MF investors have to give info under FATCA from Nov

Mutual Fund houses will have to mandatorily provide additional KYC informations pertaining to gross annual income and net worth of new investors by November 1, as also their ‘beneficial ownership’ details.

Fund houses have also been asked to reject new applications for non-submission of these details, while existing investors would need to update the information by December 31, 2015.

The new requirements follow the Best Guidelines Circular issued by the industry body AMFI to bring uniformity in KYC requirement and ensure compliance to the provision of information on ultimate beneficial ownership and implementation of the new global tax avoidance law FATCA.

Under the FATCA (Foreign Account Tax Compliance Act) of the US, India and other signatory countries have agreed that all their financial institutions will follow enhanced KYC (Know Your Client) procedures to identify accounts of the US and other foreign taxpayers on an annual basis.

With effect from November 1, 2015, mutual fund houses have been asked “to mandatorily provide ‘Beneficial Ownership’ details of all new MF investors,” BSE said in a circular.


Also, they have been asked to “mandatorily provide additional KYC details such as gross annual income, net worth etc, of all new MF investors,” it added.

In order to continue making additional subscriptions (including switches) in their existing accounts, bona-fide investors will have to submit the details by December 31.

Further, funds have been asked to make focused and sustained efforts to obtain the missing KYC information from existing investors or complete the ‘in person verification’ requirements by December 31 to ensure that KYC obligations are met but without causing inconvenience to bona-fide investors.

In case investors fail to adhere to the norms, fund houses will reject all purchase and switch transactions.

It is based on OTP authentication. OTP will be sent to both email n mobile so that NRIs can also update details. Updation is based on PAN so it is very convenient to the investors. Participating AMC- AMC in which KCPL is Registrar.

You can submit FATCA & CRS online

Individual investors can submit the information through Online mode

Japan Post ( World’s largest IPO ) Jump On Debut, The Largest IPO Since Alibaba

Japan’s government raised 1.44 trillion yen ($12 billion) from the IPO, the largest since Alibaba Group Holding Ltd. in September 2014 and Japan’s biggest state asset sale since 1987. The privatization is part of a wave that includes Britain’s Royal Mail Plc in 2013, Italy’s Poste Italiane SpA last month and potentially China’s postal savings bank next year.

Biggest listing in Japan since 1987.

IPO a key step in Abe’s growth strategy.

First-time share investors get first-day boost.

Shares priced cheaply to ensure happy debut.

Japan Post IPO to Shift Focus to Property Portfolio With offering looming, postal service develops more of its vast land holdings.

Japan Post Bank May Shift Some of Its Investments to Stocks.

Also, like other postal services, Japan Post has a major asset to back it up as it adapts to the enormous technological changes in the ways that people communicate and move goods: a vast real-estate portfolio.

Japan Post Bank is also considering allocating money to alternative investments such as private equity and U.S. real estate investment trusts.

Japan post

The holding company was priced at 1,400 yen in the IPO, the equivalent of 0.41 times the book value of its assets. Japan Post Bank Co., the nation’s biggest holder of deposits, was priced at 1,450 yen, or 0.47 times book value, less than the average of about 0.7 times at Japan’s three biggest lenders. Japan Post Insurance Co., the nation’s largest insurer by assets, was priced at 2,200 yen, or 0.67 times book value.

Japan Post Bank has a market value of 7.5 trillion yen based on early trading Wednesday, making it the nation’s second-biggest bank, ahead of Sumitomo Mitsui Financial Group Inc.

For Prime Minister Shinzo Abe, facing questions over the effectiveness of his Abenomics economic revival plans, the IPO could be an uncomfortable bellwether if it does not create a new generation of shareholders. Some 75 per cent of the stock has been earmarked for individual Japanese investors, who now have a chance to buy a chunk of the most dependable brand in Japan, with a yield, at just over 3 per cent, far better than leaving the money in the Japan Post Bank.

About 10 percent of each Japan Post company’s shares were sold to the public, raising about 1.4 trillion yen, in the largest privatisation of a Japanese state-owned firm since that of Nippon Telegraph and Telephone Corp in 1987.

