Bharat 22 pg 26
Interaction: Vinay Sah, MD & CEO, LIC Housing Finance pg 58
O c t o b e r 2 0 1 7, ` 5 0
o u t lo o k m o ne y.c o m
The Essential
Home Buyer’s Guide Presented by
8 904150 800027
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Contents october 2017 ■ Volume 16 ■ Issue 10
pg
33
roof over the head The essential home buyer’s guide
Regulars
6 Letter 12 Queries 16 News roll 82 Smart Money Cover Illustration: mohan sharma Head Office AB-10, S.J. Enclave, New Delhi 110 029; Tel: (011) 33505500, Fax: (011) 26191420 Other Offices Bangalore: (080) 45236100, Fax: (080) 45236105; Kolkata: (033) 33545400, Fax: (033) 24650145; Chennai: (044) 42615225, 42615224; Fax: (044) 42615095; Mumbai: (022) 33545000, Fax: (022) 33545100. Printed and published by Vinayak Aggarwal on behalf of Outlook Publishing (India) Pvt. Ltd. Editor: Narayan Krishnamurthy. Printed at Kalajyothi Process Pvt. Ltd., Plot No. W-17 & W-18, MIDC, Taloja - 410208, Navi Mumbai and published from AB-10 Safdarjung Enclave, New Delhi 110029 For Subscription queries, please call: 011-33505562, 33505500 or email: yourhelpline@outlookmoney.com Published for the month of October 2017; Release on 1 October 2017. Total no. of pages 84 Outlook Money does not accept responsibility for any investment decision taken by readers on the basis of information provided herein. The objective is to keep readers better informed and help them decide for themselves.
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Contents
pg
76
Travel
Singapore and beyond; the perfect post-summer retreat for the travelling soul
22 investment Destination The Gateway to UP, Ghaziabad, has many feathers on its caps
24 Investment Risk
The updated series sharing the numerous investment risks
26 Mutual Funds
Everything you need to know about the launch of Bharat 22
29 LI Made Easy
With the increase in life expectancy, planning for retirement must start early
30 OLM Elite
The updated OLM Elite List
58 Interaction
Vinay Sah, MD & CEO, LIC Housing Finance
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62 Pension Options
PF, NPS or Superannuation; plenty to choose from when it comes to retirement
64 Car Insurance
Everything you need to know about insuring your new car this festive season
66 Enterprise
Entrepreneurs’ Special: Running a successful pet salon
70 My Plan
Define your financial roadmap to live all your financial dreams
81 Books
Bad Choices: How Algorithms Can Help You Think Smarter and Live Happier by Ali Almossawi; What I Did Not Learn in B-Schools by Rajeev Agarwal
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pg
72 Gadgets
The battle of the best; Tushar Kanwar takes you through the latest Apple and Samsung launches
Money Talks
It doesn’t add up
C When in doubt As purchase decisions during festive seasons are based on emotions, it is crucial to get the mental maths right
Narayan Krishnamurthy nk@outlookindia.com
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factored in. It is strange how rational ome festive season and thinking consumers sometimes the markets are swamped tend to overlook the logical, that if with sales and discounts someone was offering something on everything from clothes free there is an assumption that he to cars. It is also the perfect time for would really not be losing money? real estate developers to throw in some spiritual and traditional values into their offerings, as if one would not get a Poor with mental maths similar home at any other time during Most people assume that a 33 per the year. On their part, most consumers cent price increase and 33 per cent defy conventional logic by being drawn discount are same; they are not. to free items that are packaged with Let us take an example of, let’s say cars and homes than go for discounted a dress for `1,500. Now, a 33 per products, where you can clearly cent discount will bring down the understand the value of the deal. price of the dress to `1,000. But, a “Free is magic,” says Barry Schwartz, 33 per cent mark-up on `1,000 will author of The Paradox of Choice. “If be actually just `1,330. To get the you offer something for free, people math clear, a 50 per cent mark-up will gladly spend money to get it,” he on `1,000, will get the pricing right. has said on numerous occasions. The This is where the perception that power of freebies is deep, because one is getting a superior discount consumers assume they are getting actually turns the decision to buy something for nothing financially wrong. I and respond in a very would be happy to buy The power of 33 per cent more unconscious way—they freebies is deep chocolates than buying land up buying things that as consumers chocolates at may not be as valuable as assume that they assumed them to be. 33 per cent discount. they are getting The reason: most buyers Purchase decisions something for during festive season are feel obliged to buy more, nothing and because during festivals mostly based on emotion that free they want to match up and for many this is the is magic to the peer pressure and time for celebrations sometimes generally laced with following because they feel such a deal will never one’s values. There is nothing wrong come back again. in following these practices, as A classic freebie with homes is long as you are not clouded by the modular kitchen, LED and ACs. It is real worth or price of the freebie a different matter that eventually the that you may assume is a great buy. modular kitchen may not shape up the Instead of trying mental maths, way you would want it. The LED TV may be try to work out the maths, and AC may be locally assembled, which and if you feel the seller would have may consume power, which would shoot actually lost if the numbers were up your operating expenses on these correct, chances are the deal is not gadgets a lot more than you would have in your favour.
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Talk Back Stellar List At first look, I felt that the Stellar List in your magazine was like any other list of funds. But, on closer observation and reading the methodology, I started appreciating the effort gone into arriving at the list. The 16 funds listed are among the best and I found 4-5 of them in my own portfolio. What impressed me the most was the easy to follow approach adopted by your magazine, which makes fund selection look like a simple task. I also enjoyed the way you have done away with fund classification and stars, because these are not necessarily what most investors look for when choosing a fund to invest.
Parthasarathy Sarma, Trivandrum
Editor
Narayan Krishnamurthy ASSISTANT Editors
Anagh Pal, Preeti Kulkarni senior CORRESPONDENT
Himali Patel
correspondents
Rounak Kumar Gunjan SUB-EDITORS
Devanjana Nag, Rimme Dirchi, Shipra Singh, Anupam Pandey Art
Praveen Kumar. G, Vinay Dominic (Senior Designers) Rohit Kumar Rai (Designer) Girish Chand (Operator) Photography
Gireesh. GV (Picture Editor), Soumik Kar, R.A. Chandroo (Photographers)
Raman Awasthi, Suraj Wadhwa
Tech team
Business Office Chief executive officer
Vibrant Vietnam
Wonderful Food
Reading the travel story on Vietnam reminded me of my trip to this Far East Asian destination which has some very interesting history attached to it. The place has fantastic friendly people, lovely scenery and food, and I enjoyed our cruise to the stunning Halong Bay. A visit to Vietnam is incomplete without visiting both Hanoi and Ho Chi Minh City. There is plenty of action on the streets and if you are lucky, you will be saved from bikers on the pavements, who can be whizzing past you on many occasions. The night life is also one of action, and if you like street side shopping, this is one city that you will love to shop at. Overall you will see great architecture and restaurants. If your budget permits and you have the time, you should also visit Cambodia and visit Angkor Wat. Vietnam has a variety of hotel option to cater to varying budget, which makes it a very travel friendly destination.
I have travelled in East Asia due to work extensively over the past decade and I can tell you there is nothing like experiencing food on the Spice Route. The ancient riverside port of Hoi An in central Vietnam has always been a melting pot of cultures and cuisines. It remains a honey pot for travellers – its streets are lined with wooden Japanese merchant houses, Chinese temples billow with clouds of incense and food stalls produce gutsy cooking infused with spices and singing with fresh herbs. I don’t know if it is because of the location or the local water, the noodle dish in this place is the best you can have. The fat rice noodles, given a distinctive soft yellow tinge and chewy texture, and the aromatic juicy variants have a definite Chinese twist. There are herbs, lemongrass, bean sprouts, crispy fried rice cracker – the list goes on, but those who love food will not be disappointed.
Ashok Sridhar, Bangalore
Ravi Hattangadi, Mumbai
Indranil Roy
ViCE pRESiDENts
Prashant Kapoor (New Initiatives), Meenakshi Akash (Events)
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Chief Manager
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company Secretary & law Officer
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Ankit Mangal
Talk Back
Your concerns are valid, but debt funds are nowhere known to beat inflation in the long run, and hence this list focused on the three distinct needs of most investors – tax savings, conservative growth
and growth. The universe of diversified equity funds was filtered to arrive at the list. Moreover, the universe of debt funds though has distinct investment objective, arriving at a good debt fund is not as difficult as it is arriving at a diversified equity list. Likewise, a way to address your concern of tackling low interest rate regime and high inflation can be tackled by investing in equities to preserve the real worth of your investment and for that funds like HDFC Balanced and Franklin India Balanced would be suitable.
Up and about
Coping with GST
With the introduction of the GST, I am finding it hard to get my compliance going in a cost-effective manner. The examples featured in your story mentioned that in passing, but that is the real problem now with the GST in place. I agree that introducing uniform taxes is a good move, but I don’t understand the rationale of paying taxes in advance and then claiming input costs and then waiting for things to be adjusted – it is not just tedious, it is also very stressful for small businesses, where margins are already stretched.
A very apt story, given the kind of confusions and anxiety faced by many start-ups with the introduction of GST. Your magazine always manages to capture nuances which are distinct and much needed to understand the subject. A lot has been talked about the GST, but very few publications have detailed the way small businesses and entrepreneurs are adapting to this major tax change. Keep up the good work.
A fund for every investor I disagree with the view to invest only in equity funds as espoused in your cover story. Not everyone has the ability to stomach risk when it comes to investing in equities. By not listing a single debt fund, you are doing disservice to retired people like me, who are today facing the multiple troubles in times of reducing interest rates, vanishing guaranteed returns and increasing inflation.
S Amritalingam, Coimbatore
India’s Finest Money Managers What a galaxy of fund managers you have featured and how crisp the narration was. I have always felt that if you know the person managing the fund in which you have invested, you will be able to better manage your emotions. With my money in funds managed by Harsha Upadhyaya and Mahesh Patil, I am confident that they are in safe hands. I was also happy to note the methodology to arrive at these highly qualified fund managers who have demonstrated their abilities over the years. It was heartening to note that you did not get into arriving at a list based on one year’s performance.
Abhishek Mittal, Noida
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Ed’s response
Himadri Sengupta, Kolkata
Radheyshyam Agarwalk, Kolkata
Save vs Spend I am fond of the last page in your magazine and you rarely disappoint me with what I read in it. This time too, it was a simple, yet powerful message on saving, which has changed even my habit to think a lot more before actually spending money these days. Small ideas are always what leave a lasting impression. I am glad you focus on one aspect of money management in every edition of yours.
Suresh Narula, Chandigarh
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Growth Objective Some of the listed funds in this category would actually be a bit risky. However, I found the variety suitable for every type of investor, which is what your story had promised to do. Please do share the update on this list, in terms of performance once every quarter.
Ravi Asthana, Bhopal
Queries Pratap Sen, Kolkata
At a traffic signal a biker picked the camera I was carrying from the passenger side of my car. Will the claim be payable under my householder’s policy, where the gadget is mentioned in the list of articles of value? The incident is highly unfortunate, but the claim would not be payable as the circumstances of the loss clearly fall within the special exceptions stated in the section pertaining to jewellery and valuables in the householder’s insurance policy schedule. As per the provision, theft from car is specifically excluded except in the case
Amrit Mathur, Noida
I have recently taken up a job in Australia. As an NRI, how should I make payments on my existing life insurance policies? NRIs have various options for payment of premium on life insurance policies that were bought in India. You can pay the premium in any of the following modes: by direct remittance from abroad through banking channels in approved manner (preferably by Indian rupee drafts drawn in favour of insurer) or by remittances through postal channels like foreign money order. You may also do so by payment out of funds held in non-resident (external) account or foreign currency (nonresident) account with a bank in India. Cheques can be drawn on bank accounts held in India in your name (either solely or jointly with another member of the family) whether or not the account has been designated as NRO or by cheque drawn on account maintained by your resident parent
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when the car is one of the type; fully enclosed saloon with all the doors, windows and other openings securely locked and properly fastened. From your version of the
incident it appears that the windows of the car were open and you were present in the car when it this unfortunate incident happened. Therefore, this claim will not be paid.
or spouse in their own name or joint names with other close relatives. The absolute assignee in India can pay the premiums wherever such policies have been absolutely assigned to a resident in India or by the employers in respect of policies issued to their employees who have been deputed abroad by them. Last, the premium can be paid in cash by your resident parent or spouse of subject by submitting a letter stating the relationship with the policyholder.
policy, it is advisable to check the list of illnesses covered and the ones that are not covered. Some insurers exclude critical illnesses that may have been caused by the existence of pre-existing ailments. Also, the point worth noting is that few insurers terminate the base policy once a claim is made on the rider. Typically, the rider gets terminated if the critical illness is diagnosed to be terminal in nature.
Suman Sinha, Ghaziabad
How does a ‘Critical Illness Rider’ attached with a life insurance policy work? The ‘Critical Illness Rider’ attached with a life insurance policy provides coverage in the event of discovery of a critical illness to the insured. The entire sum insured under the rider is paid to the policyholder on the diagnosis of a critical illness. The illnesses covered and the premiums vary across insurers. However, before signing up the
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Ankit Mangal, Lucknow
I earn `12 lakh p.a and last year my employer deducted `1.5 lakh as TDS, but the same was not credited to the tax department. I have also not received the Form 16 from him. Can I file my tax returns for this year based on these details? This is not the right way to pay salaries or to deduct money by employees. You should reach out to the TDS assessing officer in the income tax office under the
jurisdiction where you are employed to check the status of deposit of the tax deduced from you. Use the salary transfer to your bank account as evidence in case you do not have any salary slip to show. Check Form 26AS for tax credits if any by your employer, who may be operating, deducting and depositing the tax under some other name. But this is a serious matter, which you should not leave unattended. Ram Mohan Reddy, Hyderabad
My father gets a pension every month since retirement at 65. He is detected of kidney problem which requires frequent dialysis. Can he claim the pension towards medical expenses and get a tax deduction on it? According to the provisions under the Income Tax Act, your father can claim deduction of the actual expenditure incurred up to a maximum of `40,000 for most people and `60,000 for senior citizens. As your father is a senior citizen, he can claim the same, provided the deduction is allowed in treatment of dialysis.
premium outgoes, decide if you wish to continue with the policy or close it. Endowment plans are a mix of savings and insurance and they are best avoidable as you do not get high value insurance for the premiums you pay and if you opt for a high value cover, the premiums may be too high to afford. It is best to keep life protection and savings separate when taking a life insurance policy.
taxpayers, any payment towards health insurance or preventive health check-up for self, spouse and dependent children of individual is allowed as deduction subject to a limit of `25,000. Where such expenses are towards medical expenditure of very senior citizen (i.e. 80 years or above) not covered by health insurance, deduction is allowed up to a limit of `30,000.
Aloka Rani, Delhi
Karen Lobo, Mumbai
What is the tax benefit in case of medical expenses incurred with a health insurance policy for senior citizens?
What should I keep in mind before purchasing an online term insurance?
You can claim tax deductions on premiums paid towards health insurance under Section 80D of the Income-Tax Act. In case of most
A basic term life insurance plan can have exactly the same benefits irrespective of the channel you buy it from. Buying an insurance plan online is safe. However, you need to be mindful of the features
Samir Nair, Gurugram
Tasleem Haider, Jammu
I took an endowment policy when I started my career three years ago, which I now realise was a waste. I am told that I should wait for two more years before I can surrender this policy and get some money in return. What should I do? Check with your insurer what your current surrender value on the policy would be. If the gap between the premiums you have paid so far and the surrender value is marginal, cut your losses and just close the policy. However, if the gap is wider, which is likely to be the case—get a sense on how much it would be two year hence and then based on your total
The recent rains short-circuited the wiring in my house and caused a fire. Under my home insurance cover damages due to fire is covered. The main cause was rain, will the insurer cover this? The recent rains have played havoc with a lot of lives at a lot of places. It is good that you have a house insurance policy. Under the standard fire and special perils policy, damage caused by perils like storm, tempest, flood, and inundation are covered, which means your claim on the wiring shortcircuit due to rains and water logging will be covered. However, in most policies, short-circuit is excluded under the standard fire insurance. This exclusion is applied on the apparatus that suffers short-circuit. However, consequential damages due to short circuit are covered.
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Queries that you are opting for. Often, features are not understood before purchase. Considering the pure risk insurance that comes with term plans, it makes very easy to compare term plans. Premiums on online term plans are many a time lower than that of a similar cover policy if bought offline through an agent. Look for a term plan which is available till you turn 65 and do make all health related declarations when taking the policy to ensure no problem when your dependents may actually need to raise a claim on the policy.
