Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
Boardroom’s Communiqué
Last six years have been a kind of challenge for anybody who wants to invest his savings and make it
grow or make any capital expenditure commitment. Mortgage crisis of USA in 2007-2008, its
subsequent impact on world economy, policy and political situation in the country left people with
fewer options to invest money with safety and good growth possibility for social security. There are
primarily five type of investment options available for people; 1) Deposits in government tools
(Government bank deposits, PPF, Post Office etc.) 2) Equity Market 3) Debt Market 4) Gold and 5)
Real Estate. Our research says, only real estate has stood firm on the test of safety and growth of
investment beating other investment options as well as inflation and it gave 29% YOY growth against
21% of gold and 12% of Nifty.
At Ethical Consulting Pvt. Ltd.(www.ethicalwealth.in), we believe and act on only two things, strong
analytics and customer service. In this complex financial market, we try to relieve our customers
from the worry of scanning various numerical details of investment options to make the correct
investment decision. We break this complex data into all possible simpler points and hand hold them
in their journey of making the correct investment decision. For us, each client is different and their
needs are different. That’s why we don’t use cookie cutter approach.
We all four promoters have experience of financial and real estate market for more than 50 years in
combined and we are backed by twenty strong team based at Gurgaon, Delhi, Patna and Ranchi. As
we believe in making complex things simple, we have kept our business objective simple; we are
wealth managers in the field of real estate. You can trust us for your investment decisions, because
we have full faith in our capabilities and you must be aware of the adage, “have faith in yourself,
then only others will have faith in you”.
We wish and pray everything best for you !!! Invest smart, stay smart !!!
Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
Table of Contents
1. Directors Note: Pros and Cons of Real Estate Investment by Nitin Kumar, Founder-
Director Ethical Consulting Pvt. Ltd.
2. Guest Column: Why Real Estate Prices Are High in Bigger Cities: An Outsider’s View by
Mukul Bhartiya, Marketing Consultant with Digiage
3. Some Information: Leading Bank’s Home Loan Rates
4. Work With Us
5. Locate Us
Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
Mr. Nitin Kumar
Founder-Director, Ethical Consulting Pvt. Ltd.
Pros and Cons of Real Estate Investment
The beneficial points:
Property can be less volatile than stocks/shares or other investments You can earn rental income and benefit from capital growth (if your property increases in
value over time) If you take out a loan to purchase an investment property the interest on the loan is tax
deductible You are investing in something which is tangible i.e, you can see and touch
The pitfalls:
Rental income does not usually cover your EMI payments or other expenses so you may have to use your regular income to cover these costs
A jump in interest rates will affect your return and decrease your disposable income There may be periods of time where you don't have a tenant and will have to cover all costs
yourself You can't sell off a bedroom if you need to access some cash in a hurry If your property investment is your major investment then you may have little or no
diversification If the property market goes down so does your whole investment. There are many instances
where people have ended up owing more than their investment property was worth, this is known as negative equity.
There are very high entry and exit costs
Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
Buying an investment property
Where and what you buy will affect your return on investment.
Where to buy
Think twice about investing in property markets you are not familiar with, for example one recommended by a unscrupulous property developer. In the
Buy in a high-growth area where there is potential for capital gains. Read the newspapers regularly to pinpoint the up and coming suburbs
Look for properties that will appeal to tenants e.g. properties with a view or are close to shops, schools and transport
Research recent sale prices to give you an idea of what you can expect to pay for property in the same area
Find out about the vacancy rates in the neighbourhood. A high vacancy rate may indicate a less desirable area. This may make it harder for you to rent your property and may make it difficult to sell in the future.
Think about changes in the suburb that will affect future prices. Things like planned developments or population changes can affect the future value of a property. Don't assume that last year's boom will continue forever.
What to buy
Look for properties with features that will appeal to as many people as possible e.g. number of bathroom or car parks.
Look for a property that will attract more than one segment of the rental market such as singles, couples, young families or retirees
Low maintenance costs are important Units can be easier to maintain than houses, although you may need to pay maintenance
charges to the builder or maintenance agency.
