Consumer Rights

Expectation mismatch between the gift packaging and the inside of the gift

ashish — Wed, 25 Aug 2010 18:22:01 +0000

This seems like an obscure topic, but was actually something that caused sudden laughter, and an extreme amount of dissonance. It was Raakhi time, and my wife had bought some presents for her brothers, including a very attractively packaged Cadbury chocolate box for Rs. 200 (not a very small sum either). From the box, it seemed like it was full of chocolate drops, and she was happy (especially since her brothers liked chocolate, and she was sure that they would be happy). There were 3 such boxes bought for the 2 brothers and a cousin, and seemed like a good gift.
And then the actual time for the event came, where her brothers landed up at the house, and all the respective presents were exchanged. So far so good. And then we all settled down for lunch, and after lunch, decided to take it easy and sat down for some cool chit-chat and some relaxation. And then, since the brothers could see that there was a nice chocolate box, it was the first item to be opened. What anticipation…
And what an anti-climax, when the box was opened, there was an awful lot of packaging and 2 small plastic pouches containing the promised chocolate drops. Nobody could believe that the amount of chocolates contained would cost Rs. 200, and seemed like price gouging. As they say about ‘customer beware’, all of us would be much more careful the next time we even look at a gift box from Cadbury’s, and they sure lost some customers to some extent (atleast for festive occasions). I would rather take some chocolates and wrap them up in some nice wrapping sheets rather than pay the exhorbitant markup on these items that they provide.

How to decide between a fixed interest and floating interest rate home loan – some tips and pointers

ashish — Thu, 27 May 2010 19:07:47 +0000

Now that you have decided that you need to take a home loan to buy your dream house, the next query is about selecting the bank from which to take a loan, as well as whether you should go in for a fixed vs. floating interest home loan. I have some friends who have taken a floating interest loan, and others who have taken a fixed interest loan, and there is no major dissatisfaction levels that I have seen in either, so basically, it is more about your comfort level with either type of loan. Let me outline some of the parameters / factors that could help you decide:
- In a fixed interest loan, like the term fixed means, the interest rate will remain the same during the course of the loan even if the Prime Lending Rate changes. However, as was in the past 2 years, this is not totally true, the banks / financial institutions did put into the small print that in some situations, they could even change the rate of the fixed interest loan (something that scared and puzzled a large section of the borrowers); so keep this in mind
- In a floating interest loan, the loan is benchmarked to some interest rate, which could be an internal benchmark, or even the Prime Lending Rate (PLR). When either the rate increases or decreases, the bank will typically adjust the time period left in the loan and keep the EMI constant (since you might have given post-dated checks, or signed an ECS agreement of a certain amount). You can request them to change the EMI amount.
- When the interest rates are at historic lows, that is a time when people try to lock themselves into a fixed interest rate regime so that they can avail the benefit even when the interest rates rise (although if the interest rates rise too much, the banks will reset the interest rate)
- People who tend to more conservative fiscally do no find the idea of a changing EMI amount or a changing loan tenure comfortable, and hence try to ensure that they get the required stability in a fixed interest rate loan
- When you compare fixed interest rates with floating interest rates, it is generally found that you end up paying for this stability, with the fixed interest rate working out to be more than the floating interest rate
- When you have a floating interest rate loan, then you should be prepared for the uncertainty, such that an increase in your EMI or loan tenure through an increase in the interest rate not causing your personal finances to be in jeopardy
In the end, you need to take a call. Evaluate your options, calculate the effective rates and do some personal calculations of what would be the impact of changes and then decide which option you want to take.