Kamal Saldhana, Pune
If interest rates are likely to come down, will returns from debt mutual funds also fall? What kind of debt funds should I invest in? Ideally your investments should be based on your financial goal and what you want out of your investments. Blindly going in for a fund because of economic changes is ill-advised. In the current scenario, short and medium-duration debt funds are likely to offer better risk-adjusted returns and could be considered for fresh investments. Make sure that
Prasad Rao, Udipi
My father died a few months ago and the policy proceeds worth `40 lakh came to me. Will I need to pay tax on this sum that has now come into my account? Unfortunate to hear about your father’s demise, but you need not worry about the insurance proceeds being credited to your account. Under the Section 10(10D) of the Income-tax Act 1961, any proceeds received under a life insurance policy, including the sum allocated by way of bonus on such policy is exempt from tax. However, there are few exemptions to this rule that vary from policy to policy which is listed below to be eligible for the exemption under this section. Case -1: If an insurance policy is taken after 31st April 2012 If it is a traditional policy, the premium per year should be lesser than 10 per cent of the sum assured. If it is a ULIP, the sum assured should be a minimum of 10 times of the premium paid per year. And, in case of a pension plan, 1/3rd of the maturity amount can be withdrawn as a tax-free lump sum. The balance of the maturity amount has to be purchased as annuity from the insurance company. Case -2: If an insurance policy is taken before 31st April 2012 If it is a traditional policy, the premium per year should be lesser than 20 per cent of the sum assured. If it is a ULIP, the sum assured should be a minimum of 5 times of the premium paid per year. And, in case of a pension plan, 1/3rd of the maturity amount can be taken out as a tax-free lump sum. The remaining of the maturity amount has to be purchased as an annuity from the insurance company. If the maturity of your policy is not exempted under Section 10(10D), then the amount you receive from such a policy is subject to a TDS (Tax deducted at source).
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you know how long you need to stay invested in these types of funds and the investment risk associated when putting money in these. Ajay Garg, Delhi
Are hybrid funds different from balanced funds? The two are often used inter changeably because both have a combination of equity and debt allocation in them. However, depending upon the allocation between these two asset classes, such funds are classified into two types—equity oriented hybrid funds and debt oriented hybrid funds. Balanced fund is a type of equity fund wherein the equity allocation can be between 65-80 per cent of the portfolio. Hybrid funds are suitable for investors with a moderate risk profile as the portfolio is constructed keeping in mind the conservative risk profile of investors. Deepak Patel, Ahmedabad
Does the expense ratio of a mutual fund affect the returns? How important is it to check it? The expense ratio indicates the sum you pay a fund in percentage term every year to manage your money. For instance, if you invest `10,000 in a fund with an expense ratio of 1.5 per cent, then you are paying the fund `150 to manage your money. In other words, if a fund earns 10 per cent and has a 1.5 per cent expense ratio, it would mean an 8.5 per cent return for an investor. Funds’ NAVs are reported net of fees and expenses. So, it is necessary to know how much the fund is deducting. The expense ratio is a recurring expense and can change even after your sign up for a scheme. The SEBI stipulates the maximum expense ratios that schemes can charge. And, yes it is important to check the expense ratio that a fund charges when evaluating its performance or at the time of the fund selection.
News Roll
Alternate option for senior citizens By raising the entry age for the NPS, there is hope for those looking for safe options beyond fixed return instruments, by Narayan Krishnamurthy
A
t a time when interest rates are falling, there is very little to rejoice for senior citizens, especially those who are looking for avenues to earn interest or regular income streams for their retirement savings. In recent times, the National Pension System (NPS), has found takers who are looking to save a retirement kitty for their golden years. Currently, there are several retirement savings options including the PF, PPF, NPS insurance and mutual fuds. The NPS, until recently was available only to those who were under 60 years. However, from now on, even senior citizens up to 65 years of age
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can be members of the NPS. This increase could be a trial phase and it is a possibility that the entry age limit in case of the NPS may be raised to 70 or get revised with each passing year. Raising the entry age limit to 65, the NPS is structuring itself to suit several retirees who would like to continue their employment well past the retirement age of 60 in most cases. Moreover, several government departments have retirement age of 65 now, which automatically would result in an NPS member to continue well till the time they turn 65 at least. For those making a late start into the NPS, it is still not too late
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with at least five years available to them, if they have just turned 60 before they can invest in this retirement plan. The fact that the NPS has different fund options to invest in with equity, debt and a mix of the two asset classes as an option to invest, there is plenty to choose from depending on one’s risk appetite. The upside of investing in NPS funds is the upside of superior returns that they can earn than the available fixed return alternate options, making the NPS an option that is not easy to miss out. The returns on NPS have also been attractive with equity funds (Tier-1) posting 14.5 – 18.5 per cent returns
Enter cautiously
Do not blindly put money in the NPS without checking on the fund you will invest in Past returns posted by NPS funds may not be possible in the future Use the Tier–2 option smartly for its easy liquidity compared to Tier–1 The withdrawal has a compulsory annuity clause Returns on annuities are low and annuities are taxed as income Use the PMVVY to create a fixed income stream, however, low it is
in the past year. These are returns in funds where the maximum equity exposure is 50 per cent. Even for conservative investors, the returns of 9-9.5 per cent in the past one year is anyway better than what the fixed return investments have to offer. However, the perennial concern with NPS remains – the withdrawal continues to be treated as annuity and taxed accordingly. But the NPS as an option for those who are retiring by 60-65 is that the lump sum retirement benefit that they receive can be deployed in to the NPS.
Use both the Tier-1 and Tier-2 options available with the NPS to your advantage by maintaining the Tier-1 as retirement savings and Tier-2 for funds that you may need in the short-term. The NPS could be another option other than the Pradhan Mantri Vaya Vandana Yojana (PMVVY), made available by the LIC for citizens who are over 60 years old with an assured return of 8 8.30 per cent per annum, depending on whether you choose to get your pensions on a monthly, quarterly, half-yearly or yearly basis.
Know your agent
Most people interact with an agent, when it comes to buying insurance and yet, there is very little by way of finding out details about the agent. Over the years, the number of active agents in life and general insurance space has reduced, but even now over 20 lakh agents exist and service policyholders as well as solicit new business. In order to know about agents, the insurance regulator IRDAI has started work on creating an online database of agents, which should be up and running soon. The database will include agents, brokers, corporate agents and even web-aggregators. For the layman, all these entities may seem to be the same. However, each one is regulated differently and has to follow distinct rules and prerequisites when offering insurance products—their commission or earning structures also vary accordingly. The task to collate the data has been assigned to the Insurance Information Bureau (IIB), which is working towards collecting all the necessary details and hosting it on its website. With the database in place, it will ensure that those selling policies are genuine insurance intermediaries, which should reduce mis-selling as well as fraud, which is very common with insurance sales. For the buyer, the website could be a useful resource to check on the legitimacy and credentials of the person selling the policy to them.
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News Roll Advantage consumer
Changing face of motor insurance
C
ome November, and your car dealer will come under the purview of the insurance regular if they are going to offer you an insurance policy. Currently, when you visit a car showroom and seek an insurance policy for your car, the dealer would offer you choice or a policy from an insurer whom he is affiliated to. Most car buyers rarely dwell into the intricate details of the insurance sold to them because the belief has been that in case of a claim, the dealer would step in and facilitate the necessary smooth and fast claims settlement. According to a recent IRDAI guideline, dealers can become a distributors for motor insurance as long as it is sponsored by an insurer or a licensed insurance intermediary like a broker or a corporate agent. These motor insurance service providers (MISPs) will be allowed to work with one or more insurers if they are directly dealing with the insurer. The rationale behind this move is that dealers are known to pass limited discounts to customers, and on occasion issue policies from insurers who charge more. To terminate any such discrepancy, the regulator has made sure that the dealers come under its purview, and the dealers will be remunerated as per rules applicable to them.
If you have been a regular user of e-commerce sites to transact and have looked into the terms and conditions on the sale, there is always a mention of litigation to be addressed in a city where the e-tailer is registered. So, imagine, you buy a phone from an e-tailer registered in Bangalore, from your home in Agra —in case of any dispute, you could file a complaint only in Bengalore. Several e-commerce merchants, used this discrepancy to their advantage by registering their offices in far-flung areas, leaving harried consumers hassled.
The MISP guideline Do’s Offer choice of motor insurance policies and premiums of different insurers Have a separate dedicated bank account linked to the MISP PAN number in which ensure all issuance of receipt of the insurer on receiving premium
Don’ts Directly or indirectly control or interfere in determination of premium of policies Force the prospect/ policyholder to buy motor insurance policy through a particular insurance intermediary or insurer
The outcome may not impact most car buyers because many dealers have tie-ups or have corporate agency to issue insurance policies on their own. Many large dealer networks have better offerings than many agents and even brokers. In fact, the dealers will no more have any incentive to act in the interest of consumers, and would leave the decision making to the policyholder. A long-term benefit of bringing dealers under the regulatory purview could help in product and service innovation.
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Thanks to the intervention by the Supreme Court, the National Consumer Disputes Redressal Commission’s (NCDRC’s) has now clarified from where an individual could file a complaint against an e-commerce company. So, from now onwards, a consumer can file a complaint in the city where he made the transaction or at the forum where the office of the company is located, according to the NCDRC’s and state forum’s orders. This order gives impetus to consumer rights activists and empowers them to take on some of the bigger e-commerce players, who otherwise tend to take consumer woes lightly.
Settlement matters
In recent years, life insurers have been using their claims settlement data in advertisements to emphasise on their better delivery of value. However, this data is being interpreted differently by different insurers. To check on this anomaly, the Insurance Regulatory and Development Authority of India (IRDAI) issued a circular stating the introduction of a standard practice on communicating deathclaims data by insurers in their advertisements and other forms of communication. Instead of indicating death claim settlement in percentage terms, insurers are being asked to mention the actual death claims settled based on the existing claims raised. Effectively, instead of reading 98 per cent settled, you will read about 98 death claims settled out of 100 raised. To make the data more relevant, the IRDAI has asked insurers to segregate the claims on policies that were taken by individuals and those that were taken as a group. Moreover, these would be relevant for a financial year to give a specific indication on how many claims were settled by the insurer. So, the next time you read about a death claim, make sure you check the full details, however, morbid it may seem.
Affordable housing booster shot I
n a development that could further give the necessary push to affordable housing to gain ground, Durga Shanker Mishra, the Housing and Urban Affairs Secretary, clarified that the interest subsidy of up to `2.60 lakh on home loans under the affordable housing scheme will now be available to middle-income group (MIG) beneficiaries till March 2019. “The decision will provide more time for MIG beneficiaries to avail interest subsidy under the Pradhan Mantri Awas Yojana (Urban),� he said. In his December 31 announcement, Prime Minister Narendra Modi had stated that the credit linked subsidy scheme (CLSS) under PMAY (Urban) will be applicable to MIG till the end of December 2017. This has now been extended by 15 more months, which should benefit scores of middle income homebuyers. Under CLSS, MIG beneficiaries with annual income of above `6 lakh and up to `12 lakh would get an interest subsidy of four per cent on a 20-year loan component of `9 lakh. And, those with annual income exceeding `12 lakh and up to `18 lakh would get interest subsidy of three per cent. This move will be very beneficial for the urban segment of middle income group because developers are now focusing on this segment in the periphery or most metros. Further, the Minister of Housing and Urban Affairs Shri Hardeep Singh Puri, announced a new PPP policy for affordable housing that allows extending central assistance of up to `2.50 lakh for each house to be built by private builders even on private lands besides opening up immense potential for private investments in affordable housing projects on government lands in urban areas. The above policy level push, combined with RERA could result in the time being most apt to consider buying a house in the affordable housing segment, if you qualify for it. Pricing apart, the availability of home loans at a low rate combined with increasing inventory in this segment act favourably for someone looking to buy a house now.
www.outlookmoney.com October 2017 Outlook Money
19
News Roll
Young Minds A
s soon as you enter Lovely Professional University (LPU) you are taken in by the sheer size of the campus and its 30,000 student population. On a pleasant day, Lalit Sharma, Zonal Trainer - North for Adita Birla Sunlife AMC and Narayan Krishnamurthy, Editor, Outlook Money, addressed management students at the Mittal School of Business in the campus. With over 150 students in attendance, the session proved to be educative and informative, with students wanting to know about how they could start investing in mutual funds. Over two and half hours, students heard the speakers on the various aspects to understand the intricacies of investing in Indian markets and how they could benefit from it. Many students also wished to know about career prospects in the financial services and how they could be geared to join the work force in this sector. Such financial awareness sessions with young minds, are conducted with the intent of spreading financial awareness and helping them understand the nuances of money management. With many students being hostellers, the fact that they do handle some amount of money on their own, helps them understand problems that they face when handling money in real life. If you are interested in having such a program in your institute; write to nk@outlookindia.com
High on Cash
Going by indicators, mutual fund managers are sitting on a cash pile which could be as much as `50,000 crore or assets which is more than what two of the biggest equity funds manage. One of the reasons is the increasing inflows into funds this year, and the second is a cautionary approach adopted by fund managers and AMCs in deploying this money, with valuations being high. Moreover, with several IPOs lined up in the coming months, fund managers are smarting up money to invest in some of these large IPOs to enter new segments like insurance and listing of PSUs. The fund manager’s job is getting tougher and rightfully so, with several economic indicators not being favourable, positive money flow, which is causing this increasing cash pile. For investors, nothing has changed much, especially those with a 3-5 year investment time frame. The upside of economic
Money Flows 2017 Net Inflows (`crore) Pure BalanEquity ced
April 9429 7136 May 10739 7663 June 8164 7458 July 12727 7864 August 20362 8783 TOTAL 61421 38904
Investment in stocks (`crore) 11244 9977 9106 10800 17941 59068
Source: AMFI and SEBI
indicators and growth will pay off handsomely for those who are able to stay the course without worrying over a temporary cash pile with fund managers. As for fund managers, days of high benchmark beating phase may no more be that easy. By Himali Patel
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Outlook Money October 2017 www.outlookmoney.com
Investment Destination
Photo: outlook Archive
GHAZIABAD
An important railway junction in Northern India, Ghaziabad has tremendous growth opporunities rooting for its development
S
ituated in the upper Gangetic plains, Ghaziabad is sometimes referred to as the gateway to UP due to its proximity to Delhi. It is a part of the National Capital Region of Delhi and the boundary is adjacent to the national capital, making it a significant commuter town. However, there is more to this satellite city than meets the eye, it is a primary commercial, industrial and educational centre of western Uttar Pradesh, apart from being a major railway junction in Northern India. With all-round infrastructural development and connectivity, low cost housing are an important part of this growth agenda for Ghaziabad. Further, major part of this commuter town’s attraction lies in its commercial growth.
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Thriving areas
The upcoming residential corridors in Ghaziabad are spread across Raj Nagar extension with several local developers announcing their capital ventures. Widening the NH 24 to a 14 lane area is expected to further boost the realty sector of Ghaziabad. Apart from residential developments, its micro markets are also increasingly becoming important commercial belts. Unskilled professionals from neighbouring cities who are looking to shift base to developing cities are aiding the industrial sector to flourish. Healthcare facilities include the Columbia Asia Hospital, while educational institutes like Ryan International School, IMS Ghaziabad and others are present. This, in turn,
Outlook Money October 2017 www.outlookmoney.com
increases the demand for affordable housing in Ghaziabad. Furthermore, the core demand is likely to emanate from the low and middle-income population for the residential offerings in this corridor.
Growth drivers
Ghaziabad Development Authority (GDA) has signed an MoU with the Delhi Metro Rail Corporation for extending the Metro line from Dilshad Garden upto New Bus Stand, Ghaziabad, and the work on this has already begun. GDA will be shelling out `2,870 crore towards different infrastructure projects in 2017. Widening roads, underpasses and other infrastructure development are being executed in a bid to untangle movement of traffic
Loni Hindon AirForce Station
Ghaziabad With its close ties to the National Capital, Ghaziabad is touted to be an important part of the country’s growth agenda
Raj Nagar Extension Govindpuram
Ghaziabad Indirapuram ABES
Booming Ghaziabad
Development indicators ■
GDA has already signed an MoU with the Delhi Metro Rail Corporation for extension of Metro line ■ GDA to shell out `2,870 crore towards different infrastructure projects in 2017 ■ Work is going on to connect NH 24 with NH 58 ■ A six-lane elevated road in Ghaziabad and Noida-Greater, Noida Metro projects as well as the Faridabad-Noida-Ghaziabad (FNG) corridor
■
Upcoming residential corridors in Ghaziabad are spread across Raj Nagar extension ■ Micro markets in Ghaziabad are increasingly becoming important commercial belts ■ Healthcare facilities include Columbia Asia Hospital, along with along with educational institutions like Ryan International School, IMS Ghaziabad
Affordable Housing in the Suburbs of Ghaziabad Developers Name
Location
Suvasa Villa Infrastructure
Govindpuram Ghaziabad
SPH Propmart
NH-24 Highway
14 lakh
Anshul Gupta
Crossing Republik
15 lakh
Alpha Developers
NH-24 Highway
20 lakh
Windsor Paradise
Raj Nagar
27 lakh
Landcraft Developers
Raj Nagar Extension
32 lakh
Price range (`)
and improve the commuting process. Work is also going on to connect NH 24 with NH 58. Furthermore work on other Metro lines is in progress, including Vaishali to Mohan Nagar and from Noida sector 62 to Kanawani, Indirapuram. The National Capital Region Planning Board (NCRPB) had earlier decided to provide a total loan assistance of `3,113 crore for nine transport infrastructure projects. The projects include six-lane elevated road in Ghaziabad and NoidaGreater, Noida metro projects and the Faridabad-Noida-Ghaziabad (FNG) corridor. For development of six-lane elevated road in Ghaziabad, the NCRPB is providing a loan of `700 crore. The board will also finance the 29.7 km long `5,533 crore NoidaGreater Noida Metro Project with a loan assistance of `1,587 cr. The under-construction FNG Expressway will improve connectivity between Noida and Ghaziabad. Being a satellite city to the Capital, Ghaziabad is being seen as the next cheaper alternative and the potential business destination of India where investment in offices, shopping malls, and entertainment centers will change structure of the city in the long term. The shifting in business and commercial units from Noida to the cheaper rental rates of Ghaziabad has steadily been attracting more job opportunities. With the coming up of the corridors the industrial demand and trade as well as investments will increase the demand for real estate leading to an overall development of Ghaziabad.
