How NRIs, PIOs can buy land in India

The law has come a long way since the days of the Fera (Foreign Exchange Regulation Act) regime, when buying or selling of immovable property was governed by the citizenship of a person. Under Fema (Foreign Exchange Management Act), the thrust is on residential status. But before we go into the details of the law, let's get the definitions straight. An NRI is an Indian citizen residing outside India. A citizen of another country is a PIO (person of Indian origin) if he has held an Indian passport at any time or if he, his father or his grandfather has been a citizen of India. A citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan is not regarded as a PIO.
With the emphasis on residential status, a foreign citizen who is a resident of India can buy and sell properties without prior approval from the Reserve Bank of India, subject to a general ban on citizens of the eight countries mentioned above and restrictions on buying certain properties.
A foreign citizen of non-Indian origin cannot acquire agriculture land/farm house/plantation property in India without the prior approval of the RBI, whereas a foreign citizen of Indian origin can acquire such properties without the prior approval of the RBI but only by way of inheritance. Leasing of immovable property for a period of five years or less is freely permitted.
The RBI does not determine the residential status of a person for the purpose of acquisition of immovable property in India. Under Fema regulations, residential status is determined by operation of law. The onus is on the individual to prove his residential status, if questioned by any other authority. Read more at this link

Tags: NRI, PIOs, buy land, FERA, property, residential status, foreign citizen, buy property, sell property, RBI

How to be RICH in old age

What does retirement mean to you? Is it anxiety or happiness? Or both? Retirement actually is a transition. Someone has said, "I'm retired -- goodbye tension, hello pension!"
Retirement is transition from work to no work, from Mr. Mehta, General Manager- SBI to just Mr. Mehta; it is a transition from breadwinner to bread dependent. All kinds of transitions have anxiety; be it the first day at a new job, a bride going to her in-laws place or first day at college, there is always a fear of the unknown. However, it has been usually observed that if financial aspects of transition are taken care off then transition becomes less stressful. The biggest anxiety about retirement is, "Will I outlive money or will money outlive me?"
In the first phase of retirement we will discuss how to accumulate wealth for retirement. This is called accumulation phase. Second phase is technically called distribution phase. In this phase, an individual distributes his/her 'accumulated' wealth to one's own self after retirement.
Golden rule for retirement accumulation is "start early." The day you earn your first pay, set aside funds for investment. Remember 20s and 30s are your golden savings years. In this period, family responsibilities are least. In all probability you will be staying with parents and hence either there is no household expense or you are contributing a very small portion.
Since you are single there are no children responsibilities too. Also your father (parents) could be still working and hence there is no financial commitment towards parents as yet.
From late 30s onwards, there will be home EMI, school fees etc to pay. Though your income would have gone up from what it was when you were in 20s, your expenses would have also kept pace with rising income.
Another advantage of starting early is that you can consider high-risk investments such as equities. Equity markets are place to earn higher returns 'slowly.' This is unlike common belief where people feel equities are instruments to earn higher returns very 'fast.'
As has been written several times, investing in equities is like growing a mango tree. You need to sow seeds, water it and take regular care. It will take years before it starts giving "mangoes." Lastly there is the benefit of compounding.
Once you are in 40s, your family responsibilities are highest. Home EMI, car EMI, school fees and even parental responsibilities would start showing up. In 40s you would be in middle to senior management. Chances are your spouse is back to work, after children have grown up to take care of their routine.
Use second income for retirement. Park funds in mid-cap and large cap mutual funds. Fifties will be the toughest for retirement planning. You will have to balance between saving/investing for retirement and children's higher education, their marriage and even ailing parents.
Restrict investment into large cap funds and also consider index funds. Also 5-6 years prior to retirement, start-allocating funds to debt based mutual funds. Depending on the interest rate scenario, consider floating rate funds and/or bond/income funds. Read more

Tags: retirement, SBI, money, wealth, start earlly, home loan, EMI, income, expenses, equity markets, higher returns, SIP, car EMI

10 things you shouldn't buy new

Few people really enjoy wasting their hard-earned money, but many of us do it every day by buying new. We could do our pocketbooks, and the environment, a big favor by opting to be the second owner of some of the stuff we buy.
Obviously, some things are best purchased new; lingerie pops to mind (see my companion piece, "10 things you should never buy used" for more). But lots of other stuff depreciates quickly while still having plenty of useable life left. 10 things you shouldn't buy new tells the 10 items where the cost vs. use equation strongly tilts toward buying used.

