In today’s context innovative options both in the residential units and loan offerings seem to be the need of the hour. The boom in real estate that has been fueled by the ever rising incomes of individuals in India combined with easy access to home loans has brought about such new and innovative options in the residential units. Luxury and lifestyle demand has seen the emergence of elegant builder floors as the preferred choice among many upwardly mobile Indians. This concept of building a three or four level high building over small or medium sized residential plot and then selling each of the floors to independent buyers is gaining rapid popularity in the metros as well as tier II cities across the country. The builder floors can be developed either by established builder, individual land owners or as joint venture of both the parties.

Basic Differences between Builder Floors and High Rise Apartments

There are several differences in the basic considerations of builder floors as compared to apartments in high rise buildings.

• Builder floors are low rise buildings with generally 4 floors or less whereas the high rise residential projects may have a large number of floors depending on the project clearances.
• In the builder floors only a single dwelling unit is provided per floor which implies that a single family has the entire floor to itself providing greater privacy. The high rise projects on the other hand have a number of 2, 3 or 4 BHK apartments on a single floor which implies more people sharing the same floor.
• The cost of builder floors are inherently higher as they cater to high end customers who prefer to enjoy better amenities and privacy at a higher cost. The high rise residential complexes cater to the average middle class who require budget housing solution with a ready to move in option. Economically speaking the apartments in high rise buildings are much more efficient in terms of cost as well as utilization of available space.
• High rise complexes with more number of units will generally have more common amenities such as swimming pools, community halls, club houses and children’s park. The social life is also more inclusive in case of the high rise apartments as more families reside in the same building.

Key Benefits of Builder Floors

The USP of builder floors is that it allows one to own an independent dwelling unit without having to pay hefty amounts required for independent villas or bungalows. The price difference between an independent villa and the builder floor makes it a lucrative option for all those who want better lifestyle at limited costs. Along with the privacy and luxury of an entire floor to you also comes the freedom from paying maintenance fees and other charges commonly applicable in high rise apartment. The builder floors accord one the freedom to choose the locality of the house in more developed areas of the city. Tying up with independent land or house owners for developing builder floor can work out to be a great deal for buyers. There is a better opportunity for friends or like minded people getting together and buying all the floors of the building so as to have a separate community that will not be disturbed by outsiders as is the case in high rise buildings that have a large number of apartments. Each floor has its own separate water and electricity connection which helps avoid disputes or misunderstandings which are common in larger communities where floors are shared by many families. Additionally the returns that can be expected from the sale of builder floors are much higher in terms of sheer percentages as the entire floor is being disposed at a time. A higher premium on the property is naturally expected as the new owner gets independence along with luxury.

Common Problems faced by Builder Floor Owners

Along with the luxury of owning a builder floor there are a few associated problems which have to be catered for by the owner all by himself. The first among these is the maintenance activities which are taken care by the society in larger residential complexes have now to be undertaken by the owner himself. Additionally community facilities which are commonly available in larger societies will be absent in most of the builder floors as only a few families will be sharing the entire complex. The quality of construction may not be as good as in the other case. Hence the due diligence and supervision has to be carried out by the owner if required with the help of a hired professional.

Essential Checks while Buying Builder Floors

While buying any kind of real estate requires the customer to do a few fundamental checks, the situation becomes even more critical and essential in case of builder floors as only a few customers are involved. Mentioned below are some of the important checks that must be carried out prior to buying a builder floor.

• The past record as well reputation of the developer or land owner must be verified carefully in terms of quality as well as commitment to schedules.
• The title of the property has to be individually verified at the local courts or land record offices.
• Check out the market rates applicable in that circle or the base rate fixed by the local authority.
• Consult and discuss with a number of builders, brokers and individual land owners before making up your mind.

The builder floors promise to provide lifestyle and luxury at an affordable price. However there are a few inherent risks associated, which can be catered for through a bit of research and careful planning.

Planning for retirement and doing something about it is something that most youth and elders detest. For the youth there is no incentive to plan for something that will come up 35 years later. For the elders, the fear that they may not have enough money in their last phase of life prevents them for doing a deeper analysis and action after that.