9 Lakh Direct Logo
IFAN (Independent Financial Associates Network) is a webenabled distribution platform of Reverse Logo IFAN Finserv Pvt. Ltd. (ifan.co.in)
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23 B&W Logo
Debunking Risk Series
Investment Risks When we hear high returns, our mind tends to ignore all other facts; this is because all of us want lots of money at a fast pace
A
viewer on a TV show asked me: “I want to take high risk; can you please recommend an instrument?” My counter question to him was: “why do you want to take high risk?” To which he quickly replied, “because it is said that high risk means high return.” Think about it, should it be “high risk, high return” or “high return, high risk”? Think deeper; is there a difference between the two? When we say “high risk, high return” we are telling our mind if we take high risk, we will get higher returns. The mind tends to give
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When we invest in fixed deposits or bonds there is no authentic information available about notional loss suffered due to inflation
Outlook Money October 2017 www.outlookmoney.com
more importance to the latter part of the quote. But we all know the fact—it is always “high return, high risk.” All those investments which generate higher returns are subject to higher risk. Why would anyone give us higher returns if there is no risk or less risk involved? The definition of risk is a probability of losing money. In all high return yielding investments there is higher probability of losing money. When we hear high returns, our mind tends to ignore all other facts. This is because all of us want lots of money at a fast pace. Ask a youngster
The definition of risk is psrobability of losing money. In all the high return yielding investments there is higher probability of losing money
New Series With this issue, we are starting a new series by Gaurav, who will share the numerous risks that one is exposed to and how to understand and relate to them. The series will run over the next several months to help you overcome your fear with investing as well as break some myths around risks that you may have grown up with over the years.
who is speeding on a motor cycle. He is aware of the risk but the thrill of fast pace shadows the risk associated with speed. Speed thrills but kills is applicable to investments also. Starting today, for about eightten weeks we will discuss various kinds of risks associated with our investments. There is no investment in the world which is risk free. The day we part with our money we have taken a risk. This does not mean we should not invest. In fact, not investing is a risk in itself. What I am trying to do through this small series is draw the attention of readers to understand various types of risk, associate them with respective investments and then make an informed investment. Risk can be transparent or non-
transparent. For example, when we invest in equity shares either directly or through mutual funds, risk is transparent. Let us assume we bought shares of ABC Ltd at `575 per share. After we have bought the shares, next day its price falls down to `545. Authentic information about rise or fall in prices of shares is easily available. There is complete transparency in the price movement of direct equity shares. Similar is the case with units of mutual funds—this is represented in the form of NAV. The same holds true for investment in gold also. We can view the price movement and know about our notional profit or loss. Hence feeling the pain of notional loss, we find investment in direct equity, mutual funds or gold risky. When we invest in fixed deposits or bonds there is no authentic information available about notional loss suffered due to inflation. There is no transparency. Such is the case with real estate—no authentic number available to gauge the loss, if any. Since there is no transparency, we do not feel the pain or loss and hence find these investments risk free. Remember risk and returns are two sides of the same coin. Both always co-exist.
Gaurav Mashruwala (Financial Planner & Author of Yogic Wealth) gmashruwala@ gmail.com
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Mutual Funds
Betting on the India story The launch of Bharat 22 ETF will benefit several investors, especially those who are looking for stable returns, by Narayan Krishnamurthy
T
he CGO complex in Delhi, next to Jawaharlal Nehru Stadium off Lodhi road, houses several central government and some PSU offices. The complex can be pretty intimidating. So, when I visited Neeraj Kumar Gupta, secretary, Department of Investment and Public Asset Management (DIPAM) to understand the thinking behind the much awaited Bharat 22 ETF, it took a while to reach his office on a floor which was being renovated. Thankfully, the interaction was smooth and he was very candid about his take on this new offering. “The broad divestment policy is looking to achieve divestment target through minority stake sale, strategic sale, listing of CPSEs, consolidation of oil sector, and listing of insurance companies,” he said. Having tasted success with the CPSE, this route for strategic disinvestment was favoured by the government for several reasons, but primarily to engage retail investors to take part in this investment opportunity that was being
26
offered to them. “ETF management costs are low, relatively less risky, the investments are transparent, one can trade in real time, and there is liquidity,” he explained. The ETF will be managed by ICICI Prudential AMC and the index was created by Asia Index Private Limited, which is a joint venture between the BSE and S&P Global. The composition of Bharat 22 is very different from the earlier CPSE ETF. “Bharat 22 is well-diversified with investments across six sectors—basic materials, energy, finance, FMCG, industrials, and utilities,” says Gupta. The focus on constituting this ETF has been done taking into account the retail investor need for stable return on investment in companies that have a proven track record, with a long history of existence. The mix of allocation across sectors is such that it takes into account safe, cyclical, and growth prospects. So, FMCG takes care of the safety net, energy and metals will benefit from cyclical nature of the economy. Further, the caps on allocation to sectors and companies means, there is very little room for discretion in allocation. Moreover, the fund will be balanced annually in March, which is again favourable for
Upside of Bharat 22 The index is based on extensive research and back tested data The portfolio is rebalanced once a year in March The cost and expenses of managing this fund is low The portfolio is well diversified across sectors and stocks One can trade in real time and the fund is highly liquid
Performance indicator Index Name
Returns (%) 1-Year
3-Year
5-Year
10-Year
S&P BSE Bharat 22 index
15
10
14
13
S&P BSE Sensex
13
7
14
9
Nifty 50
14
9
15
10
Source: Data as on Aug 31, 2017
Outlook Money October 2017 www.outlookmoney.com
Sector
Weight (%)
Energy Oil & Natural Gas Corp
5.3
Indian Oil Corp
4.4
Bharat Petroleum Corp
4.4
Coal India
3.3
Total - Energy (%)
17.5
National Aluminium Co
4.4
Total - Basic Materials (%)
4.4
FMCG ITC
15.2
Total - FMCG (%)
15.2
Utilities Power Grid Corp of India
7.9
NTPC
6.7
Gail India
3.7
NHPC
1.2
NLC India
0.3
SJVN
0.2
Total - Utilities (%)
20
Industrials Larsen & Toubro
17.1
Bharat Electronics
3.3
Engineers India
1.5
NBCC (India)
Total - Industrials (%)
0.6 22.6
Finance State Bank of India
8.6
Axis Bank
7.7
Bank of Baroda
1.4
Rural Electrification Corp
1.3
Power Finance Corp Indian Bank
Total - Finance (%)
1 0.2 20.3
Reform Impact Reforms
Companies to benefit
Financial Sector (digital economy, insolvency and bankruptcy code)
Axis Bank, BoB, Indian Bank, SBI,
Tax reforms (GST)
All the companies of Bharat 22
Infrastructure
Larsen & Toubro, NBCC (India) and NALCO
FDI Liberalisation
Banks, Bharat Electronics
Make in India
ITC, Larsen & Toubro and NALCO
Oil & Gas
BPCL, GAIL and ONGC
Energy Sector
BPCL, Coal India, NTPC, NHPC, Power Grid, Power Finance Corporation, SJVN and Rural Electrification Corporation
investors so that the basic allocation mix is somewhat maintained. “We have looked at creating an avenue for investors to take advantage of some of the best companies where the government operates with grown potential,” adds Gupta. In all fairness, the thought gone into creating this product is sound and convincing. The role of DIPAM is also clearly stated, as the department will help in managing the financial aspects of CPSUs such as capital restructuring, leveraging of assets, bonus policy, dividend policy, and capital expenditure. “My department views all aspects of our actions from an investor’s perspective. Our aim is to provide investors with the opportunity from the value unlocking of PSUs from such a strategic route,” explains Gupta. With near 90 per cent of the S&P BSE Bharat 22 constituents dominated by large-cap stocks, there is little room for slackness in the performance. If one digs deeper into the performance of the index, in terms of dividend yield, the S&P BSE Bharat 22 index scores over the BSE Sensex over different time periods based on historical data. Likewise, if you look at the 22 companies that form the index, a majority of them are those in which several established
mutual funds are already investing, which validates their presence in this ETF as well. As we were winding up the discussion, I asked Gupta if he saw room for more such ETF offerings and he replied with a smile: “let us take one step at a time. Bharat 22 offers good opportunity and prospects to investors and for now that is the focus.” By the time you read this, the fund offering must be on or would have just got over. Going by the past experience with the initial launch of the CPSE ETF, there is chance for the government to throw in a discount to market price of the underlying stocks and loyalty bonus to retail investors. I don’t know where the idea of Bharat 22 came from, but if one has read The 22 Immutable Laws of Marketing by marketing and branding gurus, Al Ries and Jack Trout, there is a lot that an investor could gain by investing in this ETF which has been made from 22 magic companies. The biggest advantage of investing in a basket of PSUs is that you will not be in for surprises, because these are businesses that focus on areas in which they operate, with little room for divergence into new areas or segments. nk@outlookindia.com
www.outlookmoney.com October 2017 Outlook Money
27
Mutual Funds
A fund for every investor The launch of Bharat 22 will pave way for ETFs to find an active place in the investment portfolio. We asked Chintan Haria, Fund Manager and Head - Products Development and Strategy, ICICI Prudential AMC, about the fund’s prospects
Chintan Haria
ICICI Prudential AMC
Stock level cap of 15 per cent Sector level cap of 20% Diversification across six sectors and 22 companies Index has a mix of leaders from different sectors, balancing growth and stability
For adequate diversification, an index requires a set of defensive, cyclical and structural stocks. 28
How different will be Bharat 22 compared to other ETFs? When it comes to Bharat 22 ETF, we have 22 stocks spread across sectors with sector weightages capped at 20 per cent, making it more diversified than several other indices. Most of the constituents of this index stand to gain from the reforms agenda of the government. Also, the ETF will have low expense ratio compared to other schemes in the industry. How do you see diversification in this index with six sectors and 22 companies? We believe this index is diversified than most other indices. For adequate diversification, an index requires a set of defensive, cyclical, and structural stocks. All of the three requirements are met by S&P BSE Bharat 22 index. This is considering that the index is not restrictive to any theme and with sector weightage capped at 20 per cent. What can investors hope from their investments in this fund? There are essentially three benefits for investors for investing in this fund and they are: 1. The constituents of the index is poised to capture the benefits of various key reforms initiated
Outlook Money October 2017 www.outlookmoney.com
such as Goods and Services Tax (GST), financial inclusion, digital and cashless economy, infrastructure reforms, Make in India, and Direct Benefit Transfer (DBT) of subsidy. All these reforms have the potential to enhance the earnings growth of the constituent companies, thus benefitting the investors. 2. In terms of dividend yield, S&P BSE Bharat 22 Index scores over S&P BSE Sensex. The dividend yield offered by the S&P BSE Bharat 22 Index for the financial year 2016-17 was about 2 per cent compared to 1.3 per cent offered by S&P BSE Sensex, which adds to the overall returns. 3. The expense ratio of the ETF is one of the lowest in the industry, which will add to the overall return. How can retail investors participate in this ETF? Retail investors can subscribe to the ETF during the NFO period. Post this they can buy and sell units of the Bharat 22 ETF on the exchanges on real time basis. Given that the underlining constituents have a large investor base, ETF will have sufficient liquidity, which will ensure a lower impact cost of transacting.
Life Insurance Made Easy
Building a retirement corpus Increasing life expectancy makes it necessary to start saving for retirement from an early age. What are you waiting for?
M
ost people, particularly those in the early stages of their career, think retirement is too far away to worry about. Thus, it is fairly common to find retirement taking the backseat when it comes to short-listing one’s financial goals. The reality is that cost of living is on the rise today and with guaranteed employment-linked pensions all but extinct, most of us will need to make our own plans to deal with retirement. While you may have decades to go before you retire, it’s never too early to start planning and setting aside savings for retirement. There are several ways in which you can build a retirement corpus, and one optimum way to do so is with retirement plans offered by life insurers. These are policies in which you can save and invest towards building your retirement corpus. Moreover, the premiums that you pay towards creating the retirement
corpus can also be claimed as tax savings, under the Section 80C of the Income Tax Act. Like other insurance policies, these too offer you features that you can select to suit your financial needs.
Additional benefits
One big advantage of saving towards retirement in a disciplined manner over the long run is to gain from the power of compounding. You also have the convenience to pay the premiums in a regular frequency or in one go, through the single premium payment option. There is also flexibility to increase your contributions towards retirement savings such that you can increase your contribution with
top-ups as and when you have additional money to contribute. There is the provision for a life insurance cover provided with the policy, till such time that you contribute or decide to contribute in such
policies. This way, not only can you save for your retirement in case of any contingency, your financial dependents can also fall back on the death benefit that is included with these policies. Further, there are options available to put your money into retirement policies with different risk profiles, to suit you risk profile. This way, you can opt for a retirement savings plan with life insurance in a stress-free manner, even as the insurer does the hard work of helping you reach your retirement goal.
It’s never too early to start planning
Compound Interest Formula Amount
Interest Rate
r nt n
A=P(1+ ) Principal
Time (Years)
®
www.bajajallianzlife.com
Number of times interest in compunded per year
BEWARE OF SPURIOUS PHONE CALLS AND FICTITIOUS/FRAUDULENT OFFERS - IRDAI clarifies to public that - IRDAI or its officials do not involve in activities like sale of any kind of insurance or financial products nor invest premiums. IRDAI does not announce any bonus. Public receiving such phone calls are requested to lodge a police complaint along with details of phone call, number. The Premium Edition
www.outlookmoney.com October 2017 Outlook Money
29
OLM Elite
What’s your risk profile? Every investor is different, thus varies the choice of the right mutual fund for them. The OLM Elite list is based on your risk profile; choose your fund wisely
T
he year 2017 would go down as a year of the bull run, going by the gains made by the stock market indices. The falling interest rates on bank deposits and other guaranteed return schemes is resulting in wary investors to look at options beyond the safety of guaranteed returns. The investment flow into mutual funds in the past nine months has been trailblazing and the return posted by almost every mutual fund scheme is spectacular. Thus, it becomes important to know which fund to invest in based on its performance history and track record. The OLM Elite constituents haven’t changed, because of the sound performance of the selected funds.
Total Value of investment investment Gain (`) (`) (`)
Annualised returns (%)
Beginner
2,85,000
4,38,739
1,53,738
18.43
SafePlayer
2,85,000
4,27,465
1,42,464
17.29
UltraCool
2,85,000
4,46,653
1,61,653
19.21
Adventurer
2,85,000
5,12,544
2,27,544
25.29
FixedGuns
2,00,000
2,52,335
52,335
8.90
Value of `1,000 SIP across five funds in each portfolio depicting a unique investor profile. Monthly SIP from Jan 2013. The FixedGuns portfolio is alternate to bank fixed deposits, and olmdesk@outlookindia.com started in Jan 2015
Beginner ■ First-time investor ■ Looking at low volatility ■ Looking at saving taxes
I
t would be in the interest of new investors entering the stock markets to invest in diversified equity funds, which offer them the necessary exposure and possible gain on their investments. Many of them are also looking at ways to save on taxes; the funds recommended include a healthy dose of equity-linked savings scheme (ELSS). Balanced funds and ELSS offer the perfect choice to the first time investors to experience equity investing. The ELSS comes with a three year lock-in and balanced funds follow a dynamic asset allocation between equity and debt, demonstrating investment discipline.
SIP Value (`)
Returns (%) 1-year
3-year
5-year
Annual Returns (%)
DSPBR Tax Saver
93,860
16.10
15.03
21.08
21.38
Franklin India Taxshield
86,489
11.07
12.65
18.57
17.80
HDFC Balanced
88,266
15.00
13.10
18.24
18.68
ICICI Pru Balanced
86,195
12.91
12.81
18.41
17.65
SBI Magnum Balanced
83,929
11.78
12.14
18.36
16.49
SIP Value and returns as on Sep 24, 2017; Total SIP investment of `57,000 in each fund
30
Outlook Money October 2017 www.outlookmoney.com
SafePlayer T ■ ■ ■ ■
Cautious investor 3-5 years’ investment horizon Looking at low risk Wants some potential hedge against inflation
his fund is for investors who wish to tread cautiously and are content with inflation beating gains and tax efficiency. The funds selected for them have passed this test with performance history that spans both the down and up cycle of the stock markets. Do not expect these funds to perform erratically, as these have several years of history that have indicated their sturdy performance during both market lows and highs. Returns from these funds will be less volatile, which should be the draw when investing in them. Do not feel let down if these funds don’t post very high returns during a bull run.
SIP Value (`)
Returns (%) 1-year
3-year
5-year
Annual Returns (%)
Aditya Birla SL Equity
97,907
18.57
16.75
22.17
23.25
Franklin India Bluechip
80,199
11.00
10.68
14.39
14.51
ICICI Pru Focused Bluechip Equity
84,256
14.70
11.14
16.66
16.65
Invesco India Dynamic Equity
83,655
19.12
11.69
16.69
16.34
UTI Equity
81,448
10.10
9.58
15.99
15.18
SIP Value and returns as on Sep 24, 2017; Total SIP investment of `57,000 in each fund
UltraCool
I
■ Expects moderate returns ■ Has growth in mind ■ Over five years’ investment
horizon
■ Willing and able to accept a
moderate level of risk and return
nvestors who can stomach some risk and have a fiveyear investment time frame can choose funds from this list, as the funds in this portfolio seek growth with a dash of risk. The selected funds have stood the test of times over different market cycles, which make them ideal for investors who are open to a little risk as long as the growth is commensurate to that risk. The sizeable assets managed by each of the funds here stands testimony to its ability and investor confidence in them, which you too should take a cue from when investing.