Nationwide network

One of the company’s greatest advantages is its nationwide network of 240,000 Full-time staff work for Japan Post, another 150,000 part-time.

In February, Japan Post announced its first overseas acquisition with the $5.0 billion takeover of Australia transport logistics giant Toll Holdings.

($1 = 1.3887 Australian dollars) ($1 = 121.0400 yen)

RBI fixes gold bonds issue price

Reserve Bank of India (RBI) has fixed the public issue price at Rs 2,684 per gram for the sovereign gold bonds, for which applications will be accepted from November 5 to 20.

The gold bond scheme will offer investors an interest rate of 2.75 per cent and a choice to buy bonds worth 2 grams of gold, up to a maximum of 500 grams. “The issue price of the sovereign gold bond for this tranche has been fixed at Rs 2,684 per gram of gold.


“The rate has been fixed on the basis of simple average of closing price for gold of 999 purity of the previous week (October 26-30, 2015) published by the India Bullion and Jewellers Association Ltd (IBJA).

Gold Monetisation, Bond Schemes

“The tenor of the bond will be for a period of eight years with exit option from 5th year to be exercised on the interest payment dates.
The interest earned on gold bonds would be taxable, and capital gains tax shall be levied as in case of physical gold. The bonds can be bought by resident Indian entities including individuals, HUFs, trusts, universities and charitable institutions.

gold 1 finalgold 3 final

Be ready for empty property or land Tax

Good news for home seekers in Maharashtra

Affordable housing” was one such commitment made by the BJP led Maharashtra Government during their election Campaign & it seems that they are very seriously working on its completion.

We are well aware of the tax head” Income from housing property” in the income tax form. But first time Maharashtra Government has decided to introduce a tax on “Vacant Land & apartment (i.e.flat)

In India most of the developers, politicians and investors are using their black money for buying land or flats in bulk. “It leads to crony capitalism. As a result of it, genuine people are deprived of getting the roof over their head.

If this vacant land tax is imposed and sincerely implemented, the black money market in the real estate sector will be also systematically curbed. “Because of this decision, no one will own more than one or two houses. Currently, everyone wants to park their money in real estate. There are many buildings which have been vacant for several years now, and these buildings are now known as ghost buildings. Such things should be stopped.

According to latest report from “Liases Force” a real estate research firm 2 lakhs housing units are lying vacant in Mumbai metropolitan region alone that is more 73 % of the completed projects.

Mumbai Metro Region Stuck with 2 Lakh Unsold Flats

empty tax final

The government’s move aimed to curb developers practice of sitting on excessive land banks for indefinite period, unfair practices of builders of withholding completed flats / projects for speculative gains ultimately leads to real estate rate increase & as well as for multiple flat owners invested for such speculative gains.

The government has prepared draft but rules & regulations, percentage of tax to be levied are not yet finalized.

Though this is a well-come move for people & many real estate research firms too has appreciated it but certainly for developers & builders it is not & people form constriction industry has started criticizing it by labeling it as anti development ( ? ) (obviously).

However there are some serious issues involved in its implementation such are number of permissions required for construction industry & time lapses in obtaining those permissions, time laps in cases related with land litigations, flats purchased by the NRI’s or especially Indians currently staying abroad but willing /planned to return India in near future.

This move is likely to open approximately 3 to 4 lakh empty flats in Pune itself, which may trigger real estate price correction ( expected for long time) & will not only give an opportunity to the people to fulfill their dream of making their home but also it correct or moderate the rent market which is currently too high especially in western Maharashtra.

Pune’s real estate unsold inventory reaches to 2.8 lakhs units

Though first time in India any state government has decided to implement this tax but for optimum utilization of land & resources, speedy completion of projects it is globally well accepted tax policy. Many Latin American countries too (except Peru with no such tax) have this provision at differential higher rates. Country like Singapore has a provision of 25 % tax on vacant land & if the purchased land not used in specific period, land cost gets wiped out in the next 5 years.

Indigo IPO Review

Incorporated in 2006, Interglobe Aviation Ltd is India based aviation, hospitality and travel related service provider. Company own and operate ‘IndiGo’, India’s largest airline with over 33% of domestic passenger market share.