Retirement Planning is not only about money

There is more to retirement planning than money. Some of the key things to be planned which actually make the planning more interesting is to consider:

1. How will you spend your time?
2. Places to visit
3. Tackling health related issues
4. Sharing the wealth created
5. And finally planning for income (of course)

In fact, most people just think of the last one without considering the first four. This leads to confusion and fear.

Tips for Retirement Planning

Plan Time: Many retired people are lost because they have not planned for the question “What next?” It is important to find some activity that will fill the 8 to 12 hours that one has spent at work. This is not only for the breadwinner but also for the homemaker. What will you do to manage a new person with whom you need to share 8 to 12 hours, suddenly?

a. Think Social Activities: There are so many activities that one may have thought of doing to the society and not done due to want of time or due to other priorities. Post retirement one can take them all with a vengeance. This not only a time filler but also a very good way to keep the brain stimulated.

b. Think Hobbies: Apart from filling time and keeping one mentally agile, hobbies also add to your skill sets. Taking up a new hobby and joining a hobby club is a great way to manage retired life.

2. Plan Travel: Except for the envied few who had great travel oriented jobs, most would have sacrificed their travel plans for their career. And don’t grow too envious because those jet flyers on the job are also cribbing because they had to travel on such tight schedules that they hardly got to see anything worthwhile travelling on the job. Retirement is a wonder time to plan for all those missed countries and places to visit.

3. Plan Health: Health insurance is very handy when you are retired. But if this is planned on the brink of retirement not only is the cost too high, but diseases may already have set in. This means that the pre-existing diseases will not be paid for by the insurance for upto 4 years after taking the plan.

4. Write a Will: Writing a will to efficiently pass the wealth created to our loved ones is very important. However in India, this is a commonly absent practice. Even some of the richest persons in India have not taken up this practice (think Dhirubhai Ambani). This leads to costly and lengthy process of passing our hard earned wealth to our loved ones.

5. Plan Finances for Regular Income: Though this aspect alone can be written in whole books, the basic idea can be summed up with a few point:

a. Do not to lock up funds in illiquid assets without cash flow – avoid buying a large house for you to stay and prefer a house from which you can get a rental income.

b. Do not to give away wealth too soon – having cash does not mean that you can give it away to your sons and daughters and brothers and sisters or to a temple. Give it to them through your will so that they get your wealth, and at the same time, the money works for you when you are around.

c. Do not experiment – To experiment with retirement funds in the stock market and commodities or a new business post retirement is highly risky. You may not have the time or energy to earn the money lost (if lost).

Retirement Planning:

Retired life is supposed to be fun filled and peaceful. But today we find more old age destitute homes popping up than schools, indicating a trend towards lack of retirement planning. The above tips will help those in their prime of life and those near retirement to plan for a comfortable retired life.

Exercising discipline is extremely important in every aspect of life. This cannot be more stressed in the case of managing your money. The manner in which you manage your expenses is the key to reduce liabilities and save more. According to a famous trading and investing legend- One must not spend time looking for the Holy Grail of investments or trading systems. It doesn’t exist. The Holy Grail is within you. It’s not the investment that’s going to determine success or failure rather it’s the discipline of the investor.

There are 2 friends Mr. X and Mr. Y both in their late 20s. Mr. X has a monthly income of Rs. 60,000, while Mr. Y has a salary of Rs 40,000 per month.  However, Mr. X’s job is more stressful and demanding; while Mr. Y has a comfortable job with low stress levels and better work life balance.

Mr. X lives a lavish life. He spends most of his salary; saves inconsistently. On the other hand Mr. Y is very regular in savings. From his monthly income, he saves Rs 15,000 a month in the following investment options.

Pension - Rs 3,000; Child plans -  Rs 2,000; Mutual Funds -  Rs 4,000; Emergency fund -  Rs 1,000; Vacation fund -  Rs 1,000; PPF – Rs 2,000; Mediclaim-   Rs 2,000

Suppose at the age of 44 years, both have a medical emergency. Due to lack of savings Mr. X would be stumped. However, in case of Mr. Y, his saving patterns, as visible below, would be able to save the day and give him the ability to meet the sudden expense.

One can never predict life. It’s difficult to anticipate bad times. Hence, it is essential to save for such rainy days. One should make it a habit to save, even if it’s a small amount.

Here are some steps which one can follow.