SIP Value (`)
Returns (%) 1-year
3-year
5-year
Annual Returns (%)
Aditya Birla SL Frontline Equity
86,065
13.86
12.41
18.31
17.58
HDFC Equity
84,732
14.89
8.83
16.52
16.90
Kotak Select Focus
94,477
18.12
16.30
21.20
21.67
Mirae Asset India Opportunities
94,016
20.17
14.82
20.64
21.46
SBI Bluechip
87,364
11.76
13.47
18.97
18.23
SIP Value and returns as on Sep 24, 2017; Total SIP investment of `57,000 in each fund
www.outlookmoney.com October 2017 Outlook Money
31
OLM Elite
Adventurer N ■ Has high return expectations ■ Can tolerate higher degrees of
fluctuation
■ Is more experienced and a
risk taker
■ More than seven years’
investment time frame
ot for the faint hearted; this portfolio has funds that do take risks, but also contain the downside well. These funds post significantly high returns, and at the same time pose the risk of falling sharply when the stock markets move adversely. If you are investing in any of these funds, do keep a watch on its performance, because you may need to take tactical calls on changing your investments in them based on market conditions and changes in the economy.
SIP Value (`)
Returns (%) 1-year
3-year
5-year
Annual Returns (%)
Axis Long Term Equity
94,293
17.34
14.32
22.99
21.59
DSPBR Micro Cap
1,19,215
15.24
22.33
29.63
32.10
HDFC Mid-Cap Opportunities
1,04,192
17.56
18.09
25.32
26.02
ICICI Pru Value Discovery
88,884
7.50
10.29
21.08
18.99
Sundaram Select Midcap
1,05,960
18.08
19.06
25.24
26.77
SIP Value and returns as on Sep 24, 2017; Total SIP investment of `57,000 in each fund
T
FixedGuns ■ Seeking stable investment ■ Cannot tolerate return
fluctuations
■ Looking for a substitute to
bank deposit
■ Looking for a holding period of
1-2 years
hese four funds are highly recommended substitute to bank deposits, where the interest rates have been falling steadily. Tax efficiency is the hallmark of these funds and so is their high liquidity, which allows you to redeem your investment in these funds in very short time. Not only do they tend to earn better returns, they are as close as bank deposits when it comes to liquidity. Invest in these funds keeping in mind shorter time duration of more than a year and going up to a few years, at best, when you invest in these funds.
Investment Value(`)
Annual Returns (%)
Returns (%) 1-year
3-year
5-year
Aditya Birla SL Treasury Optimizer
63,883
7.53
10.00
10.03
9.41
HDFC Medium Term Opportunities
63,498
8.23
9.45
9.27
9.16
61,154
6.66
8.13
7.88
7.67
63,800
7.82
9.84
-
9.35
Invesco India Short Term Kotak Medium Term
Value of investments as on Sep 24, 2017; Total lump sum investment of `50,000 in each fund
32
Outlook Money October 2017 www.outlookmoney.com
All about
AffordAble Housing Presented by
An Affordable House Funding your Dream Home Smart with Home Loans Easy Credit Gratification Unleashed
www.outlookmoney.com August 2017 Outlook Money
5
C over S tory
H
Buying a
me
N a raya n K r i s h n a m u r t h y
Many of you would have seen Khosla Ka Ghosla, which hit the screens about a decade ago chronicling the journey of how Mr. Khosla gets his long cherished house after several bottlenecks. Perhaps, the film was inspirational for the government of the day to finally think up of establishing a regulator to legalise the housing sector. Since time immemorial, the most wanting desire of Indians has been the ownership of one’s house. There is plenty to read about from mythology and various films over the decades recording the great Indian dream of owning a house, to the extent that in certain communities marriages are arranged only if the groom has a house of his own. www.outlookmoney.com October 2017 Outlook Money
33
C over S tory
C
ut to 2017, the real estate landscape has changed drastically from the times of Kishan Khurana, the portly broker portrayed by the affable Boman Irani in the movie. Today, the real estate sector is in shambles. If you drive out into the two big residential hubs of NCR—Noida and Gurugram, you will encounter several ghost developments with incomplete structures and vacant plots. The story is similar in other metros too. The real sufferer—the buyer who took advantage of low interest rates and tax breaks on home loans to plunge into borrowing for that dream home. Many, in fact borrowed to fund a slightly bigger house than they could afford, because the EMIs looked convenient to repay. Today, many buyer groups are collectively fighting the builder lobby to hand over their promised homes. Several cases are registered in consumer courts and legal battles are being fought. There has been a change among the buyers too. The number of speculators and those looking to invest in real estate has gone down. Real buyers are looking to buy a ready-tomove in house than wait for a project to get completed and be simultaneously penalised with EMIs and rents. The big change that is making developers and builders fear the law is the implementation of the Real Estate Regulations and Development Act (RERA). The introduction of regulator has finally made real estate look less murky. What has aided this change in scenario is also to do with the government push towards ‘Housing for All by 2022’ and the push towards affordable housing. Suddenly, the same builders are talking a different language and are actually maintaining their delivery schedules. The changing economic landscape has also made loans cheaper and borrowing more attractive
34
Outlook Money October 2017 www.outlookmoney.com
for buyers, especially in the lower and middleincome group. The Pay Commission payout is also a factor which is creating demand for homes and overall any momentum in this sector is welcome for greater economic revival. The impact of demonetisation, GST, and RERA are still being factored in by the real estate sector, but the collective impact of these three events in quick succession has somewhat also created a clean image of the sector from its otherwise murky past. When housing picks up, several allied segments of the economy gets a boost—cement, construction, white goods, paints, and other allied elements benefit. As people start settling in new colonies, the infrastructure development around it by way of education institutions and markets further impact the economic green shoots. The unorganised segment of the economy also finds employment and it all works well. We are at the cusp of what could emerge into a different era for the real estate sector. If over the next five years, the government actually manages to achieve its aim of creating housing for all, the need for fresh homes will diminish immensely. The already changing shared economy is disrupting several segments —the hotel industry is impacted after Air BnB, as much as the taxi-business with app-based cab hailing. Chances are the perennial rent vs buy debate will take a different turn by 2022, when the craze for a second home will may automatically vanish. Already, alternate vehicles exist which allow you to invest into real estate. These are pure investments wherein the concept of unitised ownership exists, you don’t have to overtly worry about liquidity or other perils associated with real estate investing with such investments. However, if you are looking for that first home or a house to live; the time is right to take the plunge.
www.outlookmoney.com October 2017 Outlook Money
35
Cover Story
An Affordable House Housing for all, tax concessions to buyers and developers is changing the housing landscape with affordable homes getting into the driver’s seat, by Preeti Kulkarni
T
he average Indian’s biggest dream is to own a house and they would go through any extent to achieve it. Over the past two years, real estate builders, developers, and specialised lenders in the housing space have created an ecosystem which has resulted in this dream coming true for scores of Indians. However, increasing consumerism and rapid economic growth in the 2000s resulted in the size of homes getting bigger and bigger leading to affordability taking a backseat. The slowdown in the real estate sector post the 2008 financial crisis is yet to fully settle and there are several instances of stalled projects from that period. Realising the mismatch between the need of the larger mass and the available inventory, the government announced the Housing for All by 2022 in June 2015. Ever since then the affordable housing segment is literally the talk
36
of the town, with billboards hailing the virtues of upcoming residential projects splashed across cities.
Defining affordable housing
“We define affordable housing as units that are affordable by that section of the society whose income is below the median household income,” says Harshil Mehta, JMD and CEO, DHFL. However,
Outlook Money October 2017 www.outlookmoney.com
affordability is a vague term and changes its meaning depending on who the buyer is. To make some meaningful headway, three factors were arrived at to define affordable housing—the size of the residential unit, the income level of the home buyer, and the price base on demand. This definition is mostly for buyers to benefit from the tax concessions allowed on loans under the affordable housing scheme. However, the
Anuj Puri
Chairman - Anarock Property Consultants
“Most aspiring buyers preferred waiting until RERA kicked in fully, which is why this festive season you are seeing some active conversions taking place.”
overall rub off of affordable housing is being seen in the manner in which project sizes are getting realistic. Though meant for the economically weaker, lower income, and middle income groups, only housing projects that fulfil certain criteria spelt out by the Finance Ministry can lay claim to the affordable housing tag. As part of Union Budget announcement earlier this year, the finance minister announced revised parameters for promoters of affordable housing scheme to claim tax incentives. Dwelling units with a carpet area of 30 sq m (for metro cities) to 60 sq
Sriram Mahadevan Business Head, Happinest
“The festive season is always perceived as an auspicious time for making any investment - more so in asset classes like homes.”
m (for non-metro cities and towns) are eligible for the benefits. Taking a plunge, several big
Smart and affordable
T
he objective of the Smart Cities Mission is to promote cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment, and application of ‘Smart’ solutions. Now, include affordable housing to the smart city tag and it could be the answer to several problems faced by people and the government. With public-private partnership the driver for smart cities and affordable housing, some of the cities that find mention in the Smart Cities list are adopting this opportunity. For instance, Bhubaneswar is an example of a city that is trying to merge the benefits of both these government initiatives. The improved infrastructure in the smart city will be the bedrock for growth in jobs, businesses, and housing. Efficient land usage and use of technology hold promise to transform these cities into big economic centres which will also answer the need for homes near the place of work. With work going on in several smart cities towards achieving its mission, buyers could look for housing options in the smart city to live in as well as an investment if one qualifies to buy a house there.
builders such as Tata Housing, Prestige, and Mahindra Lifespaces are now offering projects well within the reach of several buyers. According to Anuj Puri, Chairman Anarock Property Consultants: “The affordable price segment dominated the residential units supply in the first half of 2017. The recent new launches show that demand for affordable housing with ticket sizes in the range of `5 – `40 lakh is continuously growing.” Recently, the Ministry of Housing and Urban Affairs introduced a modified public private partnership (PPP) policy with eight new options to incentivise private sector to invest in the affordable housing segment. This includes granting central funds of up to `2.5 lakh per unit as interest subsidy even if built by private builders on private land and assistance of `1.5 lakh per house built on private land even if beneficiary has not taken a loan. Builders can also explore developing houses on design build and transfer model on government land, cross-subsidising this segment from revenues from profitable businesses like high-end houses or commercial development and annuity-based subsidised housing scheme where developers can invest against deferred annuity payments by the government. The other factor driving the affordable housing segment is the slew of incentives on offer, including
www.outlookmoney.com October 2017 Outlook Money
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Cover Story
Vikram Goel CEO, HDFC Realty
“We are observing various big and prestigious developers with offering in the affordable segment. It could be because of considerable growth prospects that exist in this space.” the Pradhan Mantri Awas Yojana (PMAY). “Affordable housing has seen good traction with the PMAYlinked benefits for customers and tax benefit under section 80IBA for developers,” feels Sriram Mahadevan, Business Head, Happinest, the affordable housing division of Mahindra Lifespaces. He also thinks this to be the reason for several bigger organised players to focus on the affordable housing space. Going by size, the affordable housing segment is growing rapidly in smaller cities; bigger developers are seen to be focusing on the outskirts of the city, as that is where they are able to match the price for affordable homes. “It’s largely due to non-availability of contiguous land parcels for large-scale mass housing developments and skyrocketing property prices in the central locations of cities,” adds Puri. Then, there are some projects that are located within the city limits but come with matchbox-sized rooms or
fewer facilities. Customers, however, are keener on opting for projects that have the basic amenities in place. “They prefer houses in areas that have eminent presence of various facilities such as transportation, water supply, entertainment. Customers demand apartments that offer a better integration of pricing, location and quality,” explains Vikram Goel, CEO, HDFC Realty.
Hunting for an affordable home
Clearly, the affordable housing segment’s fortunes are looking up. However, the segment continues to be hobbled by steep prices of land in metro cities in particular. “Lack of available land at appropriate prices and relevant locations, regulatory constraints, and delays in approval are some of the hurdles. sApproval delays impact project feasibility, more so in the affordable segment,” points out Mahadevan. So, is the affordable housing
Harshil Mehta JMD and CEO, DHFL
“Over the past few quarters the Government has taken several steps to build an environment for growth of the affordable housing sector.”
38
Outlook Money October 2017 www.outlookmoney.com
drive only for the economically weak? Actually, the push by the government has forced developers to look mostly at homes in the sub `60 lakh category. Today, there are several options in this price-band available to interested buyers. That people are buying affordable homes can be gauged by the growing number of registrations under the PMAY scheme. While the residential sector has seen its share of ups and downs, its future over the long-term is not in question as the demand for housing is unlikely to be satiated any time soon. “With an estimated 10 million people migrating to cities annually, and an existing housing shortage of 18.8 million units, the demand for affordable housing can only grow, unless there is significant thrust on supply,” explains Mahadevan. For now, the festive season could bring some cheer to the sector that has suffered disruptions in the form of demonetisation, implementation of RERA, and the GST in quick succession. “We are addressing the LMI target segment, with an average loan ticket size standing at `14.3 lakh,” says Mehta. On their part, builders and developers are working at a frenzied pace to create inventory in the affordable home segment that can be utilised by prospective buyers. “The festive season looks promising with the availability of ready-to-move-in options in the market, both in the affordable and mid-segment housing categories,” says Puri. This could just be the catalyst that the real estate sector wanted to get back into the growth phase. Proactive response by builders and lenders in the affordable home segment has created the necessary interest and curiosity among buyers, which could find more people taking advantage of low interest rates, low cost of homes, and tax benefits. preeti.kulkarni@outlookindia.com
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Cover Story
Funding your
Dream Home Benign interest rates, policy push and fairly attractive prices—is this the right time to buy that house you have been eyeing? Anagh Pal, Preeti Kulkarni, and Himali Patel find out
40
Outlook Money October 2017 www.outlookmoney.com
J
ust the way there is no right time to start investing; there is no right time to buy a house, especially if you are looking for a house to live in. A house purchase works well if you are planning to live in it, so, your first home purchase should definitely be with the same intention. Ask any financial planner about buying a house on a loan and chances are high they will dissuade you if you plan to buy when you already own a house or are paying EMIs on another house and are planning a second house purchase as an investment. Yet today, house purchase, especially in the affordable housing segment, breaches many of the otherwise sane advices given in the earlier paragraph. The festive cheer is on us, developers are offering great deals, home loan interest rates are low and there is the tax incentive to first time home buyers, which makes home buying so tempting. The incentives under the Pradhan Mantri Awas Yojana (PMAY) have clearly played a role in price correction in the residential real estate sector. Several new housing projects announced by builders and developers are creating the interest among potential buyers to consider a house purchase owing to these factors. “The scheme has benefited not just the lower middle class but also the middle class by lowering the cost of buying a property. As the MIG scheme has been extended till March 2019, we expect demand to gain momentum,” says Renu Sud Karnad, MD, HDFC. The scheme has come as a boon for Mumbai-based Sudhir Mishra who bought a flat in Boisar in 2015, which cost him `16 lakh under an affordable housing project. “I took `12.5 lakh loan for the house and was pleased to find that I could save `2.14 lakh as interest subsidy on this flat purchase under the credit-linked subsidy scheme (CLSS) of the PMAY scheme,” he grins. He had the choice to reduce
Photo: soumik kar
the EMI or tenure after this windfall six months ago. In less than two years since he bought the flat, the loan tenure has gone down from 20 to 12 years and if one factors the escalation in the value of the flat, he is definitely a winner. And, there are many more like him who are reaping the benefit of buying a house under the PMAY scheme.
Home within reach
The changing dynamics of home loans have resulted in lenders slashing interest rates across lending segments. Moreover, the specialist lenders who are primarily focusing on the affordable housing section are creating plenty of choices for borrowers. The big beneficiaries of rate cuts are loans in the `30 to `75 lakh segment. Likewise, the coming
Jayadev and Rohini Tiruveapati, Mumbai “We pay a substantial amount as interest on the capital we borrowed. A part of that is setoff against tax benefit we claim and the rent we save as we are living in the same house.” into effect of Real Estate Regulation Act (RERA) and Goods and Services Tax (GST) has rekindled the interest of buyers looking for a house to live. Add infrastructure development across several states and the work on the Smart Cities projects are also fuelling several new real estate options for those looking to buy a house. Likewise, several redevelopment initiatives have also been introduced by developers in several parts of existing metros and big towns, which are shaping up under the affordable housing segment.
“The overall demand in housing sector has been impacted in the last one year owing to demonetisation, GST, and RERA. However, with increased buyer and investor confidence, we can now expect higher demand and credit flow to the housing space,” says Rajan Pental, group head - retail lending, YES Bank. With home loan interest rates hovering around 8.35-9 per cent, which is the lowest in the past seven years, the signs are promising for those looking for a home to benefit from the prevailing circumstances.
www.outlookmoney.com October 2017 Outlook Money
41
Cover Story
Renu Sud Karnad Managing Director, HDFC
“The PMAY scheme has benefited not just the lower middle class but also the middle class as it has helped in lowering the cost of buying a property.”