Steps to ensure that you have completed the checklist for applying for a home loan

ashish — Mon, 24 May 2010 18:19:38 +0000

In most cases, when you are looking to buy a house, you would be looking at getting a home loan (there are few normal middle class folks who can buy a house on cash); and to get a home loan, even though a bank says that it is very easy, there are steps to be followed, procedures that take time, and documents that need to be inspected and then passed, and then only is a house loan approved. However, given that there are multiple banks and financial institutions from which the loan can be taken, it is advisable that you look around, evaluate the financial institution and the terms of the loan before going in for the same. Since the terms that you (and the millions of other people taking a house loan) will be evaluation will not be very different, it is possible to create a checklist that will work for the majority of cases when you want to take a home loan. So, here goes (and remember, such articles are meant to be in the nature of advice, you should certainly evaluate many sources and information before going in for the house loan), and we are not even considering the rate of interest charged by the various banks (since that is a big factor by itself):
- If there are going to be multiple applicants (and in the case of many couples, both the husband and wife would want to be co-applicants), should consider whether the bank handles those easily in the loan process
- Your property could be a piece of land on which you are going to construct, or an existing property that you will tear down or modify, or a flat that is already available or being constructed, and so on. You need to know whether the housing loan will work in your specific case
- What are all the documents needed by the bank or financial institution for sanctioning the loan (some banks can be more rigid than the others)
- How long does the bank say it will take to process your loan request, how many meetings it will want, and how long will it take to disburse the loan
- How much does the bank expect you to contribute (this matters a great deal since you have to pay this amount and for properties in the 10′s of lakhs, this can be not an insignificant amount)
- How does the bank incorporate changes in interest rates in re-calculating your EMI (including whether the bank has a past history of actually passing on reduction in interest rates)
- Documentation and processing charges applied by the bank / financial institution for the loan
- Prepayment charges, and the maximum amount of prepayment possible
- Whether you can easily switch over between fixed and flexible interest rate regimes, and what are the charges applied by the bank for the same
Remember, the chances of negotiating with banks is much higher when you are wanting a property that is part of a project that is already cleared, you have a good credit history, can show proper income documents, and don’t already have a loan on your head. If the market is good in terms of banks wanting to disburse loans, you can negotiate better, but when the scene is bad in terms of a recessionary trends, then banks tend to be more careful and more rigid.

Planning on selling your house ? Ensure that you have all your documents in order

ashish — Fri, 21 May 2010 17:55:54 +0000

There are enough occasions in life when you have to sell your house (independent house or flat). It could be a distress sale (when you need the money), you could be doing speculation and the house made money for you in the sale, you could be moving to a new location, etc or many other reasons. In all such cases, you would want that your house is sold quickly and the transaction is a not a long drawn transaction. What will help you in this case is if you are fully prepared for this transaction and consider the needs of the purchasing party as well. It is very much possible that the person who is planning to buy your house would need a bank loan for this purpose, and as a result, would want all the documents for the house in perfect order so that the bank loan can go through fine. Here is a list of documents that you should have in order (and if they are not in order, better make sure that you are working to get them in order or possible substitutes):
- If the property is a part of a housing society, then you will need a housing society share certificate
- In the above case, you will also need a No Objection Certificate from the housing society (there have been recent cases in Mumbai when the housing societies have objected and refused to provide these certificates)
- You will need the original sale deed for the property which proves that you have the right to sell the property and it is indeed in your name; and if the property has changed hands, then you need the copies of previous deeds in order to show that the transactions were proper
- To ensure that stamp deed and registration of the house was done (although there are cases when the property is sold before the property is registered), you need to have these documents
- For flats, there are a number of other details that need to be provided, such as the payments for parking, for power backup, as well as the documents that specify the carpet area, the super area, the original construction date of the building, etc need to be provided.
- If the property has multiple owners, then these owners also have to provide their consent (and it means all of them)
- If the property still has a loan outstanding, then the bank or financial institution still owns a portion of the property, and you cannot sell the property without their involvement. It is preferable to repay the outstanding of the loan before the sale of the property happens.
There are many cases when all of these documents are not available. In such cases, it is best to take legal advice, although in several of these cases, it is very much possible to get duplicate verified documents available, as also indemnity bonds wherever they prove necessary.
These seem like a lot of documents, but if you were planning to purchase a property, you would want the same set of documents, so bear this in mind.