Track expenses: This is the foremost step. You should keep a check on monthly expenses. Unnecessary expenses should be avoided. One way to know how much one spent for a month is by having a monthly budget. This will show where the money is spent and also regulate the cash flows. This done over a period of time will help you identify areas where there is room to cut back on spending and save money. This will free up cash, which can be used to pay up existing debts or help save for the rainy day. Reducing spending, as opposed to earning more money, is the real key to gaining control of finances. Also, you must ensure that some money is set aside to cover monthly expenses for at least three months. These funds should be set aside such that can be readily accessed in case in times of emergency or as a contingency fund.

Pay off debts/ credit card debts: Paying off your debts early is one of the best investments you can make, specially paying off debts which have a high rate of interest.  This includes the credit card payments which generally have higher interest costs.

Create discipline: You need to have discipline in the way you spend and control your expenditure. It is the key to save. A consistent plan of saving and investing helps attain one’s goal. With discipline and time one can reach goals.

Importance of saving: Here is a simple example. There are 2 friends, Mr. A and Mr. B. Mr. B saves Rs 500 per month. Mr. A saves nothing. Over the years, here’s what happens.

The discipline of saving regularly has helped Mr. B be richer by Rs 19, 931. Also what you earn is not as important as what you save. If you spend everything you earn in futile pursuits and wasteful expenditure, then there is no point to the amount earned.

Invest: Start the wealth building exercise by investing in low risk investments. Once the base is strong, then increase the risk exposure by investing in higher return investments. Also, do not put all the eggs in the same basket. Your risk tolerance level goes a long way in defining your investment approach. However, do remember your investment objectives before you subscribe to an investment plan.

Follow a systematic investment plan: Invest at regular times. By doing a SIP, you can SIP (sleep in peace). This will help you reduce the cost and earn higher returns in the long term.

As seen in the case of Mr. Y, by saving regularly helped him meet the medical emergency with ease. By following these simples steps, you can make your money last longer!

Fixed deposits in banks are one of the most preferred investments by risk averse Indians who also look forward to earn a higher interest rate as compared to the normal savings account in the bank. Now these fixed deposits have another wonderful benefit to offer the customers and that is the provision to take a personal loan against it in times of requirement. This a great idea for personal loan that actually comes at a much lower rate of interest as the bank gets the security of the fixed deposit against which it provides the loan.

Key benefits of Personal Loans against Fixed Deposits

The reason for the growing popularity of this option as against traditional unsecured personal loans is the host of added benefits that come with such a loan.

• The interest rates available for personal loans against fixed deposits are lesser than conventional personal loans. The rates for such loans are generally 1 to 2% higher than the rates being paid by the bank for the fixed deposit.
• Such a loan does not require one to liquidate the FD which in that case lesser interest for being broken midway. This way the asset remains while the immediate financial requirements are met.
• The tenure for the personal loans against fixed deposits normally extends up to the maturity of the fixed deposits.
• The processing is also hassle free as the bank where you already have the fixed deposit will itself provide the personal loan against it.
• There is no prepayment penalties associated with these kinds of loans which gives the borrower the freedom to repay whenever his cash flow situation improves.

The Procedure for Personal Loans against Fixed Deposits

The process involved in availing a personal loan against fixed deposits is relatively simple and fast. In this case the fixed deposit will have to be hypothecated to the bank. At the time of the application the following documents will have to be submitted to the bank.

• Demand Promissory Note
• Pledge/lien Letter
• Loan Documents
• Overdraft Agreement
• Application Form
• Deposit Receipt
• Signed Receipt

There is a small processing fees that will be charged by the bank for the approval of this loan and the loan will be sanctioned in a very small time frame.

However one must carefully analyze the actual losses that will be accrued by taking a loan against the fixed deposit at an early stage of the deposit as compared to taking it against a deposit that is nearing maturity. In most cases it is preferable to take loan against deposits that are closer to maturity as the amount due will be more in this case. But at the same time one must understand that the tenure available for repayment reduces in this case. Weighing the pros and cons of both the situations the borrower will have to decide for himself which is the most advantageous situation for him. However in all cases taking a personal loan against fixed deposit is always better than a high interest rate pure personal loan.