Investment property advisers
Think twice before using the services of related groups of advisers such as property developers, Real Estate Consultants and Loan brokers who work together and recommend each other's services. Do you own research and work with your own trusted advisers.
Costs
Buying, selling and managing an investment property can be costly and will affect your return. When you buy a property, you will have to pay for lots of extras on top of the purchase price. Costs may include stamp duty, conveyance fees, legal charges, etc..
If you sell the property, you will have to pay agent's fees, advertising costs and legal fees. You may also have to pay capital gains tax.
Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
Borrowing to invest
Most people will borrow to invest in property (called 'gearing' or leveraging). Remember that the more you borrow, the more you stand to gain or lose and the more it will cost you in interest expenses. That's why you have to be very sure that your property will earn a positive return over time. You can engage your Real Estate Consultants to do all the calculations for you.
Managing an investment property
You have two options when it comes to managing your property: you can do it yourself, or engage a Consultants or Managers to do it for you.
If you manage the property, you can avoid paying management costs. The downside is that you will have to do everything, from showing the property to tenants to collecting rent and organising repairs. You also need to comply with all the regulations.
You can avoid this hassle by asking a Consultant or Manager to look after your house or unit. You will have to pay them management fees but these are tax deductible.
Insurance
While you don't need to pay for home contents insurance, you will need to organize building insurance. This covers you for full building replacement if, say, the house burns down.
If you are relying on part of your employment income to cover the interest cost and expenses, make sure you have adequate income protection insurance. Your ability to earn an income may be the most important asset you have.
Risks with overseas property investing
Investing in overseas property is more risky than investing in property in India or your place of origin. It is much more difficult to make sure the investment suits your needs if you don't have local knowledge and you can't regularly inspect the property.
Here are some points to consider if you're thinking about investing in property overseas:
Good tenants and good property managers are hard to find, especially when you're not present there.
Expensive renovations and repairs may be needed, especially if the property is in a location prone to violence and political instability. Buying property location which unseen is a big risk.
You must factor in other countries tax laws, local property taxes, insurance, management costs etc., There are lots of hidden costs that the promoter may not tell you about.
Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
Investing in property is a good way to grow your assets and live a peaceful life. As with other types of investments, it's important to do your research and seek professional advice if you're unsure about anything.
(Mr. Nitin Kumar is Company Secretary by qualification and has experience of fund management of
more than 12 years in the field of equity, commodity, debt and real estate. He can be contacted at
Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
Mukul Bhartiya
Marketing Consultant with Digiage(www.digiage.in)
Why Real Estate Prices in Bigger Cities Are High: An Outsider’s View
I always wondered why property rates are so high in cities, especially metro cities in India. I classify
every earning person’s expenditure into following main parts:
- Accommodation
- Food & Clothing
- Education
- Health; and
- Social Security ( Saving for immediate future and old age)
And rest of the thing comes after above five points. If earning period of an individual is 35 years
(from 25th year to 60th year), then he/she should not be spending more than 5-6 years of earning on
each of the above five mentioned points. Around 2-3 years of earning should be kept as buffer for
entertainment etc. But property rates in most of the cities consume at least 10-12 years income of a
person, which is double of what I think. This use to be a challenging question for me. I would like to
mention here is that above time periods have no scientific calculation backing and I am applying the
formula of average only. The figure may vary according to the income and earning potential of every
individual.
Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
These images were taken a month back in my village, and this is common reality. This is how many
young boys and girls in villages spend their time.
Recently I spent around ten days in my village and found better part of the answer of my question.
Since my early childhood (around 25 years back), this was the first time I spent so many days in the
village, otherwise, my stay there used to only for few hours and that also after couple of years. I
found following things, which are still missing in villages and forcing people to live in cramped spaces
in cities:
1) Basic sanitation facility: It has been very long since my childhood, almost a quarter of
century, but progress has been so little. More than two third of the population still uses
open field to attend their daily nature’s call. Hand pump in my mango orchard was source of
water for many agriculture workers working in that area. Since I am used to drink filtered
water in home and packaged water outside, water at my village tasted bit heavy. I was
informed that the water contains higher iron level and that’s why it used to take longer
amount of time to digest food. I am not a doctor, so, I won’t go into other details, but I
found most of the people complaining about stomach related health problems and I could
attribute it to high level of iron content in water.