Treatment of tax – Selling a new house and buying a new house – what happens to the capital gains?

ashish — Tue, 18 May 2010 15:32:04 +0000

It is a fairly common issue, where a person sells an old house and buys a new house. This can be done when a person is investing in real estate, it happens when a person finds that the old house they have is not big enough for their family, or when they need to move to a new location because of job requirements (and there could be other reasons for the same). Now, as per Indian tax laws, any capital gains made from the sale of a house or real estate property will need to be accounted for and if taxes are due, they need to be paid. However, for the moment, there are exceptions possible when a new property is bought soon after the old property is disposed of. Here are some more details:
- The first and foremost, if the entity is an individual or a House Undivided Family (HUF), then the sale of land / property / residential asset will be exempt if the money is invested in another residential house
- This is valid if the new property is purchased or constructed anew
- Timelines: if a residential unit is being purchased, then it should be purchased within a period of 1 year before or upto 2 years after the transfer of the property that is being sold; if the residential unit is being constructed, then this should be constructed within a period of 3 years from the transfer of the property that is being sold
- Only the amount of money that is used for the purchase or construction of the new property is exempt; so if the original property is being sold for Rs. 50 lakh, and the new purchase / construction is for Rs 40 lakh, then the remainder of the Rs. 10 lakh is still subject to tax
- What happens when the amount from the sold property is not utilized within the first year after the sale. In such cases, the amount should be deposited in a specified account with a bank or financial institution and declare the same. When the new property is being purchased or constructed, then the amount can be withdrawn from this account. If the amount is not utilized within 3 years, then the tax will need to be paid.
- However, in what can be unsettling to a purchase who does frequent sale or purchase of such properties, if the tax exemption is taken on the new property, then it cannot be transferred within 3 years. If this happens within 3 years, then its cost price for the purpose of capital gains calculation would need to be reduced by the amount of such exemption claimed earlier.

Insurance company cannot modify clauses in the insurance policy on their own, rules Consumer Redressal Forum

ashish — Sat, 15 May 2010 15:31:28 +0000

When you take an insurance company and have it for a number of years, I wonder how many of you actually go through the correspondence you have with the insurance company (especially when they modify some of the conditions of the insurance policy and expect that you will have to abide by these conditions). Well, now a Consumer Redressal Forum has refused to accept the changes in condition made by the insurance policy and awarded compensation to an individual after he was denied the compensation by the insurance company. This was a case where a house was insured with an inclusive clause that included terrorist action (since the house was in terrorist prone Srinagar) and the insurance company had accepted the clause. Later, when the house was damaged, the insurance company claimed that the clause had been deleted and refused to settle the claim, and the person went to the Consumer Redressal Forum for help (link to article):

A Nepean Sea Road resident has some reason to cheer five years after his ancestral home in Srinagar was damaged in a terrorist attack. The South Mumbai District Consumer Disputes Redressal Forum has awarded him Rs 5 lakh as compensation after an insurance firm left him in the lurch by rejecting his claim . The forum also took the firm to task for unilaterally deleting the “terrorism clause” from 66-year-old Sudhir Anant’s policy that covered the complainant’s Srinagar bungalow.
Anant, who originally hails from Kashmir, bought a policy from The New India Assurance Company, in 2000. The policy included the “terrorism clause”. According to Anant, owing to the volatile situation in J&K, he had taken such a policy and in 2003-04 paid an additional premium to get the special clause included. On May 11, 2005, while Anant was in Mumbai, there was a blast on the street adjacent to the bungalow which damaged the structure considerably.

The insurance company used the claim from an earlier Supreme Court judgment that had ruled that a renewed policy is the same as the original policy, and conditions cannot be changed by the insurance company unilaterally.