Today there are a plethora of options in personal loans being provided by various banks and other financial institutions. Though the exact eligibility criteria for availing such personal loans varies from bank to bank there are few common guidelines which most of the lenders follow when it comes to approving a personal loan in India.  The basic parameters that determine an individuals’ eligibility include age, profession, annual income, credit history and outstanding liabilities at the time of applying for a personal loan.

Age Criteria: The general guideline followed by most banks and other financers is that for availing a personal loan a salaried individual must between the ages of 21 to 60 years while a self employed persona has to be within 25 to 65 years of age.

Employment Stability: A salaried person with a minimum of 2 years of professional service with 1 year in current profession and a self employed person with a minimum of 5 years of total earning tenure with at least 2 years in current profession is eligible for a personal loan. However these criteria are flexible depending on other factors that the lender shall decide.

Financial Situation: The current and previous financial condition of an individual sis an important consideration while approving a personal loan. Minimum levels of income have been specified by the different banks for applying for personal loans. The financial condition determines the repayment capacity of the individual and hence the lenders take maximum cognizance of this aspect while giving an unsecured personal loan. The amount of loan that one is eligible for is also decided based on this criteria.

Credit Rating: The credit history of the applicant is another aspect that lenders would like to look into while approving personal loans. Delays and defaults in paying EMIs of other loans or credit card dues are some issues which can lower the eligibility for personal loans from banks and other financial institutions. A good credit rating on the other hand enhances the total amount that one is eligible for.

Employer: Since the loan is unsecured the kind of employer the applicant is working with is given due credit while deciding eligibility for personal loans. Public sector employees and those working with reputed and established private companies thus are better eligible for availing personal loans as compared to others as there is stability in their income.

Outstanding Credit Liability: Any other pending loans which the applicant has at the time of applying for a personal loan are also likely to reduce the eligibility in terms of maximum amount possible. Since the amount is calculated as per EMI that the applicant can possibly repay the contributions towards other outstanding loans reduce the total personal loan amount drastically.

However in the case of personal loans the local branch manager is given substantial discretionary powers which he can use to approve a loan despite limitations in the eligibility criteria of the applicant. The customer must always try to bargain the best possible deal while negotiating with the branch manager for a personal loan.

Moving into one’s own home is a joy, which is to be felt not explained. It is utopia what with the poojas, house warming functions, searching for just the right furniture and fittings, praises you get for having taken care of the finer parts in construction and decorating the house and the pride in having acquired a physical symbol of success.

After the festivities are over, and with the dawn of a new month, a new realization comes home. For the fortunate few, it is the reminder to fund your bank account, as the loan EMI is due after a week. For others the money simply flew out of the bank account.

It is time for us to act like the fund manager of a mutual fund or investment fund. Taking informed decisions to manage the asset that we call home and the liability that we call housing loan. By being prudent, you can get high “returns” in the form of saving on interest outflow.

Fund Management When Carrying a Home Loan

As a fund manager of the house, one has to find ways to maximize the benefits of the cash flows. Make a list of all the loans and savings/investments that you have made. Do you find places where the savings/investment is giving lesser returns than the loan rates? This can typically be seen with your endowment insurance plans, your EPF and PPF, the postal deposits, sometimes-even ULIPs. Why should you be invested in something when you are paying higher interest to somebody else? It is better to close all or most of these lesser returns savings/investments and divert the funds to close the home loan.

Care should however be taken to replace an endowment insurance plan with a term plan of higher cover. Your employer and your EPF officer will allow withdrawal of funds from the EPF account for buying and closing the loan of a house. The PPF is not so flexible with letting go of your money. ULIPs and the postal deposits can be closed only after the stipulated 3 years of lock-in.

Ways to repay your debt quickly:

There are ways to come out of the EMIs and make your loan tenure shorter:

1. Partial pre-payment

2. Switching to a lower rate

3. Increasing the EMI

Now let us look at the options in more detail. The best part is that, the options do not in any way add to your existing budget.

Partial Pre-Payment

This is the easiest way to close a housing loan faster. The method is to make use of any one-time income like a bonus, salary arrears, gifts from friends/relatives, any wind fall gains from shares, property sold, deposits closed, tax saving investments maturing, closure of savings that are giving you lesser returns than the housing loan, etc. to partially close the housing loan.

