Friday, July 29, 2011

Mercedes grows younger!

Mercedes Benz India is the one of the first entrants in the luxury car segment in India and has enjoyed dominance over the years (more than 15 years to be precise!). The growing Indian market obviously bought competition and Merc was challenged its leadership position by BMW. Even Audi has emerged as one of the fastest growing brand in this segment.

This has literally taken Merc to re-think its positioning and the equity it enjoys in the market. BMW's growth was primarily fueled by its craze in the youth and the feel of a sportiness amongst its models. And as the average age of the buyer in this segment decreased, Merc lost in the race. Most of the Merc buyers were in the 40-50 age group whereas BMW/Audi were the choice of the younger lot.

This took Merc on its heels and thus came Mr. Peter Honegg, who has recently taken in charge as the MD & CEO of Mercedes Benz India. The most crucial part of his induction was to imbibe Merc as an young, lively and a sporty brand. One of the foremost actions were:

  • *Bombarding a TVC of Legendary F1 Icon Schumacher driving the uber-sporty SLS AMG. The idea was instill and associate a RACING image for the brand. This would attract the younger aspirants in the luxury segment. 
  • *Mercedes also tried to leverage the status of being the oldest automobile brand in the world. This was also reflected in their advertisements where they projected to grow with the growing desires of the customers. It not only reflected their pursuit of perfection in every car that they manufactured but also connecting each car with their drivers. The urge to re-invent and the technical expertise was depicted by the amount of their patents worldwide (almost 80 percent of Auto patents is owned by Mercedes Benz!)     
  • *It is also planning to sell the tickets of the much-anticipated F1 serie which is to be organized at the Budh International Racing Circuit of Greater Noida. The tickets would be made available through the company's dealerships.
  • *Mercedes Benz India's Facebook fanpage has already garnered more than 41000 fans and it eminently projects MBI as a fashionable, sporty and an entertaining brand. 
  • *MBI has also inaugurated a star lounge in Delhi International Airport with SLS AMG on display.  

The company is now sure of gaining popularity in the younger buyers and also revive its position as the leading luxury manufacturer. The intention could also be seen in its fresh design of its models. 

Friday, July 22, 2011

10 Things To Do Before You Retire

Don’t put off today what you can’t afford to do tomorrow. In spite of the world wide pension crisis and a growing acceptance that we must plan and save for our retirement, the harsh reality is we are actually not saving enough. Research reports reveal that only 15% of the individuals are saving sufficiently for their retired life. Here are a few tips on things to do before you retire so that your retired life is more comfortable and enjoyable.
Get Rid of All Your Debts
If you are taking a housing loan, personal loan, car loan or any other loan make sure that you will be repaying them on or before your retirement. You need to choose the term of the loan in accordance with your retirement age. You can enjoy your retired life when you have 100% financial freedom, not when you have to repay your loans.

Protect Your Emergency fund
Emergency expenses can happen any time. But the possibility goes up during the old age. So we need to enhance the emergency reserve year on year based on the inflation and change in your expense levels. Emergency fund will give you a sense of security and also you need not touch your other investments during emergency where you need to pay pre-closure penalty. Also don’t forget to refill the emergency fund once you met an expense out of emergency fund.

Establish a Retirement Budget 
You need to visualize your retired life well in advance and need to create a budget for your retirement. That is you will not be going to office. So the expenses on transport and clothes may come down. Also you will have more time to spend. You may need to spend more on leisure travel and health care.

Examine Your Cash Flow 
Take a close look at your cash inflow as well as outflow. Is there going to be any income after retirement? Like rent, royalty…. Would there be any unwanted outflow during retired life? Like paying life insurance, or SIP. At times during your beginning of the career , you could have taken a policy where you need to pay premium up to the age of 60. But now you may plan to retire at 55 itself. So you need to realign your existing policy and other investments in sync with your retirement age.

Grow Your Retirement Corpus
Find out how much corpus you need to have when you retire so that you will be having complete financial freedom. A professional financial planner will of great assistance to you in this regard.

Develop a withdrawal strategy 
How are you planning to withdraw your cash outflow during retirement from the retirement corpus? Monthly, quarterly, half yearly or annually? Through Sytematic Withdrawal plan in mutual funds or by way of dividend or interest. All these will have a great impact on the corpus you need to accumulate. So you need to decide in advance.