Estimating the impact of risks on your finances and what steps to take

ashish — Fri, 23 Apr 2010 12:59:02 +0000

There are plenty of risks in this life of ours, and many of them impact our finances. Consider the following example. A couple of years ago (as also in the big stock market crash of 2000-2001), there were a lot of stories of people who ran into huge problems with respect to their finances. Some of the problems that people face when it comes to risks or events that happens in life and its impact on finances is:
- When the stock market is on the rise, people expect the market to keep on rising, and some people make huge financial gambles based on that. So, you get a number of cases where people have a certain amount of money and want to invest in the stock market to meet needs such as marriage of children, or education of children, or retirement goals and so on. With the amount of risk that there is in the market (and we have seen so many ups and downs), that the idea of putting all your bets on a single instrument is ‘crazy’. People suffer when such gambles implode or other problems occur. You need to have a proper investment strategy where you don’t put all your eggs in one basket, if necessary consult with an expert and then prepare a financial plan.
- People invest based on milestones, but those milestones can be interrupted by sudden events. For example, you could have prepared a perfect financial plan with an estimation of your earnings vs. the loans you have taken, and it will work out. However, what happens if you lose your job, or a medical emergency happens, or your death happens. What happens to your family and your dependents in such cases ? They can run into problems. Make sure that you draw a list of possible scenarios, and have a plan for these as much as possible. Plan for items such as: Loss of job (setting aside a corpus for some months of expenses), medical emergencies (medical insurance and plans), death or such events (having insurance policies, including those cover outstanding loans). Make sure that you have these events planned out.
- Plan for when you want to do your retirement (having a retirement plan, including how much you want to invest on an ongoing basis to meet your retirement needs).
- Insurance needs. Make sure that you have enough insurance for the various needs you have. This includes insurance for medical, vehicle (mandatory), life (along with riders), household, and any other items for which you need insurance.
- Ensuring an adequate tracking of your investments and policies. Over a period of time, people take on a number of insurance schemes as well as investments, and there is a good chance of losing track of these. It makes sense to keep a track of all such schemes and investments, so that these can be considered during the case of an emergency (deciding which ones to keep and which ones to jettison), and also if the family needs to consider them in the case of any untoward event.

Optimizing your investment in Mutual Funds (investment strategy, risk vs returns, plan)

ashish — Tue, 20 Apr 2010 12:22:03 +0000

Mutual Funds offer a great way to invest into the equity market, since they ensure that you can invest into the stock market (and hopefully make the larger returns that are available from the equity market (with associated higher risk though)) without trying to identify the individual scripts into which to invest. When combined with easy ways of investing (the logistics of providing the money to the Mutual Fund are pretty easy now), investing in Mutual Funds can be fairly easy. What makes it somewhat difficult is the huge number of Mutual Funds that are available in the market, along with their differing investment strategies, their level of risk, the sectors in which they focus their investment, and so on. It can get difficult to identify the proper Mutual Fund (and investing in a MF that has provided poorer returns can lead to a much lower increase in the value of your investments). Here are some tips for optimizing your investments in Mutual Funds:
- Determine your level of risk. This helps you in determining whether you want to invest in Debt funds, Equity Funds, or Balanced funds. Equity funds tend to have a higher amount of both risk and reward, while Debt funds tend to be much more conservative and hence have a lower risk as well as lower return.
- Evaluate your investment mix. Depending on your age, you should construct a mix of high risk and low risk mutual funds. As you get closer to retirement, the ability to take risks reduces and you should go in for more debt and liquid funds; while if you are younger, you will have a greater ability to go in for higher risk equity funds.
- Know the sectors in which the funds you are investing are invested in. Sometimes if you are not careful, you might up end up with multiple funds that are invested in the same sector, leading your investment mix to become heavy in a specific sector
- Evaluate the number of funds you are invested in. I know people who end up with 20-30 funds, and many of them are not capable of tracking the performance of so many funds, leaving to a situation where their funds are not generating as much return as they could if they were more focused
- Set a specific time period of evaluation of the performance of your funds, and do not hesitate to switch between funds when required. If a fund has not been generating good returns as opposed to other funds with a similar profile, it could be because of multiple reasons such as a change in fund manager, or a change in the investing strategy of the fund. You should be able to catch funds that are not performing and make a decision about whether to change or not.
- Check your tax profile. If you are able to take some tax-avoidance benefits of investing in some Equity Linked Savings Schemes (ELSS), then that is additional return that you are getting from your investments in Mutual Funds. Further, some of these long term funds are able to make better investment purposes.
- Investing in Mutual Funds typically makes sense when you are investing for the long term, since it does take some time for the funds to start generating value.