Budget homes
The PMAY encompasses a range of programmes meant to facilitate this objective—redevelopment of slum dwellings with the help of private participation, credit-linked interest subsidy, subsidy to beneficiaries for construction of independent houses and so on. Recently, the Ministry of Housing and Urban Affairs rolled out a series of public-private participation options to boost private entities’ interest in the affordable housing segment. “The subsidy scheme coupled with benefits for developers on the construction of affordable housing (100 per cent tax benefits on the profits) will create an extremely positive impact,” says Sud Karnad. CLSS is a key highlight of this plan, as it translates into a direct benefit of `2.3-2.67 lakh for each beneficiary family, depending on whether they fit into the economically weaker or low income group and middle income groups
I and II. Those who already own a pucca house or have availed of central assistance earlier do not qualify for the benefits. Moreover, the maximum carpet area of the housing unit to be eligible for the subsidy will be 30 sq m, 60 sq m, 90 sq m, and 110 sq m, respectively. This is how the CLSS benefit structure works—those with an income of up to `3-6 lakh per annum can avail interest subsidy at the rate of 6.5 per cent on a loan amount of up to `6 lakh. For those drawing an annual income of up to `12 lakh, the subsidy rate is limited to 4 per cent on a loan of up to `9 lakh. Those earning up to `18 lakh annually can claim a subsidy of up to 3 per cent on a loan amount up to `12 lakh. “Income here refers to the entire family’s income, but family as a unit too has been defined. So, an individual who draws an income and lives with his parents will be treated as part of a separate family and hence
Sachin Chaudhary
COO, IndiaBulls Housing Finance
“In the home loan space, more than rates and charges, increasingly, convenience and service delivery will be the differentiator for lenders.”
42
Outlook Money October 2017 www.outlookmoney.com
will be eligible for the scheme,” says Kalpesh Dave, head – corporate planning and strategy, Aspire Home Finance. Moreover, there is no cap on the maximum loan—the amount exceeding the PMAY ceilings will have to be serviced at the nonsubsidised rate. The scheme is not available for MIG home-buyers who took home loans before January 1, 2017. This is a reason why several new buyers are looking for options to exercise before the opportunity window closes for them.
Ease of loans
Loans are not only available in the affordable housing segment, normalcy seems to be back even in the regular housing loan segment. “The affordable housing segment is already doing well and the festive period could see rekindling of interest in the premium segment too. Post GST, ready-to-move-in properties have gained favour over under-construction ones,” says Sachin Chaudhury, chief operating officer, IndiaBulls Housing Finance. If government-induced concessions act as the carrot for lowcost housing customers, it is cheaper home loan rates in case of nonPMAY home-seekers. For instance, SBI’s housing loan interest rate of 8.35 per cent for salaried women borrowers opting for small-ticket loans of under `30 lakh is the lowest in six years. Presently, interest rate on home loans across banks range from 8.35-9.05 per cent for loans up to `30 lakh to more than `75 lakh, depending on the lender. Borrowers are also using their credit scores to their advantage in negotiating loan rates. The same data is used by lenders to ascertain the repayment capacity of the borrowers. Says Vaijinath MG, chief general manager – real estate and housing, SBI; “We assess how much out of the X amount the person would be able to pay after taking family requirements into account.”
Cover Story
Vaijinath MG
Chief General manager – Real Estate & Housing, SBI
“In case of home loans, the interest component is big, because of the long duration of the loan, and it also varies depending on the prevailing interest rates, which varies with time.”
However, the eligibility evaluation process is not cast in stone. “For borrowers closer to retirement, the EMI will be higher when they are employed and reduce once they retire. In case of younger borrowers with a well-paying job, we also consider their future earnings capabilities,” he says. Likewise, not only do lower interest rates make property purchase more affordable, but also ease the burden on existing borrowers’ finances. For instance, Mumbai-based Jayadev and Rohini Tiruveaipati are considering early repayment of their home loan which they had taken in 2012. “Though we have availed a 20-year loan, we may repay it within ten years. The reduced rate of interest will help us repay our loan before time.” Borrowers should know that a floating rate loan is linked to interest rate movements in the system, which means that the applicable
rate could also move upwards once the cycle turns. Therefore, it makes sense to plan your finances well to manage the EMI outgo without compromising the quality of your routine lifestyle. “It was a little difficult initially as the loan amount was large, as were the EMIs, but we re-worked our household budget and managed it,” says Rohini Tiruveaipati. There are tax benefits borrowers can claim which reduces the actual cost of borrowing. Borrowers can claim tax deduction of up to `1.5 lakh on principal repaid under Section 80C and interest paid of up to `2 lakh under Section 24. The Tiruveaipatis see immense value in the tax relief on loan interest payout. “The limitation is that we can claim deduction to the extent of `2 lakh only, though we pay higher amount,” says Rohini. If you need a house to live, the signs are promising for you to make your buying decision now. preeti.kulkarni@outlookindia.com
Kalpesh Dave
Head - Corporate Planning & Strategy, Aspire Home Finance
“Many people in the affordable housing category are selfemployed and from small towns, especially outskirts of metros and Tier 2 and Tier 3 cities.”
44
Outlook Money October 2017 www.outlookmoney.com
Take the guesswork out of your finances Ge t i t a n a ly sed t o achie v e your dre a ms Write in to us wit h your contac t de tail s at nk@outlo o k indi a .c om
Focal Point
‘We serve the underserved category’ Following its corporate philosophy of “Finding Ways to Funding Homes”, Shriram Housing Finance’s efforts has been to provide financial assistance to prospective homeowners who remain underserved. The company is known to offer several innovative mortgage products that have financed thousands of proud home buyers. Managing Director & Chief Executive Officer, Mr Sujan Sinha, reveals how Shriram Housing Finance Ltd. stands out in the highly competitive housing finance space, and the various services on offer. 2 union territories. Our key priority states are Andhra Pradesh, Telangana, Tamil Nadu., Gujarat, Rajasthan, Karnataka and Maharashtra.
Q Housing Finance is known to have several super-specializations. Which is the segment that Shriram Housing Finance is focusing on? The affordable one? Shriram Housing Finance Ltd. (SHFL) is already present in the affordable housing segment, but the right segment to describe us would be the underserved category. We offer loans to not only the low income groups, but to the middle and higher income groups too. A key common feature of all these customers is that they are underserved by banks and the more established financiers due to the challenges in assessing their financial ability.
Q Housing finance is a highly competitive space. What would you say is the USP of Shriram Housing Finance? The market and opportunities available in the housing finance domain are so huge that an HFC doesn’t really need a USP to make productive use of it. The shortage in housing units is estimated at over 2 crore on a conservative basis. Since SHFL’s focus is on the grassroots and underserved segment, I would say that the future is very promising.
Q What are the various services offered by Shriram Housing Finance? What kinds of benefits do borrowers enjoy? We offer housing loans for self-construction, purchase of new/old house, extension of house, purchase of plots & construction and thereon. We also offer for takeover of existing home loan along with additional finance. Loan against existing property is offered to the customers for meeting their personal exigencies like children’s higher education, marriage, business funds etc. In addition, construction finance product is also available for the builders/developers to finance the completion of their project.
Q Shriram Housing Finance started its operation only in 2011, and already
Q Where does your lending rates, spreads,
Mr. Sujan Sinha Managing Director & Chief Executive Officer, Shriram Housing Finance has one of the fastest growth rates in the underserved home loans segment. What do you attribute this pace to? I would attribute it mainly to the size and growth rate of the underserved segment of homebuyers. At around 90 per cent of the working population, those working in the informal sectors really constitute the mainstream segment of homebuyers. Secondly, its growth prospects and underserved nature being such, what an HFC focusing on this segment should have is adequate liquidity and, thanks to our Shriram Group pedigree, we are wellprovided on that front. Thirdly, an HFC operating in this segment should have innovative credit appraisal models, good management bandwidth and a willingness to learn, which I believe are qualities SHFL has nurtured properly. Moreover, the focus and support of the government to the affordable housing segment through schemes like PMAY (Pradhan Mantri Awas Yojana) gives a big boost to our business.
Q SHFL is known to operate more in Tier-II and Tier-III cities and towns. Explain this move to us… SHFL today operates out of 17 states and
and NIMs stand? Our average retail lending rate is in the range of 13% - 14%. It is higher than banks and HFCs to compensate for the high risk. Speaking about the spreads, margins and NIM, our experience has been that the risk-adjusted returns is nearly the same as that of the banks and mainstream HFCs. I was heading Axis Bank’s retail lending operations, and therefore I can vouch for this fact.
Q What has been the major bottleneck constraining the growth of home ownership and home loan growth in India? The primary bottleneck is that of supply. We don’t have large developers building affordable homes on a massive scale in the organised sector. I hope that with favourable policies of the central government, more developers would shift their focus on bettering the supply side.
Q Finally, the real estate sector has been hit hard post demonetization, more with the implementation of the RERA Act... what has been the impact on the housing finance category? Housing finance sector has recovered from the impact of demonetisation after the initial hiccups of first few months. Also, the implementation of RERA in the month of July 2017 has brought more transparency to the real estate segment. There is now more information available in public domain, and home buyers can therefore take a more informed decision. It is beneficial from the lenders perspective too, since the credentials can now be easily verified. This in the longer run would provide a huge boost to the entire supply chain.
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Cover Story
Smart with Home Loans Going by the low rates, this is a good time to borrow. Know some intricate details about home loans before jumping into it. By Preeti Kulkarni, Anagh Pal, Rounak Kumar Gunjan
J
ust the way a perfect home weathers all kinds of seasonal changes, a home loan too stands up and down in interest rates. Home loans are typically meant for the long haul. Being long-tenured products, these come with built-in flexibilities and other features for the borrowers. Today, at 8.35 per cent, housing loan interest rates are at a sevenyear low. If you have decided to buy a house for yourself, the timing is nearly perfect. “Buying a house for personal use with a loan is a good thing, the net cost of capital for borrowing is similar to rental expense, after accounting for
46
inflation,” says financial planner Renu Maheshwari. Once you identify a suitable property, the next step is to shortlist ideal lenders and home loan schemes, given the wide variety of schemes and loan variants on offer. If you plan to purchase your house in the future, be sure of how you develop your credit history today. The reason being, your credit card swipe and repayment history goes into building a credit score for you. Unlike other loans, you are stuck with home loans for a longer period of time—10-20 years—which means that your strategy to service the loan cannot be static through the tenure.
Outlook Money October 2017 www.outlookmoney.com
Borrowing strategy
To benefit the most from the loan that you take, you should work towards devising a strategy that can serve your interest well. “Lenders have slashed the time it takes to process a loan. Then, there are pre-approved loans from banks which can be utilised on the fly, an innovation witnessed these days,” says Suresh Sadagopan, founder, Ladder7 Financial Advisories. You would do well to take your time to study the schemes instead of opting for the one that promises a quicker approval. Put a plan in place before borrowing, in addition to regularly reviewing
Harsh Roongta Investment Adviser
“There is a trend of home loan companies not passing on the full benefits of interest rate drops to existing customers. You need to be very alert.”
your repayment goals. The basis of arriving at a home loan interest rate, the advantage in switching loans and prepayment are some of the features that you should understand before going in for a loan. Every home loan disbursed after April 1, 2016 is linked to the banks’ marginal cost of fund based lending rate (MCLR), the RBImandated revised methodology for computing benchmark lending rates that have replaced the base rate
regime. It is calculated by taking into account parameters like the bank’s incremental cost of funds, cost incurred for maintaining the cash reserve ratio, operating costs and tenor premium. The spread applicable to you will depend on the bank’s business strategy, market competition and credit risk. The objective was to force banks to be more responsive to interest rate movements in the system, so that policy rate cuts by the RBI would be passed on to the end-user. Also, existing borrowers often feel short-changed as banks refuse to fully transmit benefits of RBI’s rate reductions citing higher cost of funds even as they offer lower rates to newer borrowers. MCLR was aimed at resolving such grouses. The purpose is to make banks more responsive to policy rate revisions, but do note that MCLR loan contracts come with reset clauses, where changes in interest
Rajan Pental
Group Head Retail Lending, YES BANK
“Lower interest rates are solely not responsible for driving the growth in home loans, it has also to do with the rise in demand for affordable housing and other initiatives by the government.”
rates are effected at pre-decided intervals. Banks use their discretion to spell out the reset period, which is typically either six months or one year for home loans. The home loan rates are pegged at six-month or one-year MCLR. SBI’s home loan contracts, for example, have an annual reset clause, which means that your rates will be reviewed and revised every year on the pre-fixed date in your contract. Therefore, you will have to forgo benefits of any rate reductions post this date, though on the flipside, you will also be insulated against rate hikes during the period. Read the clause carefully before choosing your bank—in a softening interest rate scenario, a bank that offers a six-month reset clause could be a better bet.
Smart moves
Any contract between a bank and its retail customer, as RBI itself has earlier noted, is heavily loaded in favour of the former. As a result, individuals have little scope to negotiate, particularly on home loan interest rates, despite a clutch of banks competing for a common customer base. Whatever the repayment track record of a loan applicant, a uniform home loan interest rate is offered to all. State-run lender Bank of Baroda has, however, made a departure from this established convention by offering a 100-basis-points
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Cover Story concession to borrowers with favourable credit scores. For instance, while home loan-seekers with a credit score of under 724 are charged interest at 9.35 per cent, those with a score of more than 760 have to shell out a much lower 8.35 per cent. “In the future, we might see more banks following suit as differentiated interest rates based on the credit scores of borrowers is one of the intended benefits of a robust credit information ecosystem,” says Kalpana Pandey, managing director and CEO, CRIF Highmark, a credit information company. Even if your bank does not have such a policy, ask for a reduction in processing fees or a waiver citing your higher credit score. Another arrow in your negotiation armour, loan refinance entails transferring your loan to another lender who is willing to offer you a better deal. The new lender takes over by paying off your existing bank. While the purpose of the MCLR regime is to facilitate a fairer interest rate structure for all borrowers, banks do tend to circumvent the system and lower the rates sparingly, leaving existing borrowers disappointed. While loan agreements are indeed skewed in favour of the lenders, borrowers can smartly use the refinancing tool to curtail their interest payment. For instance, if a borrower with a `50-lakh outstanding home loan
Home Borrower’s Checklist Truly evaluate whether what you want to buy is necessary. If necessary, is it really necessary now?
Do you have the capacity to service the loan comfortably?
Reduce the tenure of the loan when interest rates fall.
Don’t take a home loan just to save income tax.
Don’t maximise your borrowings because its available. Do not invest in apartments, unless you want to live in it.
carrying an interest rate of 9 per cent per annum over a 30-year tenure decides to shift to another lender offering a rate of 8.5 per cent, she can net savings of `20.62 lakh on interest outgo even after paying a 0.5 per cent processing fee as the tenure shrinks by 51 months. “Even if you have availed of credit-linked interest subsidy under the PMAY
Renu Maheshwari Financial Planner, Finscholarz
“Buying a house for personal use with a loan is a good thing; the net cost of capital for borrowing is similar to rental expense, after accounting for inflation.”
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scheme, you can transfer the home loan,” points out Harsh Roongta, an independent financial advisor. With elimination of prepayment penalties, there is no reason to hold back. Refinancing the loan may seem tempting, but don’t follow this route, especially if you are servicing the loan closer to its tenure, as you would have paid the major part of the interest component in the initial years of the loan. Yet, most home loan borrowers pay off their loans much before time, rather than service EMIs till the end of the original tenure. Having toiled hard to realise your dream house, do not fall prey to sellers spiel on loan rates and other deals. Borrow wisely and repay timely to enjoy your life in the dream house you bought with so much passion. preeti@outlookindia.com anagh@outlookindia.com
Immerse in timeless tradition at the St. Regis suites. transports you to a world of the signature St. Regis Living. The St. Regis Mumbai 462, Senapati Bapat Marg, Lower Parel, Mumbai, Maharashtra, 400 013, India t. +91 22 6162 8000 | stregis.com/mumbai
Cover Story
Easy Credit How scores of Indians are smartly using easy access to loans to realise their financial dreams, by Himali Patel, Anagh Pal, and Preeti Kulkarni
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t 31, Mumbai-based Hardik R Thakker is a veteran of mastering loans. Don’t scorn at the thought of the 31-year-old being attributed as a veteran; his first loan was for his education and then he borrowed when he was about to get married to tide over the mounting
wedding expenses and now, he has taken a loan for his dream house. “These days, banking service has become so efficient that I had to just call my personal banker and tell him about my requirement and the rest was taken care by him,” beams Thakker. Thane-based Dhanse family of
Rukshar and Yasin Dhanse, Thane “We bought a Toyato Etios with a car loan, which has made our commuting comfortable and we are finding the entire EMI repayment satisfactory and within our budget”
Photo: Ram
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five spreads over three generations – Rukhsar, her husband Yasin, their two sons who are 22 and 20 and Yasin’s mother. “We bought the car as a gift for my son on his birthday. We live in Thane, where it is not easy to hail an auto at will. We felt the need for our own car due to the poor state of public transport,” rattles Rukhsar. They bought a Toyota Etios in 2014 and are happy with their choice of car and the loan. “The EMI is convenient and the car helps us commute easily,” she adds. In Pune, 35-year-old Amber
Hardik R Thakker, Mumbai “I was a bit low on cash when I was getting married and took a personal loan to fulfil my monetary requirements for the big occasion in my life” Sironzkar is a man possessed with his dream of buying MacBook Pro. “Last year, I just felt the urge to buy what I was aspiring for long—the MacBook Pro for `64,000, because the deal sounded just right and it was easy to avail an enticing offer from Bajaj Finance,” he says. For him this option was the best way to buy a product of his dreams, with an easy payment option. “The loan process was swift. The processing was complete in a short time, with an ECS Mandate form, one cancelled cheque, and a KYC document, along with one recent salary slip. With an easy four-figure monthly EMI, I was able to take my favorite machine home,” adds Sironzkar.