Minimize taxes 
Your retirement corpus and retirement income need to be tax efficient. You need to pay taxes as and when the fixed deposits matures irrespective of that you withdraw interest or reinvest under a cumulative option. But you need to pay interest only when you withdraw from the mutual funds. Careful selection of investment vehicle can reduce your tax during the retired life.

Get Sufficient Mediclaim coverage 
The moment you retire, your employer will stop covering you under the group mediclaim. So you need to plan for your individual medical cover well in advance. At old age the medical expenses are inevitable. If you have not planned it properly the all your retirement plan will become a mess.

Consider Inflation adjusted annuities
The monthly income you need when you retire is not going to be the same even after 5 years of your retirement. Inflation will increase your retirement expenses year after year. So year after year your retirement income needs to go up.

Oversee estate planning
How your fixed assets and financial assets need to be distributed to your legal heirs? Create a WILL. You can avoid creating relationship problems to your next generation because of your left out wealth.

(The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at 

Monday, July 18, 2011

ALL you wanted to know about Company Deposits

Company Deposits are simply nothing but fixed deposits in companies that earn a fixed rate of return over a period of time. Company deposits are really down-to-earth products. The influential advantage of the company deposits is its plain simplicity. Company deposit is understood even by the most novices among the investors community.
Have you ever wondered the logic behind why pure vanilla flavored ice cream sells more than any other flavor? Similar logic is just as true when it comes to the company deposits vis-a-vis many other modern investment options.

With the meltdown of NBFCs almost a decade ago, company deposit market had a major slow down, but volumes still remain significant and there are loyal investors who prefer company deposits to other investment products.

Advantages of Company deposits: 
v  Assured return.
v  Higher interest when compared to bank deposits.
v  Low risk when compared to stock market investments.
v  Service at your doorstep.
v  Lock in period in most of the cases is 6 months only.
v  If the interest income is less than Rs.5000 in one financial year, then NO TDS.

Risk in Company Deposits:
Company deposits are basically unsecured. That is if the company defaults in repaying the interest or principal, the investor will not be able to recover his capital. As a company deposit holder, you don’t have any lien on any asset of the company, in case it goes into financial difficulties. This makes the company deposits a risky investment option.

Identifying Risky Company Deposits:
One of the important tasks in investment planning in company deposits is to identify the risky company deposits and avoiding them. If you find any of the below symptoms in any of the company deposit scheme, then it is better to avoid such company deposit schemes.

ü  Poor credit ratings like A or lesser ratings.
ü  Companies making losses.
ü  Companies that skip dividends.
ü  Companies that offer higher than 3% to 4% of bank deposit rates.

Checklist for choosing right company deposits:
There are some good investment options in company deposits. Also there are some bad investment options. If you know how to select the right company deposit then company deposits can be really an interesting investment option in your portfolio.

Ø  You need to ignore all the unrated companies and need to choose companies with the rating of AA or higher.
Ø  Choose the company with better reputation within a given rating grade. If you read business papers and magazines periodically, it is not difficult for you to check the credentials of the company.
Ø  Take the help of the qualified financial advisor in choosing the right company deposit. But mind you, there are very few reputed and qualified financial advisors.
Ø  Company deposits need to be spread over a large number of companies in different industries. By this, you can diversify your risk. Irrespective of the rating and reputation of the company, don’t invest all your investments in a single company deposit scheme.
Ø  You need to check on the servicing level and standard of the company. You need to ignore companies that don’t care or care little about issues like sending interest warrants and principal cheques.
Ø  After investing in a company deposit, you need to constantly track the company’s credit rating. The times are uncertain and downgrades are rampant.
Ø  Check the company’s balance sheet for its asset back up, profitability, reserves, existing borrowings and loans.

Every investment has its distinct features and benefits. Likewise each investor has specific risk taking ability and personal needs. Professional investment planning needs matching of the product benefits and features with the financial objectives of the investors. So one need to weigh the various alternative investment options like bank deposits, debt funds vis-a-vis company deposits before making a choice.

