Monday, March 28, 2016

8 Things to Lookout for While Seeing the Model House

Buying a house is huge decision and one that involves a lot of speculation especially if its an under construction project and all you can see is the model house shown by the builder. If you talk to people who have actually bought houses after seeing the model flat or apartment or villa, you will understand that they were at least slightly disappointed after getting possession of their house. The purpose of this article is to take the model house with a pinch of salt and make a more informed decision that so that you don’t have to worry about disappointment when you get the house.

Check 1: Look at the Lighting

Builders and Promoters are smart people. They know that the model house is their best way to attract prospective customers. So, they will flood the house with abundant lighting so that it looks bright and attractive. Truth being told, in a real life scenario, firstly we probably wont have that many lights in the house. Secondly, the natural lighting of the room by means of windows plays a significant role than artificial lamps.

So, look for the positioning of the windows, the direction of the house and the sun and think realistically before you get impressed by show flats.

Check 2: Look at the Interior Doors

The doors to the bedrooms and bathrooms are often the place where costs and corners are cut. Doors should swing smoothly, feel substantial, and should not sound particularly hollow when you knock on them. For smaller units in particular, it is important to have good quality doors to maintain privacy and reduce noise from entering the bedrooms. If the doors turn out to be inadequate when you finally move in, they could cost quite a bit to replace.

Check 3: Look at the House Flow and Odd Corners

Have you noticed that all show flats or houses come fully furnished while 90% or more houses are sold in an unfurnished manner? This is because, once a house is furnished, its that much harder to identify odd corners in the house or design flaws and the intention is to distract the prospective buyer from the same using the beauty of the d├ęcor.

However, think about the flow of the space, and how you and your family will use it. For instance, think about your cooking habits in the kitchen, and if the current layout would work for you. Changing the layout of the kitchen can be expensive. Open layouts, where the dining area, kitchen and living room are combined in a single space, are very common right now. However, some people might prefer separate spaces, to prevent cooking grease and smells from affecting the whole apartment.

In general, people like regular layouts, because they flow better and help with the placement of furniture. There are many design tricks that can help to minimize the odd dead corner, such as hiding it with a partition, or covering it up with plants and vases. Buyers should always check the official floor plans to see if there are any odd corners.

Check 4: Look for Power Sockets

The amount of devices and appliances we have will only increase in the future. For areas like the kitchen, bedside, and walls where televisions can be mounted, buyers should always check for an adequate number of power sockets. While more power sockets can always be installed after completion, it is an additional cost, and the renovation would delay your move into the unit.

Check 5: Look at the Construction Materials

Each surface in a show flat will be polished to perfection. However, the builder will add a caveat in the brochure that the materials in the show flat may not be available in the house and you might have to pay a premium price. Tiles and Paints are two common areas where builders use premium materials to attract the buyer and then once you make up your mind to buy the house, you will get the surprise of additional cost. Similarly, a common, low-cost material used for kitchen counters is solid surface. While durable and easy to clean, it can be affected by high heat, and needs to be protected from hot pots and pans by trivets or place mats. On the other hand, marble is heat-resistant and beautiful, but is expensive and requires more maintenance.

Check 6: Look at Bathroom Fittings

Most show flat bathrooms are designed to look like luxurious spas. However, check to see what is actually provided. Often, wall cabinets are not provided, or might come in a plainer form than what is displayed. Fittings like the shower, toilet, bathroom tap and sink should be of good quality, too. However, there is a chance the spa like feel may only be possible if you are willing to shell out additional money. Look for windows in the bathrooms as well; they are necessary to prevent our humid weather from causing mold. For bathrooms without windows, a ceiling ventilation fan should be provided, but that requires more maintenance.

Check 7: Look at the Space

These days, its becoming increasingly popular to squeeze an additional bedroom within the same square footage just to make it appealing to the minds that think an extra bedroom will help. A Spacious 2 bedroom apartment in about 1000 sq ft would realistically be more comfortable to live in than a cramped up 3 bedroom apartment in the same 1000 sq ft size. Builders and their sales agents will claim that the bedroom will easily fit a queen sized bed but what they will not mention is that once you put the bed, you may not have enough room to move around the bedroom.
Builders may use the common trick of removing or shrinking the closet, so the bedroom looks bigger however the real one may not be the same. Make sure to double check against the plan to avoid disappointment in the future.

Check 8: Look at the Details

Keep an eye out for the small details that show a developer’s commitment to quality. Showflats are meant to display all a developer has to offer.  If you see signs of poor fit and finish, such as peeling or poorly glued laminate on the carpentry, or cabinet doors that don’t close properly, it might be cause for concern. Even small things, like whether the bed sheets are smoothed and ironed, or the cleanliness of the showflat, demonstrate a developer’s pride in the project.

Hope you found this article useful in your quest to buy the dream home. Do remember to share this in social media and with your friends who may find this useful. 

Wednesday, March 23, 2016

Was the Strike by the Jewellers in India Justified?