Making loans work for you
With the growth of consumptionbased spending, the need for loans for various goals has grown ranging from vehicles and weddings to tablet and smartphones. Today, personal loans have certainly made life easier and simpler as it is a great way to handle unexpected bills, Photo: soumik kar
Rakesh Makkar
Head of Business, Marketing & CSR, Fullerton India
“In case of holiday loans, sometimes the travel company may subsidise the interest portion and make it zero per cent interest rate.”
improve your home, make a large purchase, or perhaps assist with education expenses. The loans are getting easy to get because the lender-customer relationship, especially for unsecured loans like personal loans, is being validated with several parameters other than the credit score. Then, the access point for loans is spreading; you don’t need to visit the bank or the NBFC.
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Cover Story You don’t need to apply for a loan and wait endlessly. In the case of borrowing for consumer goods and cars, most manufacturers and distributors have tie-ups with lenders who are stationed at the point of sale to facilitate the loan. As for personal loans, your existing banking or financial dealings with an NBFC or the usage trail of a credit card makes it easy to borrow. While financial institutions follow a stringent process to ensure that borrowers can repay the loan, the borrower too must accurately judge and be confident of their ability to repay. Says Veetika Deoras, chief operating officer - Digital Head, Tata Capital: “A consistent employment record, residence stability, and adequate documentation are elements that help an individual secure a loan at a good rate. Technology is helping make the loan process a breeze for customers by providing an easy, fast, convenient and 24x7 way to apply for a loan.” And, credit card users also get the option to break down their purchases into EMIs. Almost every online purchase above `5,000 whether it is a mobile phone, home appliances, furniture or even travel tickets can be broken down into EMIs at the time of purchase. One can just click on the EMI option and see the amount of EMI and interest to be paid for a particular credit card which depends on the
Veetika Deoras
Chief Operating Officer - Digital Head, Tata Capital
“A critical decision while borrowing is also choosing the right tenure. While a longer tenure implies higher interest component, it also implies a lower EMI and hence easier repayment.” loan tenure whether it is 3 months, 6 months, or even up to 2 years in some cases.
Prudent borrowing
Just because loans are easily available, one should not err into borrowing too much and face difficulty in repaying a loan. There are several indicators to arrive at what could be an ideal borrowing. For instance, a good indicator on how much you could borrow should be the amount of money that goes towards servicing the loan from your salary. A debt servicing ratio of less than 35 per cent is preferable. This means, 35 per cent of your income goes to pay the debt off by way of EMI. This ratio would vary across individuals, but ballpark this is a good indicator to know how much money goes towards servicing all forms of debt that you have. “One has an income and then there are expenses and also, one
Anil Ramachandran
Head - Marketing & Communication and Retail Unsecured Assets, IndusInd Bank
“Getting a personal loan without established credit history is difficult. For our clients we evaluate their relationship with us and also their employment details before lending.”
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needs to keep 20 per cent for contingencies. From the surplus cash one has the option of going for loans—housing, personal, car etc. But, one should remember that one should never take into account income that is not regular. Also one needs to keep in mind other commitments like SIPs and annual insurance premiums,” says Rakesh Makkar, head of business, marketing and CSR, Fullerton India. It is for this reason that most borrowers seek your bank statements to assess the money that is going towards servicing debts to ascertain your ability to repay the loan. These days, access to Aadhaar and the Internet has meant that one cannot create fake identities for the sake of borrowing. There was a time when one could fudge bank statements and even income tax returns with the intent to cheat lenders. The credit bureaus have ensured there is practically no room for such fraud. The flipside to such robust data-driven assessment also means that if some records are erroneously marked, the onus is on you to get your records straightened with the institution where the records have not been updated or cleared. Says Anil Ramachandran, head - marketing and communication, and head - retail unsecured assets, IndusInd Bank: “Yes, getting a personal loan without established credit history is difficult, however for our own clients who have
Amber Sironzkar, Pune “Initially, I was a bit unsure about the finance option, but after my pleasant experience, I recommend loans for consumer goods for anyone looking to buy” strong banking relationship with us, we do offer appropriately customised personal loans based on their relationship with the bank, employment etc. Other than this, such clients have an option to avail secured credit card among others as well.” However, that may not be the case in semi-urban and rural areas. Says Ramesh Iyer, vice chairman and managing director, Mahindra & Mahindra Financial Services: “We cater to people mostly in semiurban and rural market. And here, there is no CIBIL score, therefore the applicant factors should be very healthy factors in the sense that he has to pay his instalment on time, so that the reputation risk is well-maintained.” At the time of festive season, several resellers and lenders have got into tie-ups by promoting 0 per cent interest, which is attention grabbing. However, do not be blinded by such deals, because such deals do not have the option for a cash only sale, which would otherwise allow you to arrive at the
Photo: purva gadre
Ramesh Iyer
VC & MD, Mahindra & Mahindra Financial Services
“In rural areas, credit score may not exist. We then go by the borrower’s reputation and focus on explaining the working of a loan and their liability before lending.”
real cost of the deal. So, no matter how tempting these loans appear and are easily available, even at low interest rates—you should know that all loans include processing fees, hidden costs, and a repayment cost by way of interest. After all, who will offer you a product at a loss? Keep this mantra handy before you embark on your borrowing journey. Himali@outlookindia.com
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Cover Story
Gratification Unleashed Easy loans make it possible for you to fulfil your dreams in a shorter span of time, say Anagh Pal and Himali Patel
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here was a time when a loan mostly meant you were going to buy a house or a car. This is not the case any longer. With changing times, now there are loans against salary advance to fund even your honeymoon. Today, there are loans available practically for every need and dream. The names of the loans may vary from travel loans to wedding loans, but the foundation of all these remain the same—they are all short-term personal loans of some form. With demand for such loans rising, lenders for such loans are no more just the banks. Several nonbanking finance companies (NBFC) are working dedicatedly to service this demand. Kolkata-based Dwijattam Mukherjee, a VP in a top tier IT company recently bought a Harley Davidson, the third in his line of hiend bikes. “I have been an avid biking enthusiast all my life and strongly believe in the mantra ‘4 wheels drive your body but 2 wheels drive your soul’ being a great way to de-
Amit A. Shukla, 29, Mumbai “I benefited from an education loan, when I was doing my graduation. I recently took a personal loan for a car, it worked better than a car loan.”
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Photo: soumik kar
Suresh Sadagopan
Founder, Ladder7 Financial Advisories
“People treat loans as if it is available free of charge. It is easy to take a loan; but difficult to keep servicing it over a period of time.”
stress, unwind and relax.” His recent 2-wheel passion cost him about `13.5 lakh on-road, for which he availed `4 lakh loan from HDFC Bank. “I borrowed to fund all my three highend bikes,” he beams.
Changing demographics
Advent of fintechs and increased use of social media and the internet, means you are leaving a lot of bread crumbs for lenders to follow you with an offering you cannot resist. Yes, technology allows lenders to send you mails and messages with irresistible offers that you cannot do without. Browse a travel site and chances are you will be inundated with travel offers by airlines to be followed by travel loans from some fintech. Most fintech companies are also playing the match-making role of connecting customers with lending institutions. Take the case of the ubiquitous car loan, the advent of luxury cars has turned several car companies to offer loans that are tailored to suit customer offerings. For instance, Volkswagen Finance (India), offers financing solutions to customers for both new and pre-owned Volkswagen group vehicles (namely Volkswagen, Skoda, Audi, Porsche, Lamborghini, MAN and Scania) through registered and authorised Volkswagen group dealer channels. “Lenders have made money available for virtually everything— even a small purchase like a garment
can be paid on EMI. Lenders have slashed down the time it takes to process a loan and loans are available very fast today,” explains Suresh Sadagopan, founder of Ladder7 Financial Advisories. You also have pre-approved loans from banks which can be utilised on the fly, which is an innovation that is seen these days. Then, several people with credit cards, convert all their credit card balances into EMI, as they feel it is easier to service. “Avoid credit card debt completely as it is very expensive. And, keep in mind that your credit score could be adversely impacted if you default or delay loan payments,” warns Vishal Dhawan, founder and CEO, Plan Ahead Wealth Advisors. Loans have also changed in their orientation with their structure being a lot better now. There is also variety, with greater degree of customisation and a wide variety of finance options like bullet option, EMI
holiday option, etc. to choose from. Moreover, with the digital medium being fast and wide, it is easy for customers to plan and compare what’s available appropriately and negotiate better. Several product manufacturers have direct tie-ups with lenders, which makes the deal sometimes too enticing to ignore.
Borrow cautiously
No, the idea is not to spoil the party, but to warn borrowers about the perils of going a bit too easy with loans just because they are available. “I would say that people should only go for good loans like that for a house or education. Any loan that is for a want is better avoided. These loans are meant for instant gratification. If you really want to buy something, it is better to save up for it and postpone the buying decision,” says Hemant Beniwal, principal financial planner, Ark Financial Planners. Good loans are typically those that play the role of asset creation or wealth. So, a home loan is considered to be good and so is an education loan. While loans are available for every need, as a consumer it is important to exercise financial prudence before going for a loan. “One needs to ensure that they have enough income to repay the monthly EMI. It is critical that customers do not over leverage themselves. Banks would generally do checks on a customer’s cash flow prior to disbursing such loans,” says Hemang Dattani, founder and CEO,
Vishal Dhawan
Founder and CEO, Plan Ahead Wealth Advisors
“Most people are aware of the EMI, but unaware of the interest rate of interest, outstanding tenor, principal outstanding as loans get reset over a period of time and they lose track.”
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Cover Story
Rajat Gandhi
Founder & CEO, Faircent.com
“The interest rates for P2P loans are significantly lower than unsecured loans from traditional sources which tend to charge high interest rates.”
DigiLend, a fintech platform that connects borrowers to lenders. Getting a clear idea of one’s cash flows is important as these loans need to be repaid out of surplus cash flow every month after paying for expenses, insurance premiums, SIPs and crucial loan repayments like home and car loans. Biting more than one can chew can land one in a financial mess.
Alternate avenues
While traditionally banks and NBFCs have been dominating the lending scene, in recent years newer ways of lending are also available. A popular format of lending that has mushroomed is the peer-to-peer (P2P) lending, which has found favour among borrowers who don’t have a credit history. P2P lending brings borrowers and lenders directly in touch with each other thereby eliminating intermediaries and their margins.
“P2P lending platforms like Faircent.com employ innovation to provide credit on demand at reduced cost and higher speed. We leverage technologies like big data analytics to assess the creditworthiness of borrowers and facilitate easy and quick access to funds for both personal as well as business requirements,” says Rajat Gandhi, founder and CEO, Faircent.com. Typically, institutions that are into lending consider few factors to arrive at a prospect’s credit worthiness. These include their bank transactions and repayment history of any past loans. “As a result, individuals with low credit scores or a lack of credit history are often overlooked for credit by are assigned extremely low credit limits,” he adds. Platforms like Faircent conduct thorough checks and verifications of a borrower’s identity and credit status through its fully-automated system as well as team of experts.
Hemant Beniwal
Principal Financial Planner, Ark Financial Planners
“If you do not want to put stress on your cash flow, you can opt for zero per cent EMI offers that sometimes manufactures offer.”
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Dwijattam Mukherjee, 41 Kolkata
“HDFC is where I have my primary bank account and borrowing from them helped because of a strong relationship, and it was cost effective.”
Not so smooth
Yet, borrowing is not as smooth as one would expect it to be. Take for instance Mumbai-based Amit Shukla, he had to take a personal loan of `5 lakh to fund his first commercial car, because a car loan did not work out the way he wanted it to work for him. “I tried for a business loan under government schemes, with all the necessary paperwork. But, the cost of loan was working out to be expensive,” he says. Finally, a preapproved personal loan worked out. “I applied for a personal loan from HDFC bank and got it within three days,” Adds Shukla. Although loans are available to
Photo: sandipan chatterjee
Hemang Dattani
Founder and CEO at DigiLend
“The unsecured personal loan space has evolved tremendously in India and there is an EMI available for almost all purchases.” fund your desires, there are costs, primarily the interest that you pay towards the loan. At the time of borrowing, keep in mind the interest that you would pay on the loan. It
is better to directly pay for what you desire than having to service a loan. “Whatever the interest rates, the idea is not to get into a cycle of overspending. This should not come
at the cost of your long term goals though. For starters, you must save for your needs and then spend on the wants. Taking a loan just because one is on offer does not make financial sense,” says Beniwal. Yes, loans are easy to avail and many people prefer to repay over a period than spend from their savings, but that should not turn you into a machine that is repaying loans, even as your savings’ worth gets eroded. Use the festive season to explore what lenders have to offer on the goodies that you desire before zeroing down on a lender. anagh@outlookindia.com himali@outlookindia.com
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Interview
Interview Vinay Sah
MD & CEO LIC Housing Finance
Scaling up re ta il housing With the festive season in full swing, Vinay Sah, MD & CEO of LIC Housing Finance tells Narayan Krishnamurthy, about the developments augmenting growth in the housing sector 58
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Interest rates are low. But the uptick on home loans is not visible. What trends are you witnessing? Home loans are growing around 15 to 17 per cent and hence it would not be entirely correct to say that uptick on home loans is not visible. The sector has seen two major reforms— RERA and GST. With RERA kicking in from 1st May 2017, builders are busy implementing their ongoing projects to the RERA regime. New launches have to be registered under RERA before any marketing activity by developers. Hence, in many parts of the country we could see a dip in launch of new projects. Second factor is the implementation of GST and clarity on the rate applicable to under construction units. Perhaps there were expectations of cost rationalisation for new units post GST which put prospective buyers in wait and watch mode. It is natural that new changes will bring its own challenges. Things are settling down fast as we see the number of projects getting registered under RERA. Confidence is slowly coming back. Typically, good deal of purchases, including homes for Indians, start from the festival season which has just commenced. The government is continuing its drive on affordable housing and supports the first time buyers with credit linked subsidy scheme. The Employee Provident Fund (EPF) now can be withdrawn for purposes of down payment and EMIs of home loans. Interest rates are attractive. These are the positives needed to lift the sentiments of people. In my opinion, all of these vibes augur well for the end user segment and we can find sustained growth in the industry for the next few years.
With the festive season round the corner, do you see an update in home loans?
We have witnessed spurt in home buying activity as soon as the festive season commences. As I said, festive season is considered auspicious for any purchase. Sales promotion activities by developers are back with exciting offers like Zero GST, OC (occupancy certificate) obtained, ready to move in, etc. The home loan market goes hand in hand. For lenders like us, the busy season has started. To induce positive sentiments, banks have started waiving processing fees and other concessions; we see home loan campaigns in all sorts of media enhancing the momentum of home purchases with easy loan options. Overall, the acceleration has started and we are optimistic about the future prospects.
At LIC HFL, we have included to increase PMAY coverage in our core marketing strategy. We are continuously educating the borrowers about the benefits of the PMAY and how their effective rates of interest comes down with the subsidy as well the prevailing tax benefit on home loans. Builders too are increasing their focus in this area after affordable housing got infrastructure status. They are customising projects for this segment and everyone is upbeat about the scheme. Overall PMAY CLSS will pave the way for success for affordable housing.
How is PMAY panning out? Doesn’t the low threshold make it restrictive for a lot of potential borrowers?
HFCs follow PLR (Prime lending rate model). At LIC HFL, we have LHPR (LIC Housing Prime Lending Rate) as the reference rate and all loans are pegged to this rate and would vary depending on market conditions. LHPR is reviewed quarterly and any reduction to LHPR automatically gets transmitted across the board and benefits our existing borrowers.
PMAY is not restrictive. It covers a wide range of income groups like EWS, LIG, and MIG with income levels up to `18 lakh per annum. Thus, the coverage is wide and targets the first time home buyers. The subsidy transmission is seamless and upfront resulting in reduced EMI and effective interest rates. This means a lot of savings over the loan tenor and more money in the hands of the borrower.
We are in talks with insurers and are hopeful that things will start getting better with annuities
What has been the impact of MCLR on existing loans? Are people shifting to this prime lending rate?
What has been the impact of digitisation on lending model? Digitisation is in the core of our strategy encompassing customer relationship, internal processes and operational areas. On credit appraisal most of our checks on KYC, PAN verification and credit rating through CIBIL are digitised. This enables us to screen the cases at the preliminary stage itself. We have online approvals in place where on basis of inputs from the customer, a pre-approved loan offer is given. So, digital platform helps in reducing TAT (turnaround time) in the approval stage. However, post sanction formalities like documentation requires customer
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Interview
The PMAY subsidy transmission is seamless and upfront resulting in reduced EMI and effective interest rates
interface owing to the technicalities involved. It is noteworthy that in many parts of the country registration of title deeds has been digitised. Also, property records like encumbrance certificates and mutation registers are available online. RERA is yet another boon for the industry. With all project details, specifications and sale position available online, comfort of lenders is going to increase manifold. With more things shifting towards digitisation and integration, it is going to make processing of loans swifter and more cost effective process. LIC HFL has been transforming its businesses successfully with the push from digitalisation, over the past several years. Overall, there has been an increment in the customer engagement levels due to digitisation.