The effect is that the one-time payments help to reduce the principal balance in the loan. And when the EMIs continue, they have lesser of the principal to cover. So the same EMIs need a lesser time to close the loan. More earlier and more frequently the partial pre-payments happen the faster the loans close.

Banks generally allow partial pre-payment starting from Rs.10,000/-. There are no charges for partial pre-payment or even full prepayment of housing loans currently.

Switching To a Lower Rate

The interest rates current are in a rising trend. There are times when the interest rates start going down too like NOW! Based on the interest rate reset period, different banks will reduce their rates at different times. If the reset interest band of your lender is a wider band, you may be at a higher interest rate for a long time after other banks have started to reduce their rates.

Switching to a lower interest rate will shave off a few years from your housing loan. Care however has to be taken about not jumping too many times or with low interest rate differences. A heartening detail though is the removal of prepayment penalty. This can definitely boost the prospects of a home loan switch easing the cost burden for the loan borrower further!

Do remember that property verification and other legal paperwork will have to be done afresh in the case of a loan transfer. Also, for a loan transfer to be effective you should have a clear track of having cleared all the EMIs on time, every time.

Increasing the EMI

This is another option to close the loan faster. If you can spare a portion of an increment to increase the EMI, considerable saving could be made. For example a Rs.30,00,000/- loan for 20 years will need an EMI of Rs.28,950/-. If you can spare an additional Rs.2,300/- per month, the loan can be closed in 15 years itself.

The EMI can also be increased by making use of money that was going into an endowment insurance plan or a recurring deposit in a post office.

Increasing the EMI can be done at any point during the tenure of the loan. There are generally no charges for increasing the EMI.

Summary

Only after closing the home loan does one really become the owner of the house. Closing the loan as soon as possible not only relieves the mental strain of carrying a debt but also releases more money into the family budget.

Car loans in India have undergone widespread in the past few years with the financiers evolving new and innovative loan products in an attempt to attract more customers. There are various kinds of customized car loans available in the market which will suit differing requirements of the borrowers. In addition to the different car loans that one can avail there are also several options in manner and mode repayment of the loans to suit the financial conditions of different buyers.

These various structures available have to understood and worked with the financier at the time signing the loan agreement in order to have convenience in repayment. Discussed below are some of the more popular repayment options that are in vogue for car loans in India.

Regular EMI: This is the standard practice adopted for majority of car loans in India wherein a fixed rate of interest is calculates and EMIs decided for the entire repayment tenure. The interest rates in such options are the lowest. The Emi can either be paid in the beginning of the month called monthly in advance or at the end of month called monthly in arrears.

Step up EMI: In this arrangement the amount of EMI increases as the repayment progresses being lowest in the first year and increasing steadily thereafter. The interest applicable in such options is higher than those of the regular EMIs. Customers opt fir this option to have a lesser burden initially and then cater for higher Emi as their income increases.

Step down EMI: In this arrangement the EMI is highest in the first and then reduces to become the lowest in the final year of repayment. Though the rate in step down EMI is higher than regular EMI mode the total cost maybe lesser as the principal amount reduces faster through bigger EMIs.

Balloon EMI: In such a method there is provision of paying a lump sum amount up to 20% of the principal at the end of the repayment tenure. Though the rate of interest chargeable in this method is higher than regular EMI it reduces the initial burden on the borrower.

Special Tie Up: often referred to as the super saver tie ups these methods ensure maximum benefits for the borrower as the financier has a tie up the bank of the borrower so that whenever there is additional or excess money left with the borrower in his savings account the same is used up for out of turn payment of the car loan. This helps reduce the principal earlier resulting in substantial savings in the overall money paid out in the long run.

Lease and Refinancing: This is a rarely used option where the borrower pays the financier an EMI equivalent to lease charges of the vehicle and at the end of the repayment tenure has the option of paying the current value of the car and buying it or selling it off and settling any outstanding dues of the financier.

Each customer has his own special financial considerations which shall dictate the kind of repayment option that shall suit him best. However having an understanding of the various options available in the market makes it easier to take a more informed decision.

