The math does not add up. The real estate refugees from the builder excesses of the past are now stuck between a rock and a hard place. These are the people lucky enough to actually have a finished flat with possession and not a legal case with absconding builders. These are the people who bought the Delhi suburban dream thinking they were getting in on the ground floor to the next Gurgaon. These are the people who live in Delhi, on rent or in own homes, and bought for investment in the greater NCR region, particularly in Greater Noida. These are the people who don’t know if they should sell and take a loss on their investment or keep funding it and hope prices recover.
A typical story goes like this: you bought a 3-BHK flat with a fancy foreign sounding name with a pool, community center, Italian tiles and more bells and whistles for Rs 60 lakh. Took a loan of Rs 40 lakh that costs about Rs 35,000 a month in EMI. Rent where you live in Delhi is Rs 30,000 a month. Rent from your Noida flat is Rs 8,000 a month. Amount of loan left is Rs 30 lakh. Current market price of flat if you can find a buyer—Rs 50 lakh.
It always happens. An introduction to mutual funds results in a feeding frenzy. I’d introduced a childhood friend to mutual funds two years ago. At age 45, she had left money and its management too late, but once she on-boarded mutual funds, she really went all the way. And beyond. Two years later, I’m horrified to see her portfolio. From the three-scheme portfolio she had started out with two years ago, she now sits on some 10 mutual fund schemes without a thought on what problem they solved. From an FD Hugger, she turned into a Feeding Frenzy Funder. I find that investors I meet fall into some stereotypes. Here are eight investor types—who are you?
The Ostrich: You have no plan, your money lies in your savings deposit and you are known to proudly say that you have no money to invest. You push away all help that comes your way because you are convinced that the world is full of cheats and you are just safer not doing anything rather than making an error. Beneath the don’t care mask, you are actually quite petrified about the state of your finance. And maybe for that reason believe that “something” will happen to make that pot of gold that you are convinced will come your way. Dream on.
A doctor friend will occasionally send a desperate SMS asking for clarity on the Narendra Modi government’s track record. He says he can’t make sense of the truth, flooded as he is with WhatsApp forwards, news, views and chatter that is so polarized that it looks like the messages are talking about two different countries. The next 10 months will see this divide get sharper and nastier as we roll up to Elections 2019.
The first thing we need to do when we enter this debate is to discard evidence by anecdote. For every anecdote from one side of the debate, the other side can give two more. My anecdote will always be more real to me than your story. Let’s stay with numbers. But numbers can also be hotly debated—depending on whether the GDP number is up or down, the validity of the data has been discarded or accepted. While numbers like the GDP or inflation or even manufacturing growth or investment are subject to a methodology which can be open to debate, the one number we can’t either fix or ignore is the Sensex, the broad market index made up of 30 companies. The Sensex seems to like it when Modi Sarkar wins elections. Look how it rose and then fell as the Karnataka elections changed colour from saffron to a muddled something.
Two weeks back, on 4 May 2018, capital markets regulator Securities and Exchange Board of India (Sebi) uploaded a five-page document that I thought should have made more news. Titled Consultation Paper on Review of SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2009, it is a call for public comments on a big rehaul of the Indian capital issue regulations. The document links to three annexures that read over 369 pages with details of regulations that were changed or deleted and the reason for it, the draft regulations and the schedules. Post public comments, the draft regulations will go to the Sebi board soon.
The $16 billion Walmart-Flipkart deal came closer home to many Flipkart employees when a letter sent to them listed out the process and price of the employee stock buyback. For those who are current employees with already vested options (see this story to know more about this: bit.ly/2wDOsfC), the money will come in three tranches—half on the date the transaction closes in about 60-90 days, a quarter a year later and the rest at the end of two years from the first liquidation. The letter puts the value per share that the firm will buy back from the vested stock options between $125 and $129. At the current conversion rate, a person holding 10,000 shares will make approximately a pre-tax Rs8 crore.
The news of the appointment of Subhash Chandra Khuntia as the insurance regulator on 1 May 2018 came as a surprise to most financial sector watchers. Of the eight people shortlisted for the final round of screening, Khuntia was the only bureaucrat, the rest were insurance industry insiders, including the serving Life Insurance Corp. of India chairman V.K. Sharma, New India Assurance chairman and managing director (CMD) G. Srinivasan, member Life at Insurance Regulatory and Development Authority of India (Irdai) Nilesh Sathe, and K. Sanath Kumar, CMD, National Insurance. The choice of a person with limited domain knowledge over others who have spent their entire careers working in this very technical industry was the surprise. Remember that it took an earlier outsider, J. Hari Narayan, the first three years of his five-year term to understand the sector. In fact, by the time he demitted office, he understood the sector so well that it went against the then government’s own agenda to allow him to continue. So what has gone into the decision to appoint an outsider as the head of a regulatory body that watches over Rs28 trillion of household savings and over Rs2.2 trillion of general insurance money?
Two and a half months after T.S. Vijayan retired, the insurance regulatory body, the Insurance Regulatory and Development Authority of India (Irdai), has got its 5th chairman, Subhash Chandra Khuntia. A former chief secretary to the Karnataka government, he has his desk overloaded as he takes over the wheel of a body that regulates firms managing over Rs28 trillion of household savings through life insurance and another Rs2.2 trillion in the non-life insurance space.
The insurance regulator has been an outlier in the financial regulatory space. While disagreements with the government by independent regulators are well reported, the conduct of the insurance regulator has left policy makers, the financial sector and analysts open mouthed. Many decisions over the past few years have been in the face of global moves by regulators on issues of costs and transparency. Raising front commissions in life insurance products, repackaging what were illegal payouts as “rewards”, doing away with a persistency target to ensure that agents don’t churn policyholders and continuing with fuzzy disclosures in both life and general insurance products are just some of the actions that have left households even more vulnerable to mis-selling and outright fraud by banks and agents.