MUMBAI | MONDAY, 8 MAY 2017 PERSONAL FINANCE 19

VALUE OF ~1 LAKH SENSEX

1-YEAR
GOLD SILVER FD (SBI) PPF
INVESTED IN VARIOUS ASSET 1,18,196 94,431 93,106 1,07,250 1,08,700
CLASSES 1-YEAR 1,18,196 NA# NA# 1,05,075 1,08,700
POST-TAX RETURNS
**Taxed at 30 per cent income tax slab
* Taxed at 10 per cent without indexation 5-YEAR 1,74,403 96,332 68,423 1,55,106 1,51,060
# Silver prices suffered losses;
All post-tax returns are calculated without 5-YEAR 1,74,403 NA# NA# 1,34,613 1,51,060
considering indexation benefit, except PPF POST-TAX RETURNS
and the Sensex As on May 5, in ~; data compiled by BS Research Bureau
> .

annualised.

Debt returns take a knock

If you can put away a portion of

Rera does your portfolio for five to seven years,

you should look at equity balanced
funds. Later, as inflation rises and your
income is then not adequate to meet

bring hope It may be a good time to either increase allocation to fixed income or move money to equities
TINESH BHASIN & SANJAY KUMAR SINGH
expenses, you can do a systematic
withdrawal plan from these funds,
which deliver better returns than MIPs
over the long term. Financial advisors
It will certainly not be an instant suggest withdrawing up to 10 per cent