After the Hon’ble Finance Minister released the budget, the Jewellers in India had been on an almost 3 week strike which was called off only on Saturday 19th March 2016. There has been interspersed coverage on the new channels and opposition parties have been as usual quick to point out that the Ruling Government is wrong and that’s why Jewellers are On Strike. Over 3 lakh Jewellers from across India had kept their shops shut over the past 2-3 weeks as part of this protest.

Anyways, coming back to the question at hand, Was the Strike by the Jewellers Justified? That’s the question this article aims at answering…

Before we Begin: Just want to highlight that I have nothing against Jewellers. The views in this article are entirely mine and if you disagree with any of them, you can use the comments section to voice your opinion. If any of the Facts Quoted in this article are incorrect, pls highlight them so I can correct them as well.

The Background Info – What Triggered the Strike?

As part of the Budget, there were three main points that made the Jewellers of India unhappy:
  1. The Mandatory Quoting of PAN Number for all Jewellery Buy/Sell Transactions worth above Rs. 2 lakhs
  2. 1% additional Excise Duty on all Gold Imports
  3. Jewellers need to maintain Accurate Records of all Buy/Sell transactions on Gold and Diamonds hich can be inspected/audited by the Officials at any time

The WHY Behind these Rules

India is one of those Economies that still has a huge chunk of Blank Money that is concealed by the super wealthy and those that are outside of the Tax Net. By making PAN mandatory for all Jewellery purchases above 2 lakhs, individuals will be forced to divulge the same and get caught by the Tax Officials which will eventually be beneficial for the country.

Import of Gold is one of the largest contributors to the country’s Fiscal Deficit every year and governments in the past have been trying to reduce the fiscal deficit by making gold costlier to import. This is not the first time excise duty on Gold has been increased and will definitely not be the last. Increasing excise duty means lesser gold import which implies lower fiscal deficit.

Following up on the first point on PAN and Black Money, Jewellery industry has been a key player in the whole black money fiasco in our country because, hoarders of unaccounted wealth prefer to buy Gold and stash it away rather than keep plain old currencies. As long as there is no PAN required, they will just keep buying more gold and keep hiding their black wealth. By making PAN  mandatory, it makes it that much harder to conceal wealth. Of course you may challenge me by saying that people will find ingenious ways of hiding their wealth which I cannot deny but then again – if governments made it easy to conceal wealth that means, they are part of the problem isn’t it?

Now that we know why the rules were set up by the Government, let’s Review the Why the Sudden Strike part of the story – Shall We?

Quoting PAN – Made Mandatory:

The Quoting of PAN number has been in existence for a while now. So, you may be wondering why are Jewellers on strike now? The threshold up until Dec 2015 was 5 lakhs but starting Jan 1st 2016, the threshold has been brought down to 2 lakhs. So, any individual who purchases Jewellery above Rs. 2 lakhs would have to furnish a PAN Number with No Exceptions.

As you are aware, a majority of the Indian population still isn’t under the Tax Net and DO NOT have a PAN number. So, Jewellers are unable to sell to those customers even if they have the money. In the last 2-3 months, Jewellers have noticed a sizeable dip in sales because the folks who have the Money but don’t want to pay taxes on the same, are Unable to buy Jewellery so Sales is Down. It is reported that in some parts of India, sales is down by as much as 30% which is a big hit. Some Jewellers claim that customers refuse to provide PAN info and are even willing to abort the purchase transaction instead of providing their PAN info.

My Take: As part of the Salaried class whose every rupee in Income is taxed, my income is all “White” and have absolutely no issues in providing my PAN details because, even if tax officials investigate they can’t do anything because I am spending money that I have legally earned and lawfully tax paid.

If I don’t pay taxes but still have a lot of income and am afraid the Tax Officials will catch me, of course I will have issues providing my PAN info.

The 1% Additional Excise Duty

Am not really sure why this is an issue because this 1% excise duty is obviously going to be passed on to the end customer. Unless the Government forced Jewellers to actually  bear the 1% extra excise duty there is not going to be much impact on the Jewellers because like the previous times when the excise duty was increased, they are just going to pass on the burden to the consumer who is buying the gold. 

The Accurate Record Keeping

Ok, now we are coming to the real crux of the “REASON” for the Strike. The Jewellers are claiming that it’s very hard for them to keep accurate records of all buy/sell transactions and if the officials from customs or excise department start showing up in their shops and demand to see the records? It’s just going to be like Inspector Raj where officials wield all the power and can shut down the shop at their will and wish. This can lead to a lot of bribery & corruption and not to mention a terrible inconvenience for them.

At the outset this may sound like a valid reason for protest but some industry & financial experts suspect that there is a lot more than fear of Inspector Raj.

With the chance of Audit, Jewellers would now be required to keep log of all the gold they buy and tally the same with all the gold they sell. This might sound straight forward on paper but as you may have read in books or seen in movies, Smuggling Gold is still a big deal across the globe. And almost all of that smuggled gold ends up in Jewellery Shops. With nobody auditing their purchase & sales numbers, its pretty easy for them to sneak in a few pounds of smuggled yellow metal and sell the same. If the numbers have to tally, that’s a problem – right? 