Filing tax returns is an annual activity which must be fulfilled as a moral and social obligation by every citizen of this nation. This is a means for the government to determine the amount and means of expenditure of the citizens and also provides a platform for the assessee to claim refunds and other forms of relief from taxation as is applicable at that point of time. The government mandates a specified amount of income which requires to be filed as a tax return within a pre determined due date. The tax as applicable must be paid by the assessee failure of which will invite interest and penalties from the IT department. While most people are aware of the requirement of filing tax returns many are still unclear about the overall implications and repercussions of not filing returns on time. The last date for filing returns is 31^st July for financial years ending on 31^st march. In case of assesses whose accounts require to be audited as per provisions of the IT Act the date is generally 30^th September.

Legal and Social Implications of Filing Tax Returns

There are several allied issues which are associated with the filing of tax returns. Filing the returns provides legal sanction to your income whether or not you are liable to pay taxes for that assessment year. The government has now in fact made it mandatory for all citizens to file returns whether or not they come under the taxable bracket. Filing returns makes it easier for individuals and firms to enter into subsequent transactions as the income they have shown is now in the knowledge of the tax department and the tax for the same has been paid as per records.  This also a means by which every right thinking citizen of the nation contributes to the progress and development of the nation. The money collected through taxes is the corpus from which the government undertakes welfare activities to improve the living conditions of the citizens.

Advantages of Filing Tax Returns

Apart from helping the cause of the nation, filing income tax returns on time has many other individual advantages associated with it.

• Processing of home, educational and other types of loans require income tax returns to be shown to the lending institutions. Thus filing returns makes loans easier to process.
• It is mandatory to have income tax returns for the processing of any VISA.
• Registration of immovable properties in most states requires production of the tax returns of the last three years. Filing returns makes such registration procedures easier.
• Issuing of financial instruments of all kinds such as credit cards mandates the production of tax returns.
• Filing returns whether eligible for taxes or not helps pad up legally tenable income which will be useful subsequently to account for the wealth or property owned.

Consequences of Not Filing IT Returns on Time

There are several disadvantages of not filing the tax returns on time under the various provisions of the income tax department.

• The various losses incurred by an individual or a firm in terms of business losses both speculative as well as non speculative, capital losses both short term as well as long term and various other types of losses which have not been reflected through proper tax returns in a financial year cannot be shown for exemption the subsequent years for the purpose of tax calculation as laid down under the Section 80 of the IT Act.
• In case the original IT return under Section 139(1) of the IT Act has not been filed then the revised return under Section 139(5) also cannot be filed subsequently when the assessee needs it.
• Under the Sections 235(A), 235(B) and 235(C) of the IT Act, non filing of returns by assesses can attract a penalty of Rs. 5000 from the IT department.

While filing of income tax returns may seem a voluntary activity on the face of it, there are legal provisions against those who do not do so. Even if a person is not eligible for taxes under the current provisions of the IT Act, it is wise to file the returns for the same so as to be on the right side of IT laws. Additionally filing of proper returns on time lends you a peace of mind and declares all your income shown as legal since they have been taxed for. Individuals, companies, partnership firms, LLP, AOI, BLP and HUF are all liable to file the tax returns before the deadline.

Home buyers are always looking for the best home they can buy with the resources and time available with them. Now, more than ever, real estate prices are subdued and buyers are again active in the market.

Buying a home is the most exciting and at the same time, tedious task for people. While the excitement of owning your own home pushes you harder to expedite the process, the tedious task of going through enormous amount of details frustrates you. Going through the process is a necessity. Though the process is tedious and demanding, any negligence on the due diligence can cost us big in the future.

In this article, we will take a look at some options that home buyers have and how they can choose the best one based on their requirement.

Buying an under-construction home

This is the most popular way of buying a home. A builder announces a new housing complex through newspapers, TV, or any other media. Agents start going around the market, companies, malls, and even homes of people to advertise the same. The goal of the builder is to sell as many as possible before the housing complex is built. In fact more than 75% of the flats of known builders are booked even before a brick is laid.

The advantage

Cheaper – Buying an under-construction home is cheaper compared to buying the one that is already built or about to be built. The cost difference is significant. In the Delhi and NCR region, a ready to move flat with 2 bedrooms that costs home buyers about 40-50 lakhs can be bought anywhere in the range of 30-40 lakhs while under-construction, depending on the location. On an average, the difference is anywhere between 20% and 40%. This is a big difference for majority of the home buyers.