2) Infrastructure: Though road infrastructure has improved considerably from the past, but
continuous maintenance is still a far-fetched dream. Despite the fact that parliament
election is drawing closer, roads connecting my village, which I used to be very proud of
couple of years back, are full of big potholes and I saw no sign of any repair work starting.
Electricity is another challenge, though it is available now. Fluctuation in electricity supply is
so high that it can damage any appliance and device. It has been ages since I had seen the
volatility of power supply in terms of voltage and time period. In my house, we used to see
Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
the voltage supply oscillating between 100 volt to 240 volt. I had carried my laptop and
tablets, assuming that I will be able to do my work from there itself. But this kind of voltage
fluctuation and erratic supply schedule kept devices in switched off stage all the time. Even I
had to switch off my smart phones some time to save the power and use it in emergency.
Telecommunication was another challenge. I had carried my 3G internet dongle with me and
just for once I tried to open my laptop and finish my work. Power supply was one major
problem, but this 3G internet connection really tested my patience and forced me close the
laptop finally.
3) Medical Facility: Though hospitals are in every block, but sans doctors, equipments and
medicines. One of my relative had to go through the pain of more than 60 high powered
injections for small blister on his leg by a quack and he is yet to recover. Had there been a
qualified medical practicener, then his problem could have been diagnosed and cured
properly. Medical facility is one of the major reasons behind travel of rural and small city
folks to bigger cities.
4) Migration: Impact of migration of local population to big cities is huge and it does not seem
to be a new phenomena. Now, at least two generation has spent their life outside the
village. Even in my case, my father left village after completing his 10th class education and
we kept moving with him till we were young. We also moved away from him to bigger cities
(read Delhi and Bangalore here), when we crossed our adolescence. This is the case of most
of the families and reverse migration seems impossible or distant dream now. Now people
go to villages to attend one or two festivals and take the return train back to their adopted
cities in a week’s time.
5) Employment: This point is connected with the previous one. Population on the hand is
problem, which creates distribution of scarce resources, but on the other hand, it creates
demand and so the need to be enterprising. Enterprise, whether individual or collective,
creates employment. But migration by first generation after independence to cities and next
generation to even bigger cities has also not done to smaller cities and these cities are still in
the phase of small trading hub fulfilling local requirements.
6) Cost in smaller cities have also gone up: Disproportionate to the facilities available there,
real estate rates have also gone up high in smaller cities. So, given a chance, anybody would
prefer to invest in property in bigger cities, unless and until he/she is suppose to never come
there in their life or their children’s life.
Now, villages and smaller cities cannot be revived with individual effort and the effort has to be
collective, that also backed by government intentions and effort in full strength. Till then, challenges
will remain where they are and people will keep flocking to bigger cities and real estate prices in
cities will remain high and normal consumer will have to keep paying.