(The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at

Sunday, July 17, 2011

Ishq Mera Dard Mera

Story & Learning of the online rage - Rohan Rathore (Emptiness fame)
What are the ingredients to publicize a song of an unknown artist in a highly cluttered media-space which has little recognition for new talent? Either you got to be in one of the Reality TV Shows which exhibits more of masala/drama than reality or rather you gotta have a renowned industry godfather. 

The marketeers of the above embedded song had a different plan - to exploit the power of Social Media and add an enigmatic story behind it. The story along with the song was publicized at Youtube and Facebook. It was as follows - 
This song will be great song in ahead days...... 
Rohan Rathore was an IIT Guwahati student, who was suffering from Cancer. He was in love with a girl named Supriya more than anything in his life. But, Supriya refused him only because he was suffering from Cancer. Then, Rohan sung this song for his love, Supriya. But, the bad part is that, after 15 days of recording this awesome song, he died.
"May Rohan's soul Rest In Peace!"  

The promoters made sure to include the hoopla of IIT Guwahati, a tragic Love Story and Cancer to acquire sufficient attention. The song garnered over a million views within the first month of its upload on Youtube and has more than a Lakh 'likes' on Facebook till date. The song immediately became a Viral and was one of the highest shared/liked video of 2010! Although theories have proved the story to be a fake, we'll have to admit that the song reached the MASSES and was instantly liked by it. It aroused and shared the feeling of the protagonist amongst its listeners. 

What clicked in the publicity??? It was the "CONNECT" it generated among the listeners and also the "SYMPATHY" factor hyped it to its current fame. Although I do not promote the means through which the song was publicized, I feel there is a lot to learn from the way it was marketed through Social Media. 

Harnessing Social Media can be only possible if you can ENGAGE the participants with your CONTENT!

for more research on the story you can refer: 

Thursday, July 14, 2011

From 'Fluidic' to 'Kinetic'

Ford India today officially launched their Fiesta Ti-VCT and TDCi sedans in India. The company has priced the car at Rs 8.23 lakh for the base variant (petrol) and Rs 9.27 lakh for the base variant (diesel)The All-New Ford Fiesta is all set to engage and elevate customers with its eye-catching KINETIC design, first-in-segment features and intuitive in-cabin technology for communication on the move.

The C-segment would currently be the most exciting segment in the Indian Auto Industry. Customers are accepting the new offerings with open hands. Recently VW Vento overthrew Honda City as the best selling premium sedan, within months the leadership position was overhauled by the new fluidic Hyundai Verna. This symbolizes the openness & acceptance of the Indian consumer in terms of design. The new offering by Ford promises uniqueness in design, sophistication in technology and class-leading fuel efficiency. 

Ford always had the DNA of addictive driving and have been touted to be the best 'Driver' cars. The same was appreciated in Ford's Figo and has turned around Ford India's fortune within the last one year. Figo evolved as a strong competitor in the hatchback market due to its generous in-car space, excellent drivability and coupled with an unbelievable price. Ford expects to crack the same with the all new Fiesta.   

Ford has also started a new trend of personalization with Fiesta. I see an excellent opportunity of increasing sales in Accessories. The simple but apt additions of Leather Mounted Steering Wheel, Leather Gear Knob, Sporty Pedals, Side Graphics, Illuminated Scuff Plates, etc will not only add to the aesthetics of the car but also to the overall business per car.
One of the tabloids had mentioned that "Ford has taken the game to a whole new level" pointing to the New Fiesta. And I second the point.   

Wednesday, July 13, 2011

Mental Accounting

Get Richer by avoiding this Money Mistake

Mental Accounting is one such money mistake even smart people are committing. Understanding this mistake and avoiding this could make us richer.

Behavioral Finance experts say that mental accounting works this way: Let us say you have bought a Rs.200 ticket to a movie. When you show up at the entrance of the theatre and realize you have lost your ticket, do you buy another ticket?

If you are like most people, you would probably think twice. You may still drop down the money, but you will now feel that you paid Rs.400 for a Rs.200 movie.

But let's construct the scenario differently. Let’s say you hadn’t bought the ticket yet, and you show up at the entrance to buy your ticket. Unfortunately, you realized you’ve lost Rs200 in cash since you walked from the parking place. But fortunately, you still have enough in your wallet to cover the cost of the ticket. Do you buy the ticket? Again, if you are like most people, you may feel upset about the lost money, but it probably won't affect your decision to buy the ticket. 