F
or people close to retirement, it of your investments in a year.
cure, even if retrospective is bad news. For the first time in Investing for five to seven years will
30 years, the interest rate on the ensure the returns accumulated over
clauses are invoked Public Provident Fund (PPF) has gone the period are able to give you a con-
below eight per cent (7.9 per cent now). sistent return, irrespective of market
The Real Estate Recently, the Employees Provident conditions.
Regulation and Fund Organisation (EPFO) also Many individuals receive pension
Development Act (Rera) slashed its rate by 15 basis points (bps), post-retirement or have property that
was passed by Parliament to 8.65 per cent. State Bank of Indias gives them a fixed income adequate
last year, with a leeway of fixed deposit (FD) for five years or to meet expenses. Such investors can
12 months for states to more now fetches a meagre 6.25 per look at large-cap or multi-cap funds
notify the respective rules cent interest annually. With many with a horizon of over seven years.
and regulations and set up people depending heavily on fixed Invest in equities through a system-
local regulatory agencies. income instruments to save for atic transfer plan to ensure invest-
MARKET INSIGHT The deadline has been
missed by most states,
retirement, declining interest rates
mean they need to fine-tune their
ment at different market levels.
Transfer the money from an ultra-
DEVANGSHU DATTA and according to CRISIL, strategies. short-term fund to an equity fund
many of the Acts provi- There is some good news, though. over six to 12 months.
sions have been diluted. As of the first week of May, Inflation is also not rising; therefore,
nine states (Andhra Pradesh, Bihar, Gujarat, Kerala, real returns arent negative. With the If you are in the 40s: As you have
Madhya Pradesh, Maharashtra, Odisha, Rajasthan, and average FY17 consumer price index at over 10 years to retire, increasing your
Uttar Pradesh) and six Union Territories (Andaman and 4.53 per cent, real interest rates on equity allocation by 5-10 percentage
Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, offer are positive for now. points is one solution. If you are
Daman and Diu, Lakshadweep, and Delhi) have noti- However, investors need to take aggressive (60 per cent or more in
fied the respective Real Estate (Regulation and one of the following two measures. equities), increase it by five percentage
Development) Rules, 2017. Either step up investments in debt or points. Those with 40-50 per cent allo-
Rera will be slow getting off the ground. The Act tries make a few portfolio changes to tide cation to equities could increase it by
to fix multiple problems. On paper, the provisions make over the lower returns, says Steven 10 percentage points.
a fair amount of sense. But, there will be wide differences Fernandes, founder, Proficient mutual funds are more tax-efficient Investment advisors say individ-
in the efficiency with which states implement the law, Financial Planners. Returns on debt WHAT HAS CHANGED IN YOUR DEBT PORTFOLIO over the long term and could offer uals in this group should get out of
especially since they have latitude in creating rules. instruments have fallen by at least one Returns (%) slightly higher returns, they are FDs that are fetching returns lower
Assuming Rera goes through various states without percentage point over the past year, Instrument 2015 2016 2017 volatile. The best way to increase than eight per cent and move the
too much dilution, builders would be forced to dissem- and even more in the case of FDs. return on investments is to keep some money to debt funds. An investor
inate all sorts of information about themselves, includ- Bhushan Anand, a 54-year-old
SBIs 5-year fixed deposit 8.25-7.00 7.00-6.5 6.50-6.25 equity in the portfolio, and not move should rely on debt funds such as cor-
ing any history of legal disputes. Every project would bank employee, is worried about his Public Provident Fund 8.7 8.10-8.00 8.00-7.9 entirely to debt, says Suresh porate bond funds. But, be wary of
have to be registered. Any changes to a sanctioned plan ~8-lakh worth of FDs that will mature Employees Provident Fund 8.8 8.65 To be announced Sadagopan, founder, Ladder7 credit risk. Tax-free bonds are anoth-
would have to be cleared by buyers. between May and June. The average Financial Advisories. Allocation to er tax-efficient alternative, says Anil
Delays in completion and handing over would incur annual interest rate his FDs pay is close Debt fund equities depends on a persons risk Rego, founder and chief executive offi-
penal interest payments. At least 70 per cent of money to eight per cent. Anand wants to rein- Scheme 2015 2016 Year-to-date Annualised 2017* appetite. It can be as low as 15 per cent cer, Right Horizons.
paid by buyers for a specific project would have to be kept vest these for six years (until he retires), Ultra short-term 8.28 8.42 1.93 5.79 for conservative investors or as high as
in an account dedicated to that project. This aims at after which he plans to transfer the 40 per cent for those well-versed in If you are in the 20s or 30s: Falling
Short-term 8.19 9.8 2.11 6.33
elimination of fund diversion. Structural defects that funds to the Senior Citizens Savings equities. No matter how aggressive interest rates should not affect
showed up within five years would have to be repaired Scheme. At eight per cent, he would Liquid 8.05 7.37 1.96 5.88 the investor is, we dont advise going investors in this category much. Such
free of charge by the developer. Buyers would also be have made ~12.69 lakh. At 6.25 per cent, Income 6.99 11.85 1.18 3.55 beyond 40 per cent in equities close to investors should stick to the asset allo-
penalised if they were late in paying. Jail sentences and he will end up with ~11.51 lakh, a differ- Dynamic bond 6.85 13.46 0.28 0.85 retirement, says Sadagopan. cation they have decided on.
heavy fines are proposed for certain types of violations. ence of ~1.18 lakh. Investors are today Credit opportunities 9.49 10.51 2.76 8.29 How much exposure you should Cyclicality in interest rates mean
Rera is proposed to be applied retrospectively to facing reinvestment risk the risk of take to equities should also vary things will even out for them over the
*Data are annualised, based on the returns for the first four months of the calendar year
ongoing, incomplete and undelivered projects. There their fixed-income instruments matur- according to the income you will long term, says Raghaw. Adds Prateek
Note: Year-to-date debt funds returns are as of May 4 Sources: Value Research, EPFO and SBI
are huge inventories of such projects and many buyers ing at a time when interest rates are on require post-retirement. If you need to Pant, head of products and solutions,
(and lenders) have their money stuck in these. By some the lower side, says Deepesh Raghaw, use your entire portfolio to generate Sanctum Wealth Management:
estimates, there are several years worth of inventory founder, PersonalFinancePlan.in, an need to make to your portfolio will vary, retirement, they need to start moving income, you can opt for monthly Investors in this age group should
stuck in high-end locations like the National Capital investment advisor registered with the depending on your age. money from equities to debt to avoid income plans (MIPs), which invest 15- allocate 100 per cent to equities in
Region (NCR), Mumbai, Pune and Bengaluru. Securities and Exchange Board of India market volatility. Like Anand, many 25 per cent in equities and the rest in their retirement corpus and only look
The Act has a strong consumer-focus. If it does go (Sebi). Investors need to ladder their Nearing retirement: Individuals in prefer FDs over debt funds, as the debt. In the past year, these funds have at adding debt in once they are in their
through nationally, buyers would have much easier and FDs (have them mature at different this segment are going to be the worst returns on the former are fixed and given an average return of 12.43 per 40s. The EPF and PPF automatically
also quicker recourse in case of disputes. This could lead times) to avoid this. The changes you affected. Three-four years before the capital is protected. While debt cent and over five years, 10.28 per cent takes care of the debt requirement.
to fresh investments entering the sector, including real
estate investment trusts, which look to buy property and
enjoy rental yields. In turn, that could lead to fresh
momentum for the construction industry, creating jobs,
and improving the offtake of cement, steel, paint and
other building materials.
The Act doesnt deal with the corrupt aspects of the
RETIREMENT IS NOT THE TOP Preferred investment instruments
Savings account 42
Sources of advice
A
sector. Land acquisition, conversion, registration, etc.
remain murky. So does the possibility of doing black
and white deals. The whole demonetisation tamasha
PRIORITY FOR NEW MONEY Time deposits
Mutual funds
33
24
B