IndiGo has scheduled services to 33 cities within India and 5 cities (Bangkok, Dubai, Kathmandu, Muscat and Singapore) internationally with 623 daily flights.

Company also has a joint venture with Accor Asia Pacific since 2004 to develop a network of ‘ibis’ hotels throughout India, Nepal, Sri Lanka and Bangladesh. With 10 ibis hotels open and 9 under development, the company shall have a portfolio of 19 operational hotels with room inventory of about 3500 rooms by 2017.

Company’s Strengths

1. Largest market share in one of the largest and fastest growing aviation markets in the world

2. Maintain disciplined execution of the low-cost carrier business model with single aircraft type, high aircraft utilization, high operational reliability, no-frills product and low distribution costs.

3. A structural cost advantage. Large Airbus aircraft orders enable favorable terms on aircraft, engines and components. Company has Young, modern and fuel-efficient fleet.

4. Company maintained consistent profitability and strong cash flow generation, balance sheet and liquidity position.

Company Promoters:

The promoters of the company are Mr Rahul Bhatia, Mr Rakesh Gangwal and InterGlobe Enterprises & Acquire Services.

Objects of the Fresh Issue

Company proposes to utilize the funds which are being raised through the Fresh Issue for the following objects:

1. Retirement of certain outstanding lease liabilities and consequent acquisition of aircraft;
2. Purchase of ground support equipment for our airline operations; and
3. General corporate purposes,
4. To receive the benefits of listing of the Equity Shares on the Stock Exchanges.

Highlight :

Issue Opens On: Tuesday, October 27, 2015
Issue Closes On: Thursday, October 29, 2015
Issue Type: 100% Book Building
Issue Price Band: Rs.700– Rs.765
Face Value Per Share: Rs.10
Minimum Bid Lot: 15 Equity Shares and in multiples of 15 equity shares thereafter
Minimum Order Value: Rs.10,500 to Rs.11,475
Issue Size: Rs.3,108 crore
Proposed Listing: Bombay Stock Exchange and National Stock Exchange
Lead Managers: Citigroup Global Markets India Private Limited, J.P. Morgan India Private Limited, Morgan Stanley India Company Private Limited, Barclays Bank PLC, Kotak Mahindra Capital Company Limited, UBS Securities India Private Limited
Registrar: Karvy Computershare Private Limited



In April-June quarter, IndiGo posted a net profit of Rs 640.44 crore. During the same period, total revenues stood at Rs 4,317.19 crore. For the year ended March 2015, the carrier recorded a net profit of Rs 1,295.58 crore on revenues of Rs 14,309.14 crore.

As of December 31, 2014, it had a total indebtedness of Rs 4,002.8 crore and Rs 2,474.6 crore of net debt (net of free cash of Rs 15,28.2 crore)


IndiGo enjoys Highest Domestic Market Share of 34% for fiscal year 2015 which has been increased to 37.4% for the five months ended 30th August, 2015.

IndiGo has been awarded for “Best Low-Cost Airline in Central Asia & India” at the SkyTrax World Airline Awards for six consecutive years from 2010 to 2015.

IndiGo is ranked seventh largest LCC in the world in seat capacity. IndiGo’s fleet has grown from a single aircraft to 97 aircraft in 9 years and company is expected to receive 14 more aircrafts by this year end.

IndiGo has the lowest Cost per Available Seat Kilometres (CASK), commonly used measure of unit cost in the airline industry, according to a report by SAP.


Its net worth fell to a negative Rs 139.39 crore at the end of June 2015. The company has attributed this to payment of interim dividend. Net worth of the company was Rs 426.22 crore as of March 31, 2015 . The company says this may make it difficult or expensive to obtain future financing or to meet liquidity needs.

Key risks to Indigo’s growth include:

a) inability to grow domestic networks and frequencies in a profitable manner

b) inability to acquire additional licenses and traffic rights

c) delay or inability to procure, flight slots on financially viable terms

d) changes to cost structure

e) greater exposure to exchange rate volatility

Failure to comply with covenants contained in aircraft and engine lease agreements or financing agreements could have a negative impact on IndiGo.