Behavioural Finance experts conducted similar experiments. They found that 46% of those who lost the ticket were willing to buy a replacement ticket. On the other side 88% of those who lost an equivalent amount of cash were willing to buy a ticket.

Both scenarios are a loss of Rs.200. However, in the second scenario you separate the loss of the Rs. 200 from the purchasing of the ticket. In the first you consider the cost of the movie as a total of Rs.400 and suffer at the high cost.

It is because of the psychological phenomenon known as mental accounting. One of the fundamental concepts in Economics says that wealth in general and money in particular, should be fungible. Fungibility, in a nutshell, means that Rs.100 in lottery winning, Rs.100 in salary and Rs.100 tax refund should have the same significance and value to you since each Rs.100 has the same purchasing power at the market. But do you treat them in a similar way?

Mental accounting has enormous consequences in your daily life. It affects how you spend money and how you save. It influences how you deal with losses and windfall gains.

How Does Mental Accounting Affect You?
1)  The source of the money affects how it is spent.
a)You tend to dine lavishly with the “gift meal vouchers” given by your company. But you will be dining consciously if you are paying out of your salary.
b)You are most likely to spend more with credit cards than with cash.
c)You may consider Tax refund as“free money”. In actual terms it is your own money. You will not spend tax refunds, birthday gift money or lottery winnings on essential things like utility bills, school fees, paying off your credit card debt. But you will be more than happy to spend the same money on discretionary items such as vacations or a trendy mobile phone. 

2)  Don’t be a victim of ‘Relative cost’. 
Assume you are going to a super market to buy a laptop. The price is Rs.40000. But you get to know that there is another branch of the supermarket, a ten minutes walk away, in which the same laptop is sold for Rs.39950. Will you walk down to the other branch?
Let us say instead of buying a laptop you have planned to buy a memory card. The price at the supermarket is Rs.100 and at the other branch is Rs.50. Where will you buy the card?

Most of us will make a trip to the other branch for the memory card but not for the laptop. Because we think that the Rs.50 saved on a Rs.100 item is better than the same amount saved on a Rs.40000 item.
But both the situation is same. You save Rs.50 by making 10 minutes walk to the other branch.
Remember that money is money. Rs.50 saved on Rs.40000 laptop is not less money than Rs. 50 saved on Rs.100 memory card.

How to face Mental Accounting and spend consciously?
  • You can use mental accounting to your advantage by spending money out of your salary. Immediately invest the “free money” like Tax refunds, gifted money or any other windfall gains.
  • Imagine that all income is earned income.
  • Use the free meal vouchers and other gift vouchers to buy essential items.
  • Pretend you don’t have a credit card. I am not telling you not to use credit cards. I am saying you should stop and think: would I buy this if I was using cash?
A Successful Practical Strategy:
You can have two bank accounts. One for the purpose of savings and the other one for spending.

Every month you need to set aside some amount for expenses as per your budget or previous experience. That amount you need to transfer to your spending account. Balance amount you need to keep it in savings account. 

You need to meet all your expenses including your credit card payment from the spending account. You should not spend from your savings account.

In between, if you receive any cash gifts or windfall gains, deposit them in your savings account. If you receive gift vouchers, then transfer the money equivalent of that voucher from your spending account to your saving account. That is your spending limit will not go up by just receiving the gift voucher. So that you will not use it lavishly and use it only on pre-planned things.

When it comes to money your mind unconsciously plays this trick of mental accounting. You have understood that today. So hereafter, you can avoid this mistake and you become richer day by day.

(The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at 

Sunday, July 10, 2011

The Off-road Adventure Series – Chikmagalur (09-07-2011)

“Are you ready to get lost???” were the first words muttered by Bijoy Kumar, the head of Mahindra’s Adventure Initiatives while briefing the participants of the legendary Great Escape which is known to be the big daddy of off road adventures. The event took off from The Golf Club with the intent of capturing the toughest terrains with the wackiest routes. The plan was to sail away through the muddiest paths and seek the 4x4 expertise. But, the monsoon was on the opposite side. This year the rain god’s were annoyed and it hadn't showered since a week! Hence, most of the journey was dry except some portions where we could find some slimy paths to test.