(Mr. Mukul Bhartiya is an inbound marketing and multichannel sales consultant with Digiage
(www.digiage.in). He can be reached at [email protected] and
Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
Bank Home Loan Interest Rates
Bank Name Floating Interest
rate Per lac EMI Processing Fee Prepayment
Charges
State Bank Of India
10.30% Rs. 984 Up to 25 lacs
: 0.125% of loan amount minimum
Rs.1000/-
Nil
25-75 lacs
: Rs.3,250/-
75 & above : 5,000/-
ICICI Bank
10.40% Rs. 992 0.50% of loan
amount upto 1 crore
N.A
HDFC Ltd
10.40% Rs. 992 0.5% or maximum
10,000+service tax
(12.36%)
No prepayment
charges shall be
payable for partial or full
prepayments irrespective of
the source
HSBC Bank
10.75% - 11% Rs.1015 - Rs.1032
1% of the loan amount applied for,
subject to a
minimum of Rs 10000 plus service
tax. This fee is payable on
application and is not refundable
Nil
LIC Housing
Scheme I:10.10% (Fixed for 2
yrs)(for female applicants) or
10.35% (Fixed for 2 yrs)(for
male applicants)
Scheme I:Rs.972
(Fixed for 2 yrs)(for female
applicants) or Rs.988 (Fixed
for 2 yrs)(for male
applicants)
Up to 50 lacs : 10,000 +(Service
tax)
Nil
Scheme II: 11.25% (Fixed
for 10 yrs)
Scheme II: Rs.1049 (Fixed
for 10 yrs)
50 lacs & above : 15,000 +(service
tax)
Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
Bank Name
Floating Interest
rate Per lac EMI Processing Fee
Prepayment
Charges
Scheme III:
12.25% onwards
Scheme III:
Rs.1118 onwards
AXIS Bank
10.25% (Upto 25 Lacs), then
10.50%
Rs.982 (Upto 25 Lacs), then
Rs.998
0.5% of the loan amount
Nil
(Max. 10000/- + service tax for
Salaried)
IDBI
10.25% Rs. 982 Up to .50%of loan amount
If Balance Transfer then 2%
Otherwise Nil (Rs 2500 to be collected at login
and balance at the time of sanction )
PNB Housing Finance
10.75% - 11.50% (For
Salaried/SEP), 11.25% - 11.75%
(SENP)
Rs.1015 - Rs.1066 (For
Salaried/SEP), Rs.1049 -
Rs.1084 (SENP)
0.50% NIL
ING Vysya
10.75% - 11.25% Rs.1015 -
Rs.1049
0.5% of the loan
amount
NIL
Standard Chartered
10% (Upto 25Lacs), then
10.25% - 10.50%
Rs.965 (Upto 25Lacs), then
Rs.982 - Rs.998
Rs.5500/- + Service tax
NIL
Citibank
10.25% (Fixed
for 2yrs)
Rs.982 (Fixed
for 2yrs)
0.25% (For
Salaried)
NIL
0.5% (For Self Employed)
Deutsche Bank
10.50% Rs. 998 12000 + Service Tax
Nil
DHFL
11% Rs. 1,032 1% for Salaried & 1.5% for SENP
NIL
Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
Bank Name
Floating Interest
rate Per lac EMI Processing Fee
Prepayment
Charges
India Bulls
10.25% (Upto
25Lacs), then 11%
Rs.981 (Upto
25Lacs), then Rs.1032
Rs.7500 +
12.36%(Upto 30Lacs)
NIL
, else 0.5% of the loan amount
Federal Bank 10.50% Rs. 998 7,000 + Service
Tax
N.A
Bank of Maharastra
10.55% (Upto 25lacs), then
10.75%
Rs.1002 (Upto 25lacs), then
Rs.1015
0.50% (Max. Rs. 50,000/-)
Nil
Allahabad Bank
10.20% (Upto 25Lacs), then
10.45%
Rs.978 (Upto 25Lacs), then
Rs.995
upto 30 lacs: 0.60% of the
loan amount subject to max.
Rs.12000
NIL
30 lacs - 75 lac: 0.45% of the
loan amount subject to max.
Rs.24000
above 75 lacs -
300 lacs:0.35% of the loan amount
subject to max. Rs.60000
above 300
lacs: 0.25% of the loan amount
subject to max. Rs.70000
(Disclaimer: These interest rates are collected from various websites, namely www.deals4loan.com
and different bank websites. We request the users to reconfirm the rates with respective
organization regarding complete and more accurate details)
Work with us:
We are a fast growing organization. You may get the chance to work with us if you are self
motivated and have a knack of fund management in real estate. You can work with us as our
employee or channel partner; just drop your updated profile at [email protected].
Newsletter December 2013
Ethical Consulting Pvt.Ltd., A-24/21, DLF Phase-I, Gurgaon-122002, Haryana, www.ethicalwealth.in
Locate us:
Ethical Consulting Pvt. Ltd
A-24/21, DLF Phase-I, Gurgaon-122002
Website: www.ethicalwealth.in
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