Unlike most full-service carriers, Indigo does not offer a frequent flyer program, free lounges or include food and beverages in ticket price for non-corporate passengers. These items have helped to further reduce its cost base.

The board member and promoters of Indigo airlines are involved in some legal/criminal cases which may affect on business/financial condition, brand of Indigo.

Company has contingent liabilities of Rs.92 crore which if materialized can adversely affect the profit of current year.


If the US interest rates start rising, it will increase the borrowing cost of lessors thereby making it less viable for them to buy planes from IndiGo. In addition, IndiGo may end up paying higher lease rentals. IndiGo’s networth turned negative as of June 30, 2015. This is due to high dividend payout.

indigo (2)


“On the valuation front, the company looks expensive comparing with most of its peers in the Europe, the Middle East and Africa (EMEA) and American regions. Further, comparing EV/EBITDA and P/E multiples with the players in the EMEA and American regions, the company is priced higher.


Retail investors should wait for secondary market listing. Hence this appears to be a ‘High Risk/Low return’ bet.

And if you are applying for Indigo IPO with the intention of selling it for a premium on listing day, please keep an eye on Bihar election results on 8 th Novemeber. Performance of BJP may directly affect the market sentiment and IPO listing price.

Difference between FDI and FII

Foreign Institutional Investors (FII).

“ FII’s sell out in the stock markets resulted in sense’s crash or major stock market correction” is now a days routine news at least once in couple of months. Certainly there are international or domestic reasons for FII sell out. But let us understand technicalities of FII, rules & regulations related with FII investments & their investment strategies.

Institutions established or registered in other countries (i.e. outside India)to make investment in the securities listed/unlisted in the Indian stock exchanges, but equally in India they have to register them selves with SEBI & governed by the rules & regulations of SEBI.

Along with the existing securities FII’s are also allowed to participate in Initial Public Offer commonly known as IPO.


However since 1st June 2014,for better administration of all classes of investments & better conceptional clarity, Ministry of Finance & RBI has merged three classes of investors i.e. . FII, Qualified Foreign Investors (QFI) & , Sub accounts & introduced one class of investor i.e.”FOREIGN PORTFOLIO INVESTORS” & insured smooth transition from FII to FPI. So technically now FII concept as such ceased to exist now.

In India FPI’s are allowed to invest in any Indian company’s shares up to 10 % of paid up capital of the company & any investment more than that known as FDI ( however any official definition as such does not exist). But in 2013-14 Union budget Finance Minister has introduced the internationally accepted standards of 10 % cap on FII investment ( as mentioned above) to distinguish the between FDI & FII.

Some of the examples of registered FII’s are
:- pension funds, Mutual Funds, Investment Trust, Banks, Insurance & reinsurance companies, Sovereign wealth Funds, etc.

FPI’s may invest in any tradable/non tradable equity shares of the company, Govt bond ,debentures, MF schemes, security receipts, commercial papers, Indian depository receipts(IDR).

FII can also invest on behalf of sub account i.e. any person outside India on whose behalf investments are proposed to be made in India by FII. But for sub accounts investment cannot exceed 5 % of paid up capital of the company.

FII and there sub accounts are required to appoint Indian custodian (registered with SEBI) to ensure daily reporting of their trading activities to the SEBI, preserves record of transactions for specified period.

Difference between FDI & FII..

Besides the basic difference of 10 % investment cap, a major difference is of investment approach. FPI’s investment is in the stock markets & securities & its approach is always of short term whereas FDI’s investment is always of long term.

Because of investment in securities, FPI’s investment is easy to liquidate compare to FDI.

In comparison with FDI, FII’s have low exit barriers. However often it results in stock market crashes.

Capital requirement is much less to FII compare to FDI.

Cafe Coffee Day (CCD) IPO review

Coffee Day Enterprises Ltd own and operates coffee cafes in India since 1996.

Company is well known for its brand name ‘Cafe Coffee Day’ (CCD). Company owns a network of 1,472 Cafe outlets spread across 209 cities in India. As of Dec 2014, Cafe Coffee Day has market share of 46% in India in terms of the number of chained Cafe outlets.

