on this scheme here

Also note that these bonds can be provided as collateral incase, you need any loans.

4. You will get interest of 2.75%

You will get interest of 2.75% interest on the initial value of investment (not the market price) every 6 months. I have not gone in details, but I think the way it will work is that if you invest Rs 1,00,000 in these bonds, then every 6 months you will get 50% of 2.75% of Rs 1 lac as interest, which would be Rs 1,375

5. Taxation on returns and maturity

Note that the interest you earn every 6 months will be taxable in your hands. Also at the time of maturity, the long-term capital gains will be applicable, which means that after applying indexation, you will have to pay 20% tax on the returns. Note that because KYC is done properly, you cant escape this.

6. KYC requirement

You will be able to buy these gold bonds only after the KYC is done for you. In simple terms, at the time of application, you will have to provide your identity and provide your PAN or Aadhar card etc and the payment can be done electronically, with cheque/DD or even CASH.

However, you will not be able to hide your identity. This will surely discourage those investors who want to convert their unaccounted money (CASH) into white money.

7. Investment in Paper or Demat Form

You can purchase the bonds in paper format or Demat holding as per your preference. Means if you want the bond in paper format, you will get a receipt and a bond that you can keep in your locker or at home and at the time of maturity you can give it back. Or you can hold it in Demat form and not worry about keeping the bond safely.

Who should not invest in these gold bonds?

I think that 5-8 yrs tenure is a long tenure and you can earn much better returns in this long term. Equity mutual funds would deliver better returns compared to this scheme. Hence if you are a young person below age 40, and are looking at wealth creation as your main goal, then you can give a miss to this scheme.

The return on the scheme (2.75%) is not to be considered and the gold returns historically have been around inflation only.

If you look at the below chart, you can see 5 yrs CAGR return of the gold investment. Note that for the tenure of 2000-2010 the returns have been very very good, but then if you look at someone who invested in the year 2010, they have just got a 7% CAGR return, which is very much in tune with long term gold returns.

gold 5 yr cagr return

So if we look at the optimal use of your investment to generate a decent return, I personally dont consider this as a great investment product. You can skip this.

Who can think of buying these bonds?

Now if we look at the other side, There are many investors who are very attached to gold and really want to invest in that. No logic will move them and no conversation of CAGR will make sense to them. So for those investors who were anyways going to buy physical gold or Gold ETF, can look at this scheme as a good alternative.

Anyways your investment value will move as per gold prices and on top of it, you will get 2.75% interest which you do not get in case of physical gold or gold ETF/funds. The best part of this scheme is that you don’t have to worry about the quality of the gold or where to store it as its all in paper format and no one is going to steal it from you.

The money will only come back to your bank account only which you have provided at the time of investment.

However, note that the investment in these bonds is going to be mainly illiquid in the very short term. If you buy physical gold, you get that liquidity in your hand and if you need money urgently you can sell off the gold. You will not get it here.

So overall, you are the right person to pick if this scheme is for you or not.

Please share what are your views on this scheme. Do you think it’s going to be a hit among investors?

Financial Life of a cab driver & life of Mumbai

I recently visited Mumbai for some work and it was 7:15 pm in the evening. When I came out of a building in Andheri East, Mumbai.

I had booked a cab from Pune to Mumbai and I was now ready to be back. I called up the cab driver and here is the conversation…

ME – “Bhaiya, kidhar hain aap?”

Driver – “Bas sir, Yahi hun 200-meter piche, 20 min me aa jaunga, aap gate ke pass hi rahiye”

ME – “Main aa jata hun paidal chal kar, Aap bataiye kidhar hai exactly”

Driver – “Arre nahi sir, aap wahin rukiye jidhar hai, itni bhid me Mujhe nahi khoj payenge”

Finally, after a long 20-30 min, I saw a car near me, honking like hell and flashing lights on me. It was my cab driver and he was indicating – “Get inside the car asap”

Finally, I was inside the cab and we were going back to Pune. It took us another 20 min to just get out of the lane. It was really frustrating to just see yourself in the middle of traffic and move nowhere.

The first half of the total time took us to come out of Mumbai and the second half took us to reach Pune. Finally, I reached Pune at 11:30 in night.

Story of the Cab Driver and his Financial life

In this article, I just want to share with you a conversation between myself and a cab driver I met recently. I asked him some questions about his life, a bit about his financial life and his work schedule. I know, it’s not directly related to personal finance, but I think, it’s a good idea to share it with you all as it has some good things to know about.

Tax driver

(The photo above is not the real cab driver in question)

The moment we were out of the lane we were stuck in at Andheri, the driver looked really irritated by the sheer amount of traffic. I asked him – “Bhaiya, Mumbai ki life Kaisi Lagti hai aapko?”

And his answer stunned me – “70 saal jeene waala insaan 50 ke khatam ho jayega, yahi hai Mumbai ki life”

While I knew he was a bit tired and his frustration was making him speak these words, there was surely some element of truth in his words. The way of life, the speed, the running around for everything. It’s really mind-boggling in Mumbai.

Anyways, One my way back to Pune, I had conversations with Driver and here are few things I came to know.

1. He drives 400 km EVERYDAY

Did I ask him if travels to Mumbai often? He said every day. YES – Everyday .. 30 days in a month… May be once in a while there is no pick or drop but in general every day. He said that he does close to 10,000-12,000 KM every month. His legs and Back pains a lot and sometimes it’s so bad, he can’t explain it. We reached Pune around 11:30 pm at night and he had to get back at 4 am again to take someone to Mumbai airport.

2. No family life

I think we felt by good talking to me, and he kept on going.

“Family life nahi hai Kuch Bhi Sir .. Ghar Jata hun, khana khata hun aur sidhe so jata hun”. He told how his life is tough and there is no energy left once he is back home. He has no motivation to talk to his kids, spouse or enjoy with them.

Even when he has to drop or pick someone, he has nothing to do and he just sits inside the car and it’s really tough to do that, day after day, month after month and year after year … It’s the height of boredom”

He was a calm person, but he said that when he is stuck in jams atleast he feels he want to throw away the car like HULK. It was a calm frustration coming out of him.

3. He had Life + Health insurance

I realized that his job is very risky. He has to drive each day and he is prone to accidents. His legs are so important for his job and to earn the money. I thought I will explain to him why he should think of covering these risks and I asked him – “Do have Insurance?”

  • “Yes Sir, I have life insurance and health insurance both from ICICI Lombard”

I was happy and a bit shocked to hear that because I didn’t expect him to have that. He told me that one of his agent friends had explained to him about these products and how it might help him. I congratulated him on that point and said that it’s a great thing that at least he has something. Thank god he did wait to find the “best product”

4. He saved Rs 4,000 per month in Recurring deposit

Though his earnings were limited and he was on a tight budget, he told that he managed to save Rs 4,000 per month. He gave it to his wife every month which is invested in Recurring deposit. I thought it was a great thing and didn’t say anything like “why don’t you invest in equity?”. I think it would have confused him a lot and it was not the right time for all that Gyan. He was doing well.

What do you learn from this?

Let me know what you feel after reading the story of this cab driver? I think that the cab driver did a few things correctly which even many with a lot of privilege fail to do. Like if you see this cab driver, he has a habit of saving some part of his income even though he does not earn as we all do. He had life insurance and health insurance which is really commendable. I know he does not represent an average cab driver from that angle, but still.

Please share your thoughts