Also, there is a lot of Wastage charged by Jewellers even for simple pieces of Jewellery. Their claim is that a certain % of gold gets wasted when Artisans craft the Gold Jewellery. However, some people suggest that this gold actually gets reused by Jewellers when they make further Jewels and if they have to tally the numbers with regards to purchase of Gold Bullion and Jewellery sold, this whole area where they make money will be exposed.

Some Last Words:

I am not a Jeweller and the info above is based on what I hear from people who know the nuances of the trade. The gripe about a possible Inspector Raj could have been legit and after assurances from the Government the traders have resumed their business.

In my personal opinion, the steps by the government are welcome in helping curb both black money as well as the fiscal deficit. So, lets hope for the best…

Friday, March 4, 2016

Recent Changes to EPF Regulations In India

The Employee Provident Fund or EPF is probably the most popular retirement savings option for the Indian Middle Class. In fact, for most of them EPF is maybe the only savings they have for retirement. EPF has been a hot topic of discussion in this blog in the past many years and recently there have been a few changes to the EPF Regulations in India. The purpose of this article is to Review them.

Before We Begin: This article is not a politically motivated article. It purely highlights the changes and reflects my personal opinion reg. the same. Please share your thoughts in the comments section. 

Change No. 1: Hike in Retirement Age 

Previously 55 was considered the Retirement Age from an EPF Perspective where your corpus will be returned to you and you become eligible to receive pension from the Employee Pension Scheme (EPS). Recently the Government has hiked the age to 58 years.

My Views on the Change: Hiking Retirement Age by 3 years basically means the individual will continue to contribute to EPF for additional years and the entire corpus will continue to earn interest for the extended period. This will certainly be Good News for Individuals. 

Change No. 2: Changes to Withdrawal Rules - Before Retirement 

Withdrawing the EPF corpus when someone switches jobs is usual practice in our country. According to the Regulations an individual is eligible for a FULL Withdrawal Only if he/she is going to remain unemployed for a period of at least 3 months. Otherwise, the regulations stated that, one has to transfer their EPF corpus to the new Job. Nevertheless, this will probably be considered the most ignored rule and almost everyone does it when they switch jobs.

Recently the Government has come up with the following Ruling.

If an Individual Wishes to Withdraw from their EPF Corpus before retirement age, the amount will be limited to their Individual (Self) Contribution. Even this request can only be done after 2 months of cease of Employment. 
So, this basically means that the Employer Contribution and the corresponding Interest Component will be retained by EPFO until the retirement age of the individual and CANNOT be Withdrawn.

Of course, there is an exception to this rule - Female EPF members who are resigning from their job for Marriage or Childbirth they can withdraw the full corpus.

My Views on the Change: Many people may disagree with my opinion on this change but if you ask me, this option actually will benefit folks who switch jobs frequently and habitually withdraw the entire corpus and spend it every time. With this new ruling, at least the Employer contribution stays with the EPFO and will only be available at retirement age. So, this will be one kind of Forced Savings on behalf of the Employee. 

Update: The Government has recently announced that, this proposed limitation on withdrawal is scrapped. So, the EPF Acc holder can get his entire corpus without having to wait till retirement age. 

Change No. 3: Taxation at Retirement of EPF Withdrawal 

When someone retires and withdraws their EPF Corpus, the Government has proposed that only 40% of the corpus will be tax free in their hands. The Remaining 60% would be considered Taxable Income.

The point to note here is that if the individual is purchasing an "Annuity" product for the 60% corpus then, this amount wouldn't be considered Taxable Income. And, more importantly, when the lumpsum amount gets paid out to the legal heirs of the individual after his/her life, this amount is Tax Free for the next generation.

Update: The Government has recently announced that, this proposed taxation of EPF ruling has been dropped. So, there is no tax on withdrawal during Retirement

My Views on the Change: Many people may disagree with my opinion on this change but if you ask me, this again is a GOOD change. Most Individuals get their life savings in one bulk and eventually spend it on something or the other and end up with little or no money for their Retirement Years. By introducing this taxation aspect, many people will think about buying the Annuity Product instead of withdrawing in full. This Annuity will help ensure that a monthly pension gets paid out to the individual for the remaining duration of their life. Couple that with the fact that the corpus will be Tax Free in the hands of the individuals sons/daughters I would say this is a VERY GOOD change. 

Some Last Words:

There is a lot of hoopla going on in Social Media where people are bashing the Government for these changes. But, the sad truth is, most folks dont understand the change fully. They believe things like - The Entire Retirement Corpus is Taxable or You cannot Withdraw Ever from your EPF etc. As citizens of our country, you have Absolutely Every Right to disagree with any rule change however please get all your facts right before you voice your displeasure.

And, please do share this article with your friends so they can make an informed decision about the changes.

Hope you found this article useful.

A Couple of EPF Related Articles that you might find Useful:

Employee Provident Fund
All Your Questions about EPF - Answered

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