The Chikmagalur event received an overwhelming response from offroading enthusiasts, leaving everyone asking for more. This edition of the Mahindra Great Escape was conducted in association with JK Tyres, Bosch and Servo Lubricants (Indian Oil). The rally was flagged off at 10:00 am from Chikmagalur Golf Club, Chikmagalur. Iconic Mahindra SUVs such as the Scorpio, Thar, Bolero, Getaway, Legend, Major and Classic negotiated an arduous route of over 70 km. But the centers of attraction were the Thar’s which had participated in humongous numbers

While there were many winching points in the whole trail, it was seldom utilized except in one or two cases. The convoy had to pass through the serenest coffee estates, cover the most beautiful lakes and the narrowest paths of Chikmagalur. . It had over 75 vehicles from the Mahindra stable maneuvering the challenging route. The 70 km trail took almost 4-5 hrs to cover –mostly due to regular stops at frequent intervals. The lunch and refreshments were later arranged at the Golf Club.

The USP of the event were the 4WD vehicles of the participants. It was also a forum to just display the enigma and pride of owning one. These beauties were majorly MM540’s & CL series (modified). It also stood as an excellent platform to promote the new baby – THAR. It stormed the event with amazing attendance.  

Through the years, the Great Escape has acquired a reputation as one of India’s premier off-roading events with each edition seeing eager participation from die-hard Mahindra fans and customers alike. From the hills of Coorg and the tea estates of Munnar to the undulating sand dunes of Mandawa in Rajasthan, the Great Escape has blazed a unique trail across the length and breadth of India. This year the number of events is scheduled to double to 20 from 10 as of last year.  It has already completed 2 events – one at Shahpur and the other at Chikmagalur. The rest are 19 are to be held all across India right from Goa to Kohima. One can further track its calendar at

First initiated in 1996, the Mahindra Great Escapes have evolved into spectacular weekend events. The routes are meticulously chosen to ensure excitement without compromising on safety. All through the route, there are rescue vehicles to help those in need. In addition, there are experts along the route who are ready to guide the drivers through difficult terrain that may require skilful driving.

The event ended with an adventurous note and also left the masses waiting for the upcoming Save the Yak expedition, New Year Escape and more…

Saturday, July 9, 2011

Eight Simple Ways to Plan your Taxes

You have got only a few more months to complete this financial year. Very soon you will get a call from your company to submit the proofs for tax saving investments. So why don’t you spend some time on organising your tax plan?

1) Proper Allocation of Annual compensation
Restructuring your salary with some additional components can reduce your tax liability. This restructuring doesn’t require any additional cash outflow. The following components can be efficiently used to reduce your income tax liability.

  • a> Transport allowance to the extend of Rs.800 is exempt
  • b> Medical expenses which are reimbursed by the employer are exempt to the tune of Rs.15000
  • c> Food coupons like sodexo or ticket restaurant are exempt from tax up to Rs.60000
  • d> Individuals who are all living in a rented accommodation can include House Rent Allowance ( HRA ) as a part of their salary
  • e> Leave Travel Allowance (LTA) can be part of your salary as this can be claimed twice in a block of 4 years.
2) Effective Utilization of Tax Exemption
As far as possible utilize the maximum exemptions available under section 80 C, 80 CCF and 80 D. The maximum exemption available under section 80 C is Rs. 100000.

Under this section Rs.100000 investment or contribution can be made in PPF, NSC, Life insurance premium, 5 year FD with banks and Post offices, Mutual Fund ELSS, Principal Repayment of housing loan, and the tuition fees paid for children’s education.

Under Section 80 CCF, you can invest up to Rs.20000 in infrastructure bonds.

Under Sec 80 D, the premium paid towards the mediclaim policies are exempt. The maximum limit of exemption is Rs.15000 and for senior citizens the limit is Rs.20000 and for covering senior citizen parents there is an additional exemption to the extend of Rs.15000.