Low EMI – The EMI is paid as the work progresses hence the initial EMIs are low in the case of an under construction home.

Win-win situation for buyers and sellers – Buying an under construction home is a win-win situation for both buyer and seller. The seller gets a ready set of customers even before he starts laying the foundation while buyers get the cost benefit.

High returns – Since the prices are lower, you may get higher returns on the under-construction home. This kind of return is not possible in a ready to move home. However, high returns come with high risks. To give an example, people who invested in Noida authority plots earned high returns while people who invested in Samshabaad in Hyderabad are still waiting for the area to pick up.

Caution Points

Risk is high – All is not so well in under construction home buying though. There have been cases where builders could not complete the housing complex and buyers lost the money. Real estate sector is full of such stories where the builders could not complete the property because of cash crunch, high interest rate, and high raw material costs.

On the other hand, the market outlook may also change like how it happened in Samshabaad in Hyderabad. Samshabaad was supposed to host the largest Infosys campus, a chip factory, few engineering & medical colleges, banks etc. but none of it happened due to the 2008 crisis.

Many times, you don’t get what you are promised – This is another common complaint the home buyers have. They usually do not get what was promised in the documents. What is distressing is the carpet area that buyers get once the home is constructed. The carpet area is usually 70% of the super built area. The illusory swimming pool may never come up.

Important Points for buyers of under construction homes

Buyers should also check the past history of the builder. If the builder has done great in the past, chances are very high that he will repeat the same. However, if the past is checkered, rest assured history will repeat itself. Hence the track record of the builder is of paramount importance.

Buyers should clarify loan tenure and how the money will be released to the builder. Typically it is completion based.

Buying a ready to move home

A new trend is observed in home buying since the last couple of months. A good number of home buyers are slowly shifting towards moving to `ready to move’ homes than buy an under construction home and wait for a couple of years to get the possession. The reason is not hard to guess. Since the economic slowdown in 2008, there have been many cases where builders could not complete the housing complex and buyers had to wait helplessly. There have been many such cases.

The advantage

Immediately Available – Investors do not have to wait to move to their new home as it is ready and all buyers have to do is to pay the money, sign necessary documents, get all titles and required documents and transport their baggage to the new home.

Either EMI or Rent but not both – In the case of ready to move, you just pay the EMI. In case of buying under construction home, you have to pay the EMI and live in rented apartment till you get the possession.

You get what you see – In the ready to move home, you get what you see. Since the housing complex is ready and there are people living there, getting feedback about the area, maintenance, locality, shopping centers, and utility centers become easy.

Caution Points

The biggest negative of ready to move home is that you will have no idea of what went on behind the scenes, i.e. in terms of materials used, in terms of strength of the foundation etc. If the maintenance is shabby, the house can start to look old in no time!

Also, the price of ready to move home is about 25% higher than the price of under-construction home.

Important Points

Ready to move homes are generally more expensive but do not take this as gospel. Do your research; speak with a few people in the locality to find out the fair value of the home.

Group Buying

Since the last couple of months, many new companies such as www.groupbookings.in have encouraged home buyers to form a group and thus increase their bargaining power. Once the group is fairly big, the group buying companies will negotiate with builders on their behalf and get extra discounts. Essentially these companies act as a mediator between the builders and home buyers.  For builders, giving extra discounts is not a problem because they are saving big in advertisement and sales force.

The Advantage

Group buying empowers home buyers to negotiate better with the builder. The group home buyers usually get a better discount than what they can get individually.

Caution Points

In group buying, an individual buyer doesn’t make much difference and hence group’s interest takes priority over individual’s choice.

The down payment usually is higher.

Important Points

The buyers should study the documents carefully. Don’t assume that someone is reading these documents. You will be surprised to know that everyone has the same assumptions.

Group buying of homes take time and hence you have to be patient about it. The group buying company has to build the group, and negotiate the price with the builder for additional discounts. These activities take time.

Buying run-down homes

This option is not yet popular in India but slowly picking up. Essentially buyers choose to buy a rundown home at dirt cheap prices.  Once the house is yours, you can fix it and spend some money to get it up to date. This can fetch a better value in the market and the investor can make a killing in profit.