has done no apparent harm to the black economy, with Fixed deposits and savings accounts are the are those earning enough to start saving. If Fixed income securities 19 C
cash apparently readily available for anybody who needs preferred choice of investment instruments these investors start using equities along
to do a big transaction. Property investment 18
for the emerging affluent, according to with other instruments, they could increase
Even if those aspects dont clean up, better customer Standard Chartereds The Race to the return on their savings by 48 per cent Stock/equities 17
service and faster dispute resolution could be game Save report. The over a 10-year period. In fact, 19 per cent of
changers. Realty has been down and out since 2012-13 Storing cash at home 15 (A) Friends and family 42
emerging affluent those in the 25-34 year age bracket keep
and associated sectors like construction have suffered as Company pension fund 12
well. A pick-up in activity or even the promise could
their savings in cash at home. The top (B) Financial institution/bank websites 39
priority for the emerging affluent is Regular deposit savings plan 0
push up prices.
childrens education (19 per cent) and (C) Financial planner/adviser 34
Rera will force some shakeout as well, since finan-
cially weaker developers and the less politically con- buying a home (14 per cent).
nected ones will simply not be able to negotiate it. The Retirement does not feature among They are in good financial health
sector has seen a sharp decline in valuations, though top priorities, even for those in the
45-55 age group. There is an Confident of Close to Invest every Invest
this is always tricky where real estate is concerned. There
are multiple ways to value developers. It is not easy to expectation that the younger achieving their top achieving the month for the top weekly for
extrapolate revenues. A company that generated ~X in generation will support savings priority top savings savings priority the top
one accounting period will not necessarily generate any- their parents priority savings
thing like the same amount in the next one. It could during priority
earn much more or much less. retirement, the
Prices can change sharply and demand can change a report states.
lot as well. A company that has liquidated inventory
might take a while to create its next set of assets. Valuation
of land banks using some sort of net asset value model is 97 35 50 17
equally vulnerable to variable land prices. So, while the
Act certainly does bring some hope, it will certainly not
be an instant cure. It will take years to liquidate invento-
ry, even assuming the retrospective clauses are invoked. Note: All figures are in % Source: Standard Chartered report The Race to Save

Use special power of attorney in property matters

Register the documents to ensure legal sanctity
TINESH BHASIN
on PoA, later found out that many
PASSING ON THE BATON other claiming a stake on the prop-
sell the property on behalf of the
original owner (donor of the PoA).
create interest of any nature - for
which a special power of attorney
WHEN ABROAD erty, leading to court cases.