3) Properly Structure your Housing Loan
The Principal repayment of a housing loan is eligible for a deduction up to Rs.100000. The interest paid on a housing loan is eligible for a deduction up to Rs.150000. If the housing loan is for a sizeable amount, then it is possible that the principal repayment and interest may exceed the specified tax exemption limit. To utilise the maximum tax benefit, an individual can consider going for a joint home loan with his/her spouse or parent or sibling. This will make sure that both the co-owners can claim tax deductions in the proportion of their holding in the loan. 

4) Tax Plan in Sync with Overall Financial Plan
You should not do your tax plan in isolation. You need to do it in sync with your overall financial plan. So a tax plan is not only to just save taxes and also it should assist you in achieving your other financial goals like children’s higher education, buying a home or retirement.

5) Avoid Last Minute Rush
In fact the right time to do the tax plan is the beginning of the financial year. If you postpone your tax planning even now and do it in the last minute, then you will not be able to choose the right investment. In the last minute rush, you will be forced to choose a scheme which gives the proof immediately. Is the investment sound and profitable? Is there any other better options? You will not be able to choose the best scheme and you may settle with a mediocre one.

6) Invest Some Quality Time
Before investing your money, you need to invest your time. You need to take some quality time to understand the various tax saving options and compare their benefits and limitations.

7) Check for Future Commitments
Some tax saving options like NSC or ELSS need only onetime investment. Some other tax saving options like PPF, Ulips need periodical investments year after year. You need to be careful in choosing a tax saving scheme where you need to commit for periodical future payments. You need to check on a few things like; do you need such a future commitment? Will you be able to meet the future commitments at ease? The law may change and you may not get any tax exemption for your future payments. Would you consider the scheme irrespective of tax benefit for the future payments?

8) Changed Your Job; Redo your Tax Plan
Did you switch your job in the middle of the financial year? Then you need to redo your tax plan with consolidating the income from both the companies. It is advisable to inform the new company about the income during the particular financial year from the old company. So that your new company will deduct the right amount of TDS. Otherwise you may need to pay extra tax at the end of the financial year.
Whenever you change your job, you need to have a sitting with your financial planner or tax advisor. So that the required changes in your tax plan can be done proactively.

With proper tax planning you can reduce your tax liability; save more; invest better and become wealthier.

(The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at

Wednesday, July 6, 2011

An unique pick-up truck with a double cabin - Genio DC

Have you ever imagined a pick-up truck with car like interiors and with features like Air-conditioner, 2 din music system on Indian roads? If yes, then the answer is Genio DC - the next generation pick up truck which promises to create a newer style conscious commercial market for itself. The days are over when small business owners would rely on their utility based, sluggish looking vehicle which are mostly driven by paid drivers. Genio DC will up the aspirational feel in the segment and give a world class product in utterly competitive price.  
Mahindra and Mahindra rolled out the two cabin pick up - 'Genio' on Wednesday, 6 June 2011. The earlier version of the commercial vehicle was a single cabin pick up which could accommodate the driver, a co-passenger and their cargo. The latest would have two passenger rows and a cargo space - double cabin pick up. Pick-up trucks such as these are hugely popular in Thailand and Europe. And judging by the growth in the retail and infrastructure industry here, we know this will be a ready market in India," Vivek Nayer, Senior VP, Marketing for the automotive division said. 
The other pick up on similar lines is Bolero double cabin but the company is sure that there would be no cannibalization. This despite there is only a difference of Rs 38,000 between the Genio and the Bolero double cabin pick up. The base variant of the new car is at priced at Rs 5.46 lakh while the higher variant which comes with more fittings is at Rs 5.95 lakh. " Although this will be an international class product compared to the Bolero there will be takers for both varieties," Nayer said.
Mahindra foresees a huge potential in the style & feature conscious commercial pick-up market. The company is all set to give birth to a new trend in the industry and is expecting to reap the first movers advantage. The current moves also displays the company's intent for expansion in the pick up segment and also maintain the dominant 75% market share they have in a segment that industry watchers say is being eyed by General Motors and Volkswagen.

Sunday, July 3, 2011

Real Estate Investments Made Simple

Gold and Real estate are very traditional investment avenues. Gold has evolved from its traditional investing and found its place in the modern sophisticated investment world via Gold ETFs. Similarly Real estate is also emerging as an investor friendly avenue with less hassle via PMS route or private equity route. Have you ever thought of investing in real estate will one day be as simple as investing in mutual funds? If no please read on….