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Photo: soumik kar
There is a visible uptick on consumer loans, what will trigger a similar uptick on home loans? Owning a home today without external financial assistance is difficult. There is an increasing demand for real estate given the emergence of nuclear families, increase in per capita income, age demographics, emergence of smart cities to name a few. Naturally the demand for home loans will also increase. Housing finance is among the most active sectors within the country today. The government’s thrust on providing ‘Housing for All by 2022’ and other initiatives such as PMAY CLSS scheme, tax benefits, infrastructure status to affordable housing will only act as fillip to the housing sector. RERA is another welcome change which will consolidate and regulate the sector which was marred by many opaque structures. Macroeconomic factors and policy led actions are conducive and should fuel the next phase of growth for the sector.
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What are the plans for LICHFL in the second half of the financial year? LIC HFL has always been adaptive and has aligned itself with the market needs. Through the right mix of portfolio on the asset side, we shall continue to show growth with profits and at the same time, maintain margins. Our zero tolerance policy for NPAs would continue and will remain the best in asset class in the industry. As I said earlier, we shall be giving thrust to PMAY CLSS initiative through our Apna Ghar loan scheme. Plans are there to identify affordable housing projects for project funding. Our focus would be to scale up the retail housing loans which are the core business of the company. With two Regional Offices opened at Patna and Bhopal, we shall expand our reach and garner new business. Our plans are to increase number of distribution intermediaries by 50 per cent. Overall, we will continue to grow our loan book by 15 per cent during the year.
nk@outlookindia.com
Column
PF, NPS and Superannuation
Anil I Lobo India Business Leader – Retirement Practice at Mercer India
There is plenty to choose from when it comes to retirement savings, which can co-exist
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here has been lot of buzz around the recent provisions in the portability of member’s accumulation from PF or Superannuation to the National Pension system (NPS). To sweeten the move, the Finance Ministry in an amendment provides employees exemption from taxation for one time portability from approved PF or Superannuation to their individual NPS account. The amount transferred will not be treated as an income in the hands of the employee and, it will also not be treated as a contribution in the current year and hence no tax benefit can be availed. Further, as per the PFRDA in its circular which came out on March 6, 2017, it laid down the process for such transfers. Without getting into the benefits of each of the three available retirement options, the pertinent question that arises is around their possible co-existence. Yes these retirement
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benefits can co-exist, which would help facilitate employees to preserve more wealth for retirement and ensure a decent income stream. It is not only important but would be paternalistic on the part of employers to
educate their employees on the need for building such corpus for postretirement income.
One-time transfer provision
Provident fund is governed by the EPF Act
and employees covered under mandatory PF may not be able to transfer it unless the EPF Act is amended to allow such transfers. Even if the employer would like to weigh options of allowing one time transfer of PF or Superannuation, the trustees will have to examine the provisions of the Trust Deed read with provisions of the Income Tax Act, 1961. The Income Tax provisions for PF and Superannuation are governed by Part A and Part B of the Fourth schedule, respectively. This would mean employer will have to amend the provisions in their Trust Deed and Rules allowing trustees for such transfers into an NPS account. The key takeaway is that now an employee has a choice to move funds weighing his individual circumstances and take advantage of what suits him the best.
Provident fund offers tax free withdrawal of lump sum accrued corpus on retirement and provides a modest return regulated by EPFO and Labour Ministry
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Tax advantages of continued contributions Features Maximum limit on Employer Tax Eligible* contribution
Maximum limit on Employee Tax Eligible contribution
Type of Benefits
Provident Fund Superannuation (DC Scheme) (DC scheme) Statutory Benefit Supplementary
National Pension System (NPS) Supplementary
Exempt up to 12% of salary No monetary ceiling
15% of eligible salary, subject to limit of `1.5 lakh per employee (contribution in excess attracts perquisite tax)
10% of eligible salary + Dearness Allowance (DA), without any cap Contribution made by the employer under section 80 CCD (2) of IT Act up to 10% of salary (basic + DA) in addition to the tax benefits available under Section 80 CCE. No monetary ceiling
Up to `1.5 lakh as per Section 80C of Income tax Act.
Up to `1.5 lakh p.a. as per Section 80 C of Income tax Act.
Employees own contribution is eligible for tax deduction under Section 80 CCD (1) of Income Tax Act up to 10% of salary (Basic + DA), within the overall ceiling of `1.5 lakh under Section 80 CCE of the Income Tax Act. Additional tax benefits exclusive to NPS. In addition to the deduction allowed under Section 80CCD(1) maximum allowed `50,000 under Section 80CCD 1(B)
Lump Sum on retirement tax free Annuity under EPS 95
Lump sum: maximum of 1/3rd of accumulations (or 1/2 in the absence of Gratuity) Annuity: Taxable as per the applicable income tax slab of the individual at the time of receiving annuity benefits
Lump sum: max 60% (or max 20% if withdrawal occurs before attaining 60 years of age) of accumulation. Tax free up to 40% at 60 years on retirement Annuity: Minimum 40% (or minimum 80% if withdrawal occurs before attaining 60 years of age) of accumulation. Option available to defer the lump sum up to 70 years and annuity up to 63 years of age.
*Allowed as a business expense under Section 36 (1) iv (a) of Income Tax Act 1961
Tax benefits
Employers can help employees make their salaries tax efficient. All the three options offer an excellent opportunities, as they provide the employees with a choice of contributing to these retirement benefits and there by, helping them save for retirement besides making their income tax efficient. The tax advantages of continued contributions towards
PF, Superannuation Plan and the NPS are worth examining (See: Table). So, if an employer has an existing Superannuation scheme, it is good to continue with it as both Superannuation and NPS can co-exist offering an opportunity to save higher tax. Under the corporate model of the NPS—employers contribute up to 10% of basic salary out of the purview of taxable
income. For those employees who are attracted to perquisite tax, employers may contribute the excess over `1.5 lakh to NPS or still better contribute up to 10% of basic to NPS. This would help preserve more wealth for retirement thereby higher corpus available for purchase of annuity under both Superannuation and NPS will ensure higher stream of post retirement
income for employees. Employees may exercise the option of portability of Superannuation to NPS during the final year of their retirement whereby they have the advantage of 40 per cent of commutation of both the accumulations put together and secure one single annuity pay out, apart from the 100 per cent tax free withdrawal of accrued the Provident Fund.
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Car Insurance
Driving the new car Don’t let the festive season celebrations cloud your vision on important aspect of insuring your new car adequately, by Narayan Krishnamurthy
W
e are in the midst of the festive season, which is not just about having a good time but also going berserk on a buying spree because everything seems to be attractively priced or available at a discount you can’t do without. A lot of people plan important purchases to coincide with this auspicious phase, especially when it comes to buying a car or property. To make the car sale attractive, dealers go out of their way to offer attractive discounts and freebies. However, it becomes important to not let the festive frenzy delay your decision of insuring your new car adequately. Incessant rains can cause considerable trouble to even your car parked outside your house. The flooding caused due
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to rain can impact not only the interiors, but also damage the car due to falling trees and other such possibilities. While the standard motor insurance which includes third party liability cover is a must as much is the own damage component of motor insurance, use the opportunity to add-on covers that address risks beyond these two.
Risk proofing the car
Your new car will be equipped with all the latest technological advancements, but it will still be susceptible to risks such as accidents, which will be covered by the own damage part of your motor insurance. With vehicles being exposed
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to new form of risks such as engine blockage due to water logging or damage to interiors owing to bad weather, insurers have come up with ways to address these issues, which are outside what a standard motor insurance policy covers. Some aspects that you should know and keep in mind when taking insurance are listed so that your prized wheels are protected against all forms of vagaries. Return to invoice: The Return to Invoice (RTI) is an add-on option which covers the gap between the insured’s declared value and
the invoice value of the car. It’s an option that will fetch you the entire amount of loss that you incur in case of an accident leading to replacement of parts. Engine protection cover: Automakers mention that it is unwise to crank up the car when it is stuck in water because it can damage the car engine. This add-on cover can be used to cover such instances along with the repairing cost of electrical circuit failure at a nominal additional cost. Zero depreciation: This additional cover gives you the legal right to claim the complete replacement cost of the parts damaged in case of an accident which the policy covers. This is useful, especially in case of plastic parts. The concept of part replacement over repairs with new age cars means you stand to benefit by adding this cover. In case you are upgrading your car, make sure that you transfer your existing motor insurance to the new car and claim the no claim bonus that is accumulated with your earlier car. The no claim bonus (NCB) is the discount that you get on the premiums you pay for each year you don’t raise a claim. Use all or a combination of these additions to make your car robust. nk@outlookindia.com
Rajiv Kumar
MD & CEO, Universal Sompo General Insurance
Safe Driving What kind of insurance should someone buying a new car look for? When buying a new car, one should opt for a basic motor insurance (own damage + third party), which would compensate for small damages and total loss arising out of accident or vehicle theft. It is prudent to get a comprehensive coverage along with specific add-ons.
Why should one go for addon covers? One should consider buying addon covers as they provide many benefits and lately, have become an integral part of comprehensive package. Add-on covers, as the name suggests, offer insurance for several damages in addition to own damage and third-party liability. Depending on vehicle type, each add-on has the potential to save from huge out of pocket expenses. There are many valuable add-on covers like nil deprecation, NCB protect, engine protect, return to invoice, daily cash, loss of key or driving license and road side assistance.
Why is zero depreciation important these days? Zero depreciation add-on, also popularly known as ‘nil dep’, preserves the value of the vehicle without considering any depreciation. It provides complete cover without factoring age of the vehicle or damages that caused depreciation on the value of parts replaced. Such add-ons are important as they provide huge advantages as the possibility of any out-of-pocket expenses is eliminated which you may have had to pay for replacing parts.
How can one cope from vehicle damage due to rain? Vehicles are susceptible to damages when rain strikes. The basic motor insurance policy can compensate for small damages and total loss due to accidents. But, damages to the engine due to water ingression while driving through accumulated rain waters is covered only when you opt for engine protect cover. If opting for a nil-dep add-on cover, any replacement to essential parts damaged will not attract depreciation.
www.universalsompo.com
Toll Free No. 1800 22 4030
Eng/Motor/Ban/Mag/2017 | IRDAI Regd. No. 134 | Regd. Office : Unit No. 401, 4th Floor, Sangam Complex, 127, Andheri Kurla Road, Andheri (E), Mumbai – 400059, Maharashtra. | Fax# 022-29211844 | CIN# U66010MH2007PLC166770. | UIN# IRDA/NL/F&U/USGI/Motor/ Add - On/1; IRDA/USGI/2007-08/05. | Email: contactus@universalsompo.com. | Insurance is the subject matter of solicitation. | For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale. IRDAI or its officials do not involve in activities like sale of any kind of insurance or financial products nor invest premiums. IRDAI does not announce any bonus; Those receiving such phone calls are requested to lodge a police complaint along with details of phone call and number.
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Enterprise
Dog’s
Day Out Some people dream and some live their dreams. This is the story of how Preeti Sood made her dream come true. By
Rimme Dirchi
T
he PoochMate journey began one wintery day in 2014, when 37-yearold Preeti Sood decided to take the big leap of faith and give up her banking career. “I wanted to follow my passion of doing something good for dogs,” she laughs when asked. A pet lover all her life, the idea of PoochMate came to her after few personal bad experiences and accounts of mishap from friends at regular pet spas and veterinary clinics who were not equipped to handle non-medical needs of dogs. The idea seemed so bizarre that her parents were concerned. “I had to convince them that if it did not work, I would go back to banking,” she says. The long years of working with the bank allowed Sood to take a sabbatical for a few months; which was her way of having a cushion if things didn’t work. To make sure she got things right, Sood went to London to pursue a short-term dog grooming course. She knew she was on the right track once she was back. She set up shop in Sainik farms, a part of Delhi, where several homes have dogs for pets. Some have more than one to boot; and PoochMate finds itself safely lodged amid the humdrum of a human marketplace. Sood acknowledges the lack of proper business understanding when she started off, but the location helped. “It was initially very confusing as I did not have much figured out. But, the location helped a lot in my business,” she recalls.
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Photo: tribhuvan tiwari
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Enterprise
PawTalk Launch: December, 2014 Initial investment: `10-`15 lakh Current Annual Turnover:
`40-45 lakh
Success Mantra: Stay committed to what is ethical, you will win hearts!
Today, PoochMate Spa works on an appointment basis, though walk-ins do happen, but in three years, the amazing work offered at PoochMate has made it a well known address for dog lovers to take their pets for a welldeserved grooming session. Serious pet lovers swear by the experience their pets have received and express happiness about this unique facility.
Teething trouble
The initial days were not as smooth. The concept was new and there were not many takers. “I had given myself 6-8 months before deciding on anything. I was convinced about the business idea and was willing to take the risk of investing around `15 lakh in the venture, which I did from my own savings,” says Sood. Customers were not easy to find initially, but that did not deter her as it allowed her to work with her own two dogs. The concept of pawdicure, deep conditioning and full grooming was nascent and she had to explain them to several clients before they were convinced to provide the same to their pets. “Several serious pet owners go all the way to provide the best for their pets and that is what make our services stand out, as we pay close attention to the comfort and benefits of the pets,” stresses Sood. Over time, she has employed two full-time staff members, who help her with the regular work, but Sood is the one to get into the act of providing the actual services, whether it is the hair cut, de-matting, dry grooming or tick flea wash, she is hands-on with every aspect of running her work space. These treatments can cost anywhere between `500 to `4,000. She thoroughly believes that people who are pet
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lovers do not see this as an expense, they view it as something in the interest of their pets, who matter as much as any other family member. Sood was also competing in a way with vets. And, although vets do offer some of the facilities that she offers, the mindset of a vet being a medical setup, did work to her advantage. PoochMate is what a wellness clinic is for many of us and does not fall into the trap of being perceived as a hospital or clinic that you visit when you are unwell. Trained abroad and experience in handling pets was the clincher. “People pay for our facilities and quality of products.” Much of what PoochMate offers is sourced from outside India and the quality is remarkably visible and takes into account the need of different breeds of dogs. “In other commercial spas they have standardised mechanisms in place and they use common products for all breeds which can be tricky because different breeds require different products and services. We cover a much wider range.’’
Pays to go niche
Being a trained professional with a Dog Grooming Course in London at the British Dog Groomers’ Association and certificate recognising Sood by the City & Guilds, London, UK sits prominently at PoochMate. Any degree of doubt vanishes when one visits the salon. “I have applied what I learnt and felt was the right for dogs in India, post my course. I take care of each of my client’s pets and their requirements as per breed, size and coat. I don’t take in more than six appointments in a day and I personally take care of each one of them.”
Today, PoochMate has 425 clients and is relentlessly growing. The business has a turnover of over `40 lakh and Sood is happy that she gave up the banking job to chase her dream. She also has an online presence, where off-the shelf items are available. Clients come in with their pets from all over the National Capital Region. She has created her own line of products. The martingale collars sold by her are designed in such a way that the impact of choking is lesser around your pet’s neck. “It allows them to breathe while running and we were able to develop this after observing pets closely and the impact of standard collars.” Social media presence, packages for pets and a variety of products for pet owners to explore have made her clients come back frequently and bring along their friends. So, does she plan to expand? “Yes. We would like to expand to more salons. But, I am extremely choosy in getting the right people on board who believe in improving wellness and lifestyles of pets as much as I do. We do not want to rush into expansions at the
Invest
Spend
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cost of compromising on the quality.” The grit, determination and hardwork are traits that have transformed Sood from a 9-5 employee at a bank into a businesswoman, who calls her own shots with a successful business that has everything going for her. rimme@outlookindia.com
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Change your Outlook on Money
My Plan
Photo: gireesh gv
Make your dreams come true With a clearly defined roadmap all your financial goals can all be achieved as per your timeline, says Pankaj Ladha
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K
arthik, Anuradha and their 2-year-old son, Advik Nagaraja Rao, live in JP Nagar, Bengaluru, which still has its share of green surroundings. The household is complete with their pet dog, Pepper. Karthik works for a professional services company
providing consulting services to an aerospace and defence contractor based out of Canada, while Anuradha works as a senior process manager at a bank. Both at 31 earn well and lead a comfortable life, with clear financial targets on their mind, which are also mapped well with the appropriate timelines. I always feel happy if someone has already set goals with this much clarity. They have a goal to have `25 lakh for purchase of land five years from today. They will need another `50 lakh for higher education of their son 20 years from today and lastly, they have targeted a corpus of `2 crore for their retirement. My suggestion to them is to start with a contingency fund, which will help them meet any contingency they may encounter in the future. This corpus can be created with the help of their existing investment worth `10 lakh in their fixed deposit and shares.
Fulfilling goals
Purchase of farm land—first and short term financial goal is to purchase a farm land in the next five years. For this, they need to have a systematic investment plan of `31,000 in a balanced type fund. The next big goal for them is in the form of son’s higher education, which should be in about 20 years hence. For this, they should set aside `5,100 in an SIP, which should be in a well diversified equity fund. As for their retirement goal, which they are thinking of 30 years hence, they will need to start an SIP in a diversified equity fund with `5,800.