Despite the Supreme Court (SC)
coming down heavily on misuse of
the power of attorney (PoA) and
clarifying its relevance, it contin-
ues to be misused. When Dhruv
Rawat was looking for a house, an
agent showed him a flat that was
sold by the government through a
lottery three years earlier. While it
was cheaper, there was a problem.
The owner was not allowed to sell it
for another two years. The agent
suggested an easy way out: The
owner gives Rawat an irrevocable
power of attorney. When Rawat
consulted a lawyer, he was advised
against the deal.
As there was a rampant misuse
of general power of attorney (GPA),
the SC had clarified that the instru-
ment does not give ownership title
to the holder, says Hormuz Mehta,
partner, J Sagar Associates. This
means the holder of a GPA cannot
Misconceptions: Many individu-
als traditionally used GPA in a prop-
erty transaction to avoid paying
stamp duty and registration. There
has been a misconception that the
GPA gives them ownership rights.
But, if theres a dispute, the GPA
holder could lose his rights to the
property, based on the apex courts
judgment, according to lawyers.
The GPA essentially means the
holder is an agent of the donor.
Explains Radhika Dudhat Pereira,
partner at Shardul Amarchand
Mangaldas: Depending on the
specifics of the GPA, the holder can
represent the donor in court, at a
bank, or any other institution. He
can apply for permissions at vari-
ous authorities. Its similar to a let-
ter of authority to undertake spe-
cific acts on behalf of the donor.
But it does not allow the holder to
will be necessary.
GPA is commonly used by non-
resident Indians (NRIs). They
authorise a person on their behalf to
take care of various matters back
home. It could be for representing
the owner in society meetings or
dealing with banks and other finan-
cial institutions. To make it a valid
legal document, a GPA needs to be
stamped and signed by a notary.
Clarity is still needed on whether
GPA continues to exist after death of
the donor or ceases as a valid legal
document. Various high courts have
taken different views on this, says
Mehta of J Sagar Associates.
PoA for immovable property: In
real estate-related matters, a spe-
cific or special power of attorney
(SPA) needs to be compulsorily reg-
istered to give it legal sanctity. The
stamp duty on this SPA varies
depending on whether the SPA is
given to a relative or a third party.
Explains Meenakshi Iyer, part-
ner at Advaya Legal: As per Article
48 of the Maharashtra Stamp Act,
the stamp duty payable on a spe-
cific PoA authorising to sell or
transfer immovable property, with-
out consideration when given to a
close relative like parents, siblings,
children, etc, shall be ~500. Other
states, too, follow a similar proce-
| Take a printout on plain paper
| Approach the Indian embassy or
consulate in the country
| Get the PoA attested by the authorities
| Send it to an attorney in India to
get it registered
not be put to use.
The stamp duty is collected at
dure, say lawyers. the time of registration of SPA to
If it is executed in favour of a fill the loophole that existed earlier.
person other than a close relative, In the past, there have been cases
authorising him to transfer (or sell) where an owner of a property sold
the immovable property, the stamp it to multiple buyers by giving them
duty payable is the same as that power of attorney. When a person
on the sale of property. Any PoA searches for titles at a registrars
granted to a person for sale of an office, the ownership of only those
immovable property will have to properties are reflected on which
be compulsorily registered with stamp duty and registration has
the applicable sub-registrar of been paid. Those owners who
assurances, failing which it can- entered into the transaction based
Be cautious: In cases like Rawats,
opting for an SPA can cause trou-
ble to the buyer in the future.
Theres already a time restriction
imposed by the government. If the
buyer still enters into a deal