In addition to having the largest chain of cafes in India, company operate a highly optimized and vertically integrated coffee business which ranges from procuring, processing and roasting of coffee beans to retailing of coffee products across various formats. Company is one of the largest exporters of Indian coffee beans, primarily to Europe, Japan and the Middle East

Company’s retail outlet includes:

1. Cafe Coffee Day CCD – 1,423 outlets across 209 cities in India
2. Cafe Coffee Day The Lounge – 42 outlets
3. Cafe Coffee Day The Square – 7 outlets
4. Vending Machines – 28,777 vending machines
5. Fresh & Ground outlet – 424 outlets
6. Coffee Day Xpress kiosks – 590 kiosks

In addition to coffee business, company operate select other businesses that are aimed at leveraging India’s growth potential, namely, development of IT- ITES technology parks, logistics, financial services, hospitality and ITITES.


Objects of the Issue:

Company proposes to utilise the net proceeds towards funding the following objects:

A. Financing our coffee businesses

1. Setting-up of new Cafe Network outlets and Coffee Day Xpress kiosks;
2. Manufacturing and assembling of vending machines;
3. Refurbishment of existing Cafe Network outlets and vending machines; and
4. Setting-up of a new coffee roasting plant facility, along with integrated coffee packing facility and tea packing facility.

B. Repayment or prepayment of loans of the Company and Subsidiaries; and

C. General corporate purposes

Issue Detail:

Issue Open: Oct 14, 2015 – Oct 16, 2015
Issue Type: 100% Book Built Issue IPO
Issue Size: Equity Shares of Rs. 10
Issue Size: Rs. 1,150.00 Crore
Face Value: Rs. 10 Per Equity Share
Issue Price: Rs. 316 – Rs. 328 Per Equity Share
Market Lot: 45 Shares
Minimum Order Quantity: 45 Shares
Listing At: BSE, NSE

Company Promoters

V.G. Siddhartha is the Promoter of the company. Promoter currently hold 63,945,904 Equity Shares, equivalent to 54.78% of the pre-Issue issued. Promoter will continue to hold a majority of the post-Issue paid-up share capital of the Company.

Share Allotment to anchor investors

In March, Coffee Day raised Rs 100 crore in a pre-IPO funding from Nandan Nilekani and Rare Enterprises (owned by Rakesh Jhunujunwala and Ramesh Damani), among others.

Coffee Day Enterprises Limited allots 1.038 cr equity shares @ Rs. 322 ps aggregating Rs. 334.27 cr to 17 anchor investors Anchors include Blackrock, Government Pension Fund Global, ICICI Prudential MF, Reliance Life Insurance, Merrill Lynch, Swiss Finance Corp., Axis MF, Faering Capital India Evolving Fund, Jupiter India Fund, Platinum Asia Fund & Tarra Fund.

Private equity

Private equity firms KKR India Advisors, New Silk Route PE Asia and Standard Chartered Private Equity invested $149.07 million in the holding company in February 2010

Subsidiaries and investments

Its Coffee day group includes Coffee Day Beverage, Coffee Day Fresh & Ground, Coffee Day Exports and Coffee Day Hotels &Resorts. In non-coffee business its subsidiaries are Tanglin Development Ltd. (technology parks), Sical Logistics Ltd (logistics), Way2Wealth Securities (financial services), Coffee Day Hotels & Resorts Private Limited (hospitality).

Coffee Day Enterprise owns 16% of MindTree and other IT-ITES companies such as Ittiam, Magnasoft and Global Edge.

Key Financials

ccd4 final

Positives :

1. Café Coffee Day dominated India in Chained Coffee Café Outlets with 46% market share. Its nearest competitor is Barista which has a market share of mere 5%.

2. Its nearest competitor Barista,has only 169 outletscompared to CCD’s 1472 outlets.

3. Café Coffee Day is the most renowned brand of Coffee Shops in India in Tier I cities. Company is expanding its operations Tier-II cities of India.

4. Holding company CDEL has diversified business but the coffee business account more than 50% of the total revenue followed by 36.9 per cent of logistics, 7.5 per cent of financial services and 3.3 per cent of technology parks.