Tips about investing in Mutual Funds through a Systematic Investment Plan (SIP)

ashish — Sat, 17 Apr 2010 12:21:44 +0000

A lot of people route their investment into the stock market through the route of using Mutual Funds, with the promise that experts are running the investment policies of the Mutual Fund, and that these Fund Managers will be able to take a better informed decision and will have more inputs than they would have as regards to investments in Mutual Funds. However, you should not just sit back and relax when investing in a Mutual Fund, consider the following tips in order to make your investments do better for you.
- Use a Systematic Investment Plan. This ensures that you don’t have to try to time the market for your Mutual Fund Investments, instead, you make regular payments for the purpose of buying units and end up averaging your investments. You will end up buying when the market is high, but with regular investments, you will also end up buying when the market is low. This ensures that your money eventually gets you a better return than if you had tried to time the market yourself
- Not all funds offer a SIP. It is typically equity (long-term investment) funds that offer a SIP for investment purposes. Funds that are more liquid such as liquid funds, money market funds, do not offer a SIP (since their investments are made into short term investments). Debt funds do offer a SIP, as do balanced funds.
- What is the tax treatment of a SIP investment ? If you investing in equity market funds, then you will be charged as per the time on which the SIP was made. So, if you sell out within an year, then you will be charged the short-term rate of tax. This is worked out on a scheme of FIFO (First In First Out, where if units are sold, they are charged against the earlier units that were bought).
- Minimum investments on SIP’s (the amount that is invested at each regular interval) depend on the specific Mutual Fund. Some can be very low, in the hundreds. Others can have a much higher minimum SIP amount required.
- How to make the investment. This depends. If you are buying Mutual Funds through an online broker, they will ask you to specify the amount per interval and on the specified date, they will deduct the amount from your linked account. If you are doing it through a Mutual Fund directly, they can do it through ECS or through post-dated checks.
- Period of a SIP. When taking the SIP, you need to specify the time period for which you are subscribed to the SIP and can extend it when you get close to the end time of the selected period.

Bad service in Big Bazaar – huge crowds and not enough staff to handle the crowds at checkout

ashish — Sun, 11 Apr 2010 18:10:54 +0000

Big Bazaar is a huge retailer, expanding its network in a number of cities. It also comes out with a number of offers and schemes over a period of time which entices a large number of people to come to their stores. I had a recent experience in a store which was pretty shocking, and showed me the level of customer service that the store managers were showing to their shoppers. Now, when we have to do some shopping in Big Bazaar, we hesitate and wonder whether we really need to go there for the stuff that we need. This was a recent exchange offer that had come out for a period of 15-20 days where people could get their old stuff to the store, get coupons for the exchange, and then exercise those coupons against stuff. Here were some matters that really bit hard to consumers:
- The coupons after exchange were valid for a period of only 10-15 days. So, you give your old stuff, and then realize after reading the fine print on the coupons that they are only valid for a short time. This was not mentioned in all the advertisements.
- The staff was not totally aware. So, you had somebody buying stuff over there after talking to the salesman, and then the clerk at the billing refused to accept the coupons for some of the items because it was not in his system. This naturally angered the customer.
- There were a total of around 12 billing counters, but for several hours, there were only 3 of those counters manned. As a result, the queues were very long, and yet even when people were shouting for more counters to be open, there was no reaction from the store. It took each person as much as 20-30 minutes at the billing counter.
- Delhi has implemented a no-plastic bag policy. But the big department stores have not really caught onto this and have not come up with a solution; in this particular case, they had some fabric bags available that were provided free if you bought upto Rs. 500. However, these bags were unavailable, so we had the strange sight of all our items being kept in a shopping cart without any bag and then taking these items back to the vehicle just like that. Felt very strange.