Real Estate as an Investment:
Buying a dream house or flat to reside ourselves is basically not a real estate investment. Buying real estate with a view to generate income and capital appreciation is considered as Real Estate investments.  Real Estate investments can be further classified into residential, farm house, commercial, retail, leisure. Leisure is a relaxation place where one can spend their free time or vacation.
Depends upon his/her risk tolerance and time horizon one can invest in real estate at different risk levels. It can be at the time of converting a rural land to urban land, or at the time of building development stage or in already developed city area.

Real Estate and Risk:
Most often investors assume real estate prices will not fall down and they only go up year after year. It is not so.  During the mid 2009 some of the real estate investments were quoting below 30% to 40% from their 2007 prices. Real Estate investments are also prone for price fluctuations.

Real estate Vs Stock market:
Real Estate is a complex and complicated investment when compared to stock market.
Non-transparent: There is no transparency in the price. It is not easy for a buyer or seller of real estate to identify the last transacted price in the same locality. There is no price discovery mechanism.
Illiquid Asset: Selling a real estate is a time consuming process. It is not liquidable easily. There is no organized market for the buyers and sellers to meet.
Impact Cost: Stamp duty and registration charges are really very heavy when compared to the other investment products.
No Regulator: There is no regulator for the real estate participants and intermediaries. Anyone can become a builder. Technical qualification is not mandatory. Also anyone can become a real estate intermediary or advisor. There is no certification or training to be completed before practicing.  As there is no qualification requirement for participants as well as the intermediaries, it is very difficult to see best business practices.

Real Estate hassles:
The other hassles with reference to real estate investment are documentation, maintaining the asset without any encumbrances, and genuineness of the title deed.

There are some practical problems with diversification. Normally an investor invests in a real estate in his own locality. It is very rare to find someone in Chennai investing in the real estate properties located at Mumbai, Delhi or Kolkata.  Affordability also limits diversification. An investor may not be able to diversify his investments across various cities with Rs.25 lacs or 50 lacs.

It may not be possible for an individual investor to buy a land and develop a viable project in that land and sell it in the market. Managing the project development need some kind of expertise.  Even if an individual is able to do it, he will be doing it in his limited ways and means.

Is there a solution for this? Of late yes.
There are some collective investment vehicles. These investment vehicles will be promoted by an investment management company. The investment management companies collect money from investors. Being professionals, they will identify good projects and do joint venture with the project developers. They will be able to diversify across various cities as well as various types of real estate investments such as housing, commercial, hospitality and the like. These investment management companies charge a reasonable management fees.

At times they collect money via PMS route and at times via private equity route.  The minimum investment ranges from 10 lacs to 25 lacs. This amount needs to be invested over a period of 3 years. That is they will collect money from investors in 4 or 5 installments. After 3rd year whenever they exit from a project they will repay the principal employed in the project as well as the profit generated out of that project. End of 6th year or 7th year, the investment management company will exit from all the projects.

The advantages of this collective investment vehicle are
·      One can invest into real estate without any hassles. All the hassles will be managed by the professional investment management companies.
·      One can invest in various real estate projects at a time.
·      One can geographically diversify his investments across India.
·   One will be able to apportion his total investment into small sums in large projects like township development, Technology Park, industrial estate, health city…
·      Cost advantage because of economies of large scale operation

This is really an investor friendly investment vehicle. Apart from the regular stocks, mutual funds and fixed deposit investments investors can consider investing in these real estate products also. This will give better diversification to your overall portfolio. Also Investors need to be careful in choosing such investment options. Background of the investment management company and their transparency levels are more important. Investors can seek the advice of the professional financial planners before investing.

This investment vehicle is in its primitive form only. It still needs to go a long way. As of now there are only a very few companies in India which specializes in promoting collective real estate investment products. But in a few years time these kinds of products will be available from various investment management companies and in different varieties like our present mutual fund schemes.

(The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of
Holistic Investment Planners ( a firm that offers Financial Planning and Wealth Management. He can be reached at

Visit to discover Indian blogs DreamHost coupon code
we are in
all india