Negatives :

1. Instead of having market share of 43%, company is not able to generate profit. Company has reported losses in three consecutive years but at the operating level company is profitable. Huge finance costs eats out total profits.

2. Because of its affordable price,the profit margin is very thin.

3. CCD has largest PAN India but it’s per day per café sale is Rs.15,000 to Rs.20,000 which is only one third of its competitor Starbucks sale of Rs.50,000 to Rs.60,000.



Financial performance of the company in last 5 years, in which it has made profit of Rs. 36 crore in 2 years and loss of Rs. 200 crores in remaining 3 years. Since there is no EPS in the previous years, PE ratio cannot be calculated.

The company has posted consecutive losses from last few years which doesn’t instill confidence for investment in short term, however in long term investment is advisable only when company will start posting profits.

Broker’s view

Hem security : Avoid
Angel broking : Neutral
Ajcon Global : Avoid
Sharekhan : Long term
Anand Rathi : Long term
ICICI Direct : Subscribe
K.R.Choksy : Long term
Aditya Birla Money : Subscribe

Please consult your financial adviser before taking any position.

What is Foreign Direct Investment ?

Foreign Direct Investment (FDI).

Every body of us is well known with this word, reads & listen several times in day but rarely know details & technicalities of it. It is our just an effort to explain it in detail.

Investor based in one country invest in the company based in another country is called as Foreign direct investment. The company that makes foreign direct investment is known as Multinational Company (MNC) or Multinational Entrepreneur (MNE).

The organization of economic cooperation & development defines control as owing 10% or more of the business.

Foreign investor has to consider several factors such as government policies of both the governments (i.e. there own govt & target company’s govt policies), taxations, risk factors, political stability, consistencies in policies geo political stability, economic stability, etc. Very recently India has witnessed importance of all these aspects pertaining to the flow of FDI when got adversely affected to the retrospective tax proposal announced by the then Finance Mr. Pranab Mukharjee UPA government , & importance of geo-political stability when its ambitious India-Iran gas pipeline project got stalled due to United States pressure.


There are advantages & disadvantages to both the countries & MNC/MNE as well. For companies it is easy way to access the natural resources, precious metals, opportunities to tap new markets, cheap labour, whereas to the host country it offers source capital new technology, increased revenue, job opportunities, import reductions which also helps to maintain country’s Balance Of Payment & Balance Of Trade which ultimately these leads to overall economic growth.

Many times by way of collaboration technology transfer/technology up gradation,is more important than just flow of capital which not only opens new avenues but also offers opportunities to the domestic companies to the international market.

For the same to attract more FDI government offers various incentives to MNC/MNE’s such as free or subsidies land , infrastructural facilities, R&D support, tax holiday ,low taxation i.e. low corporate & individual income taxes ,special economic zones(SEZ), export promotion zones(EPZ) or information technology parks (IT).

But while welcoming the FDI the host nations are equally cautious about its effect on the domestic industry, labour market, foreign policy, defense policy. Due to which country puts some restrictions or maximum caps the on some sectors, while opening other selectors for 100% FDI. Every country decides the priorities & accordingly decides the percentage of investment in that particular sector.

Now a days governments of all the countries are vigilant about the un authorized source of money or black money. So investors are required to disclose the source of there funds while investing in the company.

List of the sectors with there percentages of FDI allowed in India.

• Petroleum Refining by PSU (49%).
• Cable Networks (49%).
• Broadcasting content services- FM Radio (26%), up linking of news and current affairs TV channels (26%).
• Print Media dealing with news and current affairs (26%).
• Air transport services- scheduled air transport (49%), non-scheduled air transport (74%).
• Ground handling services – Civil Aviation (74%).
• Satellites- establishment and operation (74%).
• Private security agencies (49%).
• Private Sector Banking- Except branches or wholly owned subsidiaries (74%).
• Public Sector Banking (20%).
• Commodity exchanges (49%).
• Credit information companies (74%).
• Infrastructure companies in securities market (49%).
• Insurance and sub-activities (49%).
• Power exchanges (49%).
• Defence (49% above 49% to CCS).