My advice
One important role of financial planning other than meeting your set goals is wealth creation. This couple has the set mindset of saving at least `50,000 per month. Their existing set goals can be
Financial Goals
Farm Land
`25 lakh in 2022 SIP: `31,000
Higher Eduction
`50 lakh in 2037 SIP: `5,100
Retirement
`2 Crore in 2047 SIP: `5,800 Assuming 12% returns
met with an SIP of `41,900. Now the remaining `8,100, if invested diligently in proper equity fund, will give the couple wealth of `2.8 crore created at the end of 30 years. Gradually if the SIP amount is increased properly, then the amount of wealth that they will be able to create will be exceptional. As such, the couple has exhausted their savings and investments under Section 80C limit of `1.5 lakh. Looking at the concept of human life value, both Karthik and Anuradha individually should have a life cover of `1 crore each. This requirement can be fulfilled with the help of term insurance plans. They should reassess this requirement once every few years depending on changes in their financial goals as well as changing circumstances in life. For now, they have sufficient amount of health insurance and there is no need to further increase it. They can improve their finances by being careful when taking any other financial product. For instance, they have traditional Moneyback policies in their portfolio, which are not financially the best, but one tends to have an emotional attachment to these. By redeploying the payout that they get from these policies in mutual funds properly, which has been suggested to them, they will be able to achieve all their listed financial goals. So, this planning should be fruitful for the couple helping them meet their set targets and also create wealth at the same time. Happy investing! olmdesk@outlookindia.com
Pankaj Ladha Financial Planner, pankajladha.com
The planner can be reached at yourpankaj@pankajladha. com, 9352607325
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Gadgets
Clash of the Titans
With the smartphone giants, Apple and Samsung, releasing their most powerful smartphones yet, Tushar Kanwar finds out if the three measure up Apple and Samsung, which continue to dominate the smartphone market with their shiny gadgets, unveiled their flagship devices for 2017—iPhone 8 and 8 plus, iPhone X, and Samsung Galaxy Note 8. If you are wondering which one to pick, read on to see how they stack up.
`89,000
iPhone X: First Impressions
A
pple really pulled out all the stops with its 10th anniversary iPhone—an all-new design that’s marginally bigger than the smaller ‘non-Plus’ iPhones of the past, yet one that fits in a superior 5.8-inch edge-to-edge screen and advanced facial recognition-based biometric security. Having spent some time with the newest iPhone on the block, due in India on November 3rd starting at `89,000, here are my thoughts. The big change, one that you immediately notice if you’ve held an iPhone in the past couple of years, is that how much more screen you have access to in a form factor that’s barely bigger than the 4.7-inch iPhone 8. With the all-screen design
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iPhone8 and 8plus and lack of the thick top and bottom bezels that have characterised iPhones since 2007, the X finally has a 2017-spec “near bezel-less” design that everyone has been expecting of flagship phones this year. It’s not quite “out there” as the sexy Infinity Display-sporting Samsung S8 series, but it is gorgeous and easy to hold and operate in one hand, which is a big plus. Color accuracy and brightness levels are spot on, courtesy the new OLED panel, a first for iPhones, and the tall 1125 x 2436 pixels display with HDR10, True Tone support, and a 1,000,000:1 contrast ratio round out an impressive visual package on the X. With so much screen at your disposal, the obvious tradeoff has been the loss of the home button with the Touch ID fingerprint sensor. For the former, Apple has added some intuitive on-screen gestures to go to home screen, see open apps, and view the Control Center to access settings, but the lack of Touch ID is slightly more vexing. Sure, you sign in with a more secure Face ID facial recognition, but the whole process requires you to pick up your phone for the tech to work. It feels instinctively slower than fingerprint unlock, and certain scenarios like face-unlocking while looking away from the phone or when it is lying flat on a table are well-nigh impossible. The front-facing TrueDepth camera, which enables this entire authentication process, lets you take Portrait mode (blurry background) selfies as well, so that’s a plus. The rear camera setup impresses in equal part, from the 4K shooting at 60 frames per second to the new Portrait Lighting feature, both of which the X shares with the new iPhones , and the new dual optical image stabilisation (on both the wide-angle and telephoto lens) is going to up the camera ante seriously! All in all, Apple seems to have, from my limited time with the device, hit one out of the park with the X, and I fully expect the Californian giant to be supplyconstrained for some months into the X’s global launch on November 3rd.
T
he iPhone 8 duo, possibly better described as the iPhone 7S and the 7S Plus, had their limelight stolen at launch by the iPhone X, but both phones pack a faster processor, new camera capabilities, and wireless charging support, which make them excellent devices in their own right. Design: Brushed aluminium makes way for an all-glass rear, one that Apple claims is the most durable glass to appear on a smartphone and the glass curves seamlessly into the aluminum band around the phone edges. Let’s be clear, the overall design isn’t different from last year’s iPhones—bezels, water and dust resistance, and all. So much so, the 8/8 Plus fit right into 7/7 Plus cases perfectly, with the only additional benefit of wireless charging. Display: The display sees a bump up in terms of the addition of True Tone technology, which uses sensors to detect the ambient light and subtly adjust the color temperature of the screen to match your surroundings, no matter what environment you’re in. The screens also offer a wide color gamut and excellent color accuracy, plus support for Dolby Vision and HDR10 formats, ensuring content looks true to life. Camera: While there isn’t a big leap in the camera setup from the 7 Plus – the 8 Plus has one wide-angle 12-megapixel lens with optical image stabilisation, and another telephoto 12-megapixel lens capable of optical zoom. The marque feature on the 8 Plus – Portrait Lighting – allows you to add effects to the iPhone’s portrait mode, such as "studio light", "contour light" and "stage light" to bring out shadows and highlights, yielding more dramatic photos with beautifully blurred out backgrounds. Performance and Software: The iPhones 8 run on the new A11 Bionic processor, which is the same chip as in the iPhone X, and with Apple's lead in mobile chip performance, the A11 clearly shows it has sufficient headroom for the future. The extra horsepower is visible when you try new apps that use Apple’s augmented reality implementation (ARKit) in iOS 11. The new experience, from the overhauled App Store to the new features within Live Photos, run incredibly smoothly on the new iPhones (expectedly so!). The upgraded stereo speakers are impressively loud, Bluetooth has been upgraded to the more reliable and future-proof Bluetooth 5 and the phones finally get fast charging. Verdict: For iPhone 7 users, the improvements are marginal, but for older iPhone users, the camera and performances benefits will feel a lot more real. Should you pick one of these or wait for the X – answer comes down to practicality, budget, and your faith in the first-gen facial recognition on the iPhone X vs the established, and superb, fingerprint recognition on the iPhones 8.
00 `6(iP4ho,0 ne 8) `73,000 us) (iPhone 8 Pl
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Gadgets
Samsung Galaxy Note 8
Y
ou would think the Note series was all but written off last year after the disastrous recall and subsequent discontinuation of the Note 7. Yet, with the Note 8, Samsung has come back all-guns-a-blazin’ with the incredible 6.3-inch screen, excellent phablet-focussed software and an on-point stylus, plus some additional bells-and-whistles over the company’s existing S8/S8+ flagships. Design: Unlike the outrageously gorgeous S8+, the Note 8 is much more boxy and angular, with even the dual curved display less pronounced on this device. The flatter sides make the Note 8 better to grip, which is essential for a device with a display this big. It remains dust and water resistant, even when the S Pen is not in the slot. The fingerprint sensor is still awkwardly located. Display: You get that gorgeous Infinity Display we first saw in the S8, replete with super thin bezels and a screen that almost takes up the full front. The 18.5:9 aspect ratio display means the device is a tad tall, but not unmanageably so than any other big screen Android phone out there. Samsung Super AMOLED screens are sharp, vibrant and punchy, and the Note 8 takes it up a notch, with a gorgeous screen that is HDR-10 compliant for better color accuracy and contrast. Gorgeous stuff; perfect for movies on the go. Camera: With the addition of the dual rear cameras, Samsung has done right by adding optical image stabilisation on both, the wide-angle and the telephoto cameras, a first for a smartphone —say goodbye to blurry photos. The dual camera setup affords the Note 8 optical zoom, along with the depth effect (blurred backgrounds) which can not only be adjusted before the shot,
`67 ,90 0
but after the fact as well. Picture quality is similar to the S8 series—stunning photos packed with detail and color, and there was literally no shooting situation that the Note 8 camera couldn't handle with ease. Video recording tops out at 30fps for 4K recording. Performance and Software: The top-shelf Exynos 8895 chip with 6GB of memory guarantees interface and app performance is blazing fast on the Note 8. But, it’s the S Pen and the software tricks that has always set the series apart. New improvements to the S Pen menu include the Live Message feature, which lets you record pen strokes for a short message, turning it into an animated GIF, which can be shared even with owners of other phones. I particularly liked the Screen Off Memo, which lets you jot down up to 100 pages of notes on the screen, even if it isn’t turned on. That, and the App Pairing feature that takes advantage of the large screen to pair two apps together, and both open in split-screen windows whenever the shortcut is opened – a subtle yet nifty addition to multitasking. Battery life is adequate and lasts a full day of heavy use, yet I feel Samsung played a little too safe by kitting the Note 8 with a 3300mAh battery. Verdict: You could call this the Note 8 Phoenix edition, since the device has literally risen from the ashes to post one of the biggest product comebacks ever. Much like the iPhone 8/8s, the Note 8 is a pricey proposition, yet the Note 8 offers enough firepower to satisfy Note users, old and new.
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Travel
Singapore and
Beyond By AreFA TehSIn Photos: AdityAvikrAm more
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Drinking W or ries
bers Inner Cham
O
of the Blue
Mansion
h yes, most things are high about Singapore. Its glittering high rises, hi-tech amusement parks, high-end shopping streets, the 541feet high Singapore Flyer, the dizzyingly high Marina Bay Hotel’s swimming pool and the highest indoor waterfall in the world at Gardens by the Bay. Highly artificial though it might be, Singapore still has character, unlike the green desert of Dubai. Night Safari, River Safari, Clark Quay, Little India and not so little malls, the round-the-clock open Mustafa choking on electronics and the Sentosa Island with its nightly star attraction—a surreal light, sound and water show on the sea. There is something to do for every age group, the
W hite Tig
er at the
Singapore
Zoo
island country attracts tourists in drones. Having been there and having done all that a couple of times, the Lion City does not dazzle me anymore. But this time the highlight of the trip was a cruise from Singapore to Penang Island and back. Before that, however, Universal Studios beckoned. If you have a family group 29-people-strong and you do all the rides together, Universal can be universally fun. From being a part of the Transformers’ mission to save the world to being inside a boathouse in a stormy New York City to being tossed like a tropical salad in a roller coaster, the theme park has the makings to give you either a hell of a good time or a panic attack.
View from the SIngpore Flyer
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Travel what to know Permits: Indian passport holders can apply for visa that allows stay for maximum period of 30 days with validity of 2 years
Currency: Singapore Dollar (SGD), 1SGD = `46.49 Best time to visit: During spring, February to April
Keep an eye out on: Little India Must try: Singapore’s famous laksa, Bak Kut Teh
The Kingdom of Singhapura is an astounding jungle of skyscrapers, an immersive cocktail of old world charm and modern-day cruises Colourful Cycle Rickshaws in Georgetown
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After the usual sightseeing (posing before the Universal Globe, the Merlion, the Marina Bay Hotel etc. posted by 50 other Facebook friends), we boarded the giant Ovation of the Seas, a cruise liner of the Royal Caribbean that falls in the Quantum Class—the second largest class of passenger ships. So what do you feel like today? Wind surfing? Pixels show with robotic screens? Rock climbing? A country pub? Live music? Gambling in a casino? Robots making you a cocktail? Japanese food? Mediterranean? A Las Vegas style show? Bumper cars? Jacuzzi? Football? Viewing the ship 300ft up in a capsule? Basketball? A massage in the spa? Nah… none of these. What if you just feel like flying in air? No big deal, you can do that too. And though you’re made to dress up for dinner daily, don’t expect a Titanic style grand ball. However, one needs to book some activities months in advance. Else, you can miss out on much, especially if its a short 4-night cruise. The customer complaints redressal person would flash a dazzling smile and tell you they can’t do anything about you not being able to do any of the activities for which you took the cruise in the first place. So you have to pretty much be content with shopping, swimming and getting dressed in your fineries for dinner. The best part of the cruise for me was when I stepped out of it. The ship docked in George Town, the capital of the exotic Penang Island and a UNESCO World Heritage Site. You need more than a day to explore this heady cocktail of a city, an eclectic mix of the time-worn old world charm
Dragon Art at Gardens by The Bay
and the outlandish new. Imagine a city punctuated with crumbling yet colourful Chinese shop houses, pedalling trishaws, mouth watering hawker stalls, unexpected museums (like the Upside Down one), Buddhist temples and Chinese mansions. Above all, George Town epitomises street art. The 3D artworks decorate the streets with their quirky humour and offbeat imagination. You can push the cycle with the two happy kids on it or crouch behind a boy crouching on an old motorbike. Or you can just stand and admire the art, without making a motley fool of yourself. Not to be missed in George Town is the Blue Mansion. Built by the iconic Cheong Fatt Tze at the end of the 19th century, the mansion rose from its ashes in the 1990s when a couple of Penang conservationists purchased it from Tze’s descendants. Now a heritage hotel, the lavish mansion stands proud on its indigo blue walls flaunting its granite floored courtyards, louvred windows, art nouveau stained glass and Feng Shui design. You can take a guided tour of the place. We were lucky to get the tour from the owner of the Blue Mansion herself. We saw the grandeur, got insights into the Chinese architecture and history and even saw some possessions of the family, including those of the most favourite seventh wife, while some men in the group sighed about the good old days. And then we were back to the Kingdom of Singhapura, with its skyscrapers and friendly taxi drivers. Oh yes, you need to visit Hong Kong to see that most of the cabbies and others don’t want to flex their face muscles to smile. The last stop was pure
Outer Courtyard of The Blu
e Mansion
The Marina Bay Sands Hotel
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Travel Street Art in Georgetown
Kids on Bicycle Street Art
Street Ar t
delight for me - the Singapore Zoo! The real, after the artificial. Twenty-six hectares of a lush forest where white tigers roar, lemurs check you out, iguanas give you a withering look and orangutangs have their breakfast nonchalantly as you sit goggling at them. On the way back to the airport our tour guide gushed about Singapore being so “green.” Yes it is, green. But where were the other colours…of birds? It is uncanny that in a city with so many trees, there are hardly any birds. The guide said, “Oh, they are resting on the treetops.” What she didn’t tell was the Singapore government’s policy to shoot pest birds, who dirty their city, in thousands - common mynas, crows, feral pigeons, white-vented myna, purplebacked starlings and Philippine glossy starling. The official culling program started in 1973 and today the Singapore’s National Environment Agency employs a security agency as well as volunteers from Singapore Gun Club to shoot the birds. To quote an article in New York Times (Nov 8, 2006), “Crows are everything that Singapore is not — raucous, indisciplined…and disorderly — and they are not welcome here.” That sounds more like tourists from our part of the world. If only the birds could sing their way into the island with Singapore Dollars too. Arefa Tehsin Columnist, Author of fiction and non-fictions books & Ex-Hon. Wildlife Warden, Udaipur
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Book Review
Bad Choices:
How Algorithms Can Help You Think Smarter and Live Happier
D
on’t go by the book’s cover, the algorithmic concepts discussed are not as simple as they appear to be. The book tries to make everyday decision-making simple, convenient and effective. But, a few chapters later you realise that the book is not as simple for every reader. A big put off is the graphs in the book, which are good for anyone with an analytical mindset, but completely confusing for the non analytical sorts. While Almossawi has tried to explain the graphs with footnotes but at several places the explanation does not come across effectively. The 12 topics covered seem usual and routine and the reader may apply the Almossawi approach for it to make sense. Some are done very well
in the context of trying to explain different subjects such as getting the job done which has some quirky and easy to understand illustrations making the ideas very effective. This book will definitely help computer science students or those with an analytical bent of mind to adapt, as well as leave ideas for them to explore their imagination. What you will learn from this book is that you can solve complex problems by implementing easy to follow algorithms. This book leaves you with thoughts to work towards simplifying your life. Where it tends to fail is in making things really simple for people without an analytical mind or for a younger school going audience who despise learning computer sciences.
Publisher
Author
Ali Almossawi
Hachette India Price
` 399
What I did not learn in B-School Insight for new managers
T Publisher
Author
Rajeev Agarwal
Penguin India Price
` 299
his book has all the necessary ingredients to make for a good read for those aspiring for an MBA and those who are trying to look for quick fix solutions to what MBAs do. The IIT Kharagpur alumni network is well known and spread from Sydney to Silicon Valley. The founding editor Intelligent Investor (now Outlook Money) magazine was an alumnus and has shared the tales of Professor G S Sanyal on numerous occasions and how he learnt several management and life lessons from him, before heading to IIM Calcutta. The author has used his experiences as the CEO of MAQ Software. The book is narrated in a conversational style making it a very natty read even on matters which
otherwise sound complicated or at least difficult to practise. A plethora of industry stalwarts and top honchos have shared their views in the book, which goes to show how the old boys’ networks work. A fast and breezy read, you will enjoy the many examples, rules and chapter summaries that are provided to make it a handy reference for anyone keen to practise management lessons in their careers and their lives. The chapter on notes on business of life is a must read, and once you have read this, you will appreciate the rest of the book and the manner in which Agarwal has organised and written this book. For those who have not read his earlier book: What I Did Not Learn at IIT, may pick up that book after reading this one.
www.outlookmoney.com October 2017 Outlook Money
81
Smart money
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savIngs
1985
2016
`15
`250
`8
`70
`50,000
`10 Lakh
Film Ticket
Living too Long
Dying too Soon
Petrol
College Admission
Insurance
68.35 Years
Average life expectancy in India 82
outlook money october 2017 www.outlookmoney.com
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