Tags: earned money, buy, money, cost, stuff

High EMIs? Tips to tackle them

Your dream home and flashy set of wheels just got a bit more expensive with the Reserve Bank of India announcing yet another hike in interest rates. Now, after its second revision since June, the reverse repo stands at 6 per cent and the repo at 7 per cent. As expected, soon after this, several banks announced higher rates of interest on home and auto loans. HDFC, SBI, PNB, Oriental Bank of Commerce, LIC Housing Finance and Bank of Baroda have hiked their home loan rates in the range of 0.25-1 percentage points.
The repo and reverse repo rates set the direction for other lending rates. A rise in the reverse repo rate raises the cost of borrowing funds of banks, leading to a rise in lending as well deposit rates. For protecting its net margin, a bank typically factors in a rise in the reverse repo rate by increasing its lending rates on all retail loans. Ultimately, it is the customer who has to pay a higher price.
There are plenty of customers like Preeti Harkare in Mumbai and other cities who want to buy their dream home but do not know what to do with constantly rising interest rates. We look at some options. How to tackle rising home loan rates? Bankers are divided over which is a better product for home loans - a floating rate or a 2-in-1 loan. The latter is a combination of fixed and floating and some see it as an ideal product to hedge in a rising/falling interest rate regime.

Fixed vs floating
On the other hand, many banks and financial institutions are of the view that despite sustained hardening of rates, floating rates would still be a safe bet. Analysts aver that floating rate loans are favoured because fixed rate loans are usually more expensive than floating rate loans (approximately 1.5 per cent higher now, 0.5-1 per cent earlier).
Even today, despite all the rate hikes, 85 per cent of the new loans are still booked at floating rates. Bankers say that if the outstanding term is below ten years, floating rate would be a better option as you would benefit from the lower rate for the first few months.

Should you switch to fixed rate loan?
Converting to a fixed rate loan now may not be a prudent decision, say bankers. If you borrowed at floating rates and want to convert to fixed, you will have to pay 1-2 per cent conversion charges on the outstanding principal amount. Let's assume you took a loan of Rs 15 lakh at 8 per cent for a 20-year tenure and have paid a principal of Rs 100,000. If you convert the balance to fixed rate of interest at 10.5 per cent, you will have to pay around Rs 21,000 as conversion charge. This, in turn, would increase your EMI or extend the tenure of the loan.
If you still want to give fixed rate loan a shot, ensure it is a true fixed-rate product and not a fixed rate linked to money market conditions. True fixed products have a fixed rate throughout the tenure of the loan unlike the latter in which the banks have the liberty to tinker with the rates. The difference is that a true fixed product, offered by a few players, charges 1.5 per cent higher than the other.

How to Choose a Floater
Floating rate loans are more attractive because they cost one or two percentage points less than a fixed rate. But do choose a floater carefully. Have you ever asked the question: what does it float with respect to?
The bank benchmark, the home loan agent will quickly reply. But who fixes the bank's benchmark or the Prime Lending Rate. Did you think it was the Reserve Bank of India? No, it is not the RBI but banks themselves who fix it. So you have a loan on a rate that can move up and down only if the bank moves its PLR up or down. Banks move the PLR up, but not many moved it down when the rates fell three years back. They just introduced new PLRs, yours remained where it was.
Read more at this post

Tags: EMI, home loan, RBI, repo, high rates, interest rates, auto loans, HDFC, ICICI, SBI, PNB, oriental bank of commerce, LIC housing finance, bank of baroda, fixed rate, floating rate, UTI bank, down payment, tax benefits, floater

How much you should tip and how often

According to one report, restaurant goers in the US leave $16 billion ($26 billion according to another) by way of tips annually, so if all services where gratuity is expected were to be added up, the figure could be much bigger.
No wonder the service industry there has a fair amount of legislation in place to protect the rights of those for whom the tip is intended.
Restaurant owners cannot pocket any of the tip left for the waiter, and the unlucky boss of a Massachusetts restaurant who did could end up paying $2.5 million in damages. On the popular blog www.waiterrant.com, the blogger warns that this is illegal in most US states.
The main problem, though, is when an establishment includes a service charge as part of the bill. The service charge is a fixed tip and at (sometimes) 10 or (usually) 15 per cent, should take care of the gratuity you're supposed to leave. So, unless you've received exceptional service, you are not obliged to tip extra.
The other thing to note is that if you're dining in a large group, it's sometimes better to calculate the tip on the basis of the number of staff serving you rather than as a percentage of the bill. Say a party of 12 has a booking, and requires four waiters for service. At the end of the party, instead of calculating a percentage of the bill as gratuity, it's better to leave behind a generous tip for each waiter. Unfair? Yeah, well, you've got more money than they ever will.
Are you obliged to pay when the service has been dismal? Apparently, yes. After all, when the service charge is inbuilt into the bill, you have no choice. A tip should be treated similarly. If the service is bad, why should the kitchen staff be penalised for their colleagues, or vice versa. But you can show your resentment by leaving a sparser tip than usual. These days it isn't about tipping just waiters and bellboys. Tips are expected for almost all services - from bartenders to parking valets, from the barber to the spa attendant, and from luxury cabs to the boy who delivers your grocery. Read more on How much you should tip and how often

Tags: restaurants, tips, service, legislation, tip for waiter, blogger, hotels, tipping, valet, delhi, luxury cabs, grocery, parking valets, spa