Some of the largest foreign companies investing in India are :-

1. TMZ Mauritius Ltd.
2. Crain UK Holding.
3. Oracal Global Maurities Ltd.
4. Maurities Debt Ltd.
5. Vodafone Maurities Ltd.

Real estate in pune : Emotion vs Practical

Implications of buying versus renting a flat

Assume there is a 2 BHK Flat for sale at Kharadi (in Pune – for that matter you can assume your locality). Considering the cost of the flat between 60L to 80L. Assuming 70 L as a total cost of the flat. After US housing loan fall, no bank will give you more than 85% of total cost amount which doesn’t even include local taxes from certain banks. Assuming you have taken a loan for 20 years. Here is the calculation.

Base payment 15 % = 10.5L (this will rip you off with all your previous savings)
Loan amount = 59.5 L
EMI per month Rs.59,000 per month

Maintenance charges approx 24K Rs per year = 2000 Rs per month
Average property Tax per month = 1000-1500 Rs per month

– Tax benefit is discount on the Interest amount = 50K per year = 4K per month

That also for first few years as most of the EMI goes in interest.

– 1 Lac in base amount is any way settled for PF, 80CC and LIC contribution

– Total EMI comes to approx Rs 65,000 per month for next 20 years.

(Society maintenance, water taxes and corporation tax will increase with inflation).

After paying this much money per month.


You have to say no to your family for shopping (even after a CTC of 12 Lacs)No holiday trips, no gifts to parents, skip friend’s marriage, no new Car for initial few years and lot of cost cutting measures. If you get fired from the company, you are doomed. or what If recession hits. Days are not far for such crisis to hit the market. China market and Greece are examples of it.

Hence, total cost of ownership for 20 years = 65,000 X 20 X 12 months + 10.5 L = 1, 66, 50,000 (approx 1.67 crore)

What have you got:

“Home for 20 years”, and after 20 years you will have a 20 years old flat in 20 years old society (dirty and filthy )

– After 20 years if the cost of your 2 BHK home is say 2 Cr by market value ( I doubt because it will be very old flat in the middle of crowded city). You make nothing out of it.

– Secondly, even if it values so. I doubt how many buyers will be interested in a property ageing 20 years for 2 crores.

– We are predicting 20yrs hence. Wasting / suffering our today for future. That too a long term future, we have never seen.

-With the rising suicide rate world-wide, who knows something unfortunate happens at our floor and you will end up selling it at a lower price.

-With the heavy infrastructure development in Pune and Pune dependency on few lakes for water, I am certain of water shortage in coming years.

– Lastly, for Indian’s at least buying a house is a emotional decision. What I mean is, even if the house is worth 5 crores tomorrow. House owner will never ever think of selling to book a profit of it to enjoy his life. It’s worst that we just boast of investments and businesses but are emotional at heart. Even our share market BSE, NSE run on emotional atyachaar.

Let’s talk about rented flat

If you take the same flat on rent or say next door flat, at present rent for 2 BHK is Rs 14,000 all other things including.

– Assuming rent increase at 10% (very unlikely it will be less). Year on year you will pay rent approximately 1.44L, 1.58 L, or 1.74 L , at 20th year you will be paying 1.44 X 1.1^(20-1)= 8.8L

Total rent you will pay = 1.44((1-(1.1)^20)/(1-(1.1)) = 82L


1. You can change home any time, even for small reason like neighbor’s wife is hitting on you (I will not leave in that case tongue emoticon )
2. Better job in Bangalore or US or Mumbai (I just love it… am dreaming of getting a job in Silicon Valley or Wanna to sit in a office near Powai lake :))
3. Better Job in Yerewada (do you want to manage the traffic in case you buy the flat in Kharadi, already BRTS has increased a lot of trouble on Pune roads).
4. Growing family need a 3 BHK. (Think of future need also) or villa.
5. As your rent grows so will you HRA so more tax benefit? – Apparently rent receipts have more benefit in taxes than a Housing loan.
6. A new cosmopolitan area is coming up in the city which is better than where you stay now ( I would love to stay in Vimannagar than in Dhanori tongue emoticon )
7. If you move out of the city, finding a tenant is a problem. A tenant who may convert your dream home into filthy home(sounds scary right?)