The Advantage

The houses are much cheaper even when you add the cost of repairing the house. Run-down houses are generally row houses and hence you get the land with it too.

Caution Points

The look of run down houses can be deceptive. You may have thought how must it should cost to renew but when you start to repair it, it may exceed your cost estimation.

Important Points

Unless you have experience about this field, do not venture into it. You may end up buying a worthless property in an area where people are migrating from.

What should you choose?

Your choice should depend upon your financial condition, timing, and your choice of location. Location is the most important factor in real estate.

If you are ready to wait, can take medium to high risk, and do not care much for location (in terms of being near to the market etc.), you can go for booking an under-construction home. You can even go for group booking if your requirement is to stay with people of your social standing.

If you cannot wait and cannot take high risks associated with under-construction homes and need to be near  amenities of your choice, try to find a ready to move home or go for a group buy.

Once while chatting up with a friend over tea and hot pakoras, the talk moved towards how expenses have shot up and how difficult it was getting to manage our family budgets. My friend just shrugged and said, “Well, those are concerns of my wife. After all, she is the finance minister of the house”.

Yeah, most women don the role of the finance minister of the house apart from the cook, housekeeper, the errand girl and more! However, just like every government’s finance minister, the home based finance minister comes in different types too. Some are functional, some are innovative, some are aggressive and some are just nodding dolls. What type is the finance minister of your house?

All families can do well with an efficient and innovative finance minister and this is how you can become one:

-          First things first – by being organised

Four types of expenses happen in the household.

• Compulsory, non-negotiable expenses like the rent, school fees, groceries, electricity bill etc.
• Discretionary, variable expenses like eat outs, holidays, clothing and grooming, religious etc.
• Loan repayments
• Savings and investments

An organised finance minister has an almost clear idea of how much goes into each of these categories and allocates separately.  For example: EMIs are paid out of the husband’s salary account because he has to claim tax deduction for the same. Savings and investments happen out of a common savings account jointly held by husband and finance minister to give better control and flexibility. Compulsory expenses are settled at a specific time of the month always and paid using cash, debit card or in a disciplined manner the credit card. Discretionary expenses have a predetermined budget and are usually only handled in cash.

-          A creative finance minister will find scope to improvise in each of the above heads. Most compulsory expenses can be planned for.  Like, the school fee comes in the month of April/May and so it does every year. A bit of pre – planning can help tide over this big-ticket expenditure with ease. For regular compulsory expenses, the brown cover technique (where money required for every expense is neatly put away in their respective envelopes) is most useful. There are ways to optimise interest payments on loans. Good bargaining and searching for the best deals can help keep discretionary expenses also in control and many more…

-          Apart from the above, a smart finance minister keeps books of accounts, knows for sure how much the vegetable vendor owes her or how much advance the maid has taken that should be deducted from her monthly salary. Not from her memory which can be disputed, but in her books – clearly written with date, amount and if possible signatures.

-          A ready reckoner list with all payments to be made, to whom, how much, when, how long etc. should remain handy in the top most draw of her closet. Not a payment missed, not a day delayed, not a cheque dishonoured can mean a lot of saving in terms of interest, late payment fee, charges, penalties etc. And of course, an impeccable credit record too for the family and all those living in the house. (Btw, did you know  if a bank’s database shows up your address if a defaulter lives in the same house as you do – this cannot augur well for you – when you opt for a loan?)

-          How many instances have we seen that one person worries about the daughter’s wedding while the spouse fancies the latest model mobile phone / car? An instinctive clarity on what is important and what is not a great asset is crucial for the family’s finance minister. A focus on the family’s financial needs both short term and long term will help in prioritising savings and investments over impulsive, indulgent spending.

-          Just like how the country’s FM has to work together with the RBI governor, SEBI Chairman and others in the finance industry, the lady of the house needs to be friends with the banker, should invite the insurance agent for tea and network with the different people who are instrumental in carrying out the family’s investments, loans, insurances etc. This comes easily to most women and will turn out to be very helpful in getting the best deals and come good during the most unexpected moments

Overall, a well-informed, organised, diligent woman with clarity of goals and networking skills would make an amazing finance minister of the home. If you are reading this, you are on the way to becoming one. Good luck!