So what should I do?

Now if you are smart enough you will put some money in equity or SIP Because you are paying only 14, 000 rent and not 60,000 EMI.
Assuming you put 25000 Rs in investment for 20 years at an annual return of 15 % or 1.2% a month (buy plot in tier 2 cities, Mutual fund, SIP, Bank FD, PPF) you can reduce the investment amount as your rent increase. Still by our personal calculations, You can make anything between 3-5 Cr after 20 years depending on your Smartness.

Then you can purchase the above flat as second home for your kids and spent some money on cleaning it up smile emoticon

Moreover, after 20 years you will be sure enough where you want to settle down and hence making an investment after 20 years sounds more wiser than investing now in flat. This is the time to enjoy your life to the fullest, doing mistake, learning from it, going on an adventurous trip, checking out bucket list and list goes on and these all will be possible only if you’re not under a heavy loans. I agree that your salary will also increase which you may use a counter to this article but by the time it will increase enough that you can do anything, you would have reached an age of 40 and you won’t feel like enjoying anymore at 40 (exceptions exist)

Decision is yours and life you get once So, Make a wise decision.
Compiled & Issued in public interest.

Understanding the Bank rate,repo rate, cash reserve ratio

1) Bank Rate

It is the rate at which the RBI is ready to buy or rediscount bills of exchange or other commercial papers. This rate has been aligned to the MSF rate and, therefore, changes automatically as and when the MSF rate changes alongside policy repo rate changes.
Any upward revision in the bank rate is an indication that banks should also increase deposit rates as well as their respective base rate / Benchmark Prime Lending Rate.

Thus any revision in the bank rate indicates that it is likely that interest rates on your deposits will move according, so will the EMIs on floating rate loans.

Do note: The bank rate Remember is not the same thing as deposit rates offered by banks for fixed and recurring deposits.

Current Bank rate is reduced from 8.25% to 7.75 %

2) Liquidity Adjustment Facility, or LAF

LAF helps banks adjust their daily liquidity mismatches by pledging government securities over and above the SLR requirement. Repo and reverse repo rates form a part of the LAF.

Repo Rate

Repo rate is the rate at which the RBI lends money to commercial banks against securities. The higher this rate, higher the cost of capital. In an inflationary scenario, this will act as a disincentive for banks to borrow from the central bank and will reduce the money supply in the economy and consequently arrest inflation.

Current Repo is reduced from 7.25% to 6.75%

Reverse Repo Rate

Reverse Repo is the rate at which banks deposit their excess money with the RBI for short periods of time. The lower the rate, the less the incentive for banks to deposit increment cash with the central bank. This raises the liquidity in the banking system. It also encourages banks to lend at lower rates.


Current Reverse Repo Rate is reduced from 6.25% to 5.75%

3) Cash Reserve Ratio, or CRR

CRR is the percentage of a bank’s net demand and time liabilities (deposits) that banks must maintain as cash balance with the RBI.
A high percentage means banks have less to lend, a low CRR does the opposite. This in turn impacts liquidity in the economy. RBI can use the CRR to tighten or ease liquidity by increasing or decreasing it as the situation demands.
Current CRR is unchanged to 4%

4) Statutory Liquidity Ratio, or SLR

This is the percentage of net demand and time liabilities (deposits) that banks must maintain in safe and liquid assets approved by the RBI, such as government securities, cash and gold. Changes in SLR often influence the availability of resources in the banking system for lending to the private sector.

Current SLR: 21.5%

5) Marginal Standing Facility, or MSF

This is a facility under which banks can borrow additional amount of overnight money from the RBI.

Banks can avail funds from the RBI against their excess SLR holdings. Additionally, they can also avail funds on overnight basis below the stipulated SLR, but up to a limit of their respective Net Demand and Time Liabilities (NDTL) outstanding.

This provides a safety valve against unanticipated liquidity shocks to the banking system.

Current MSF is reduced from 8.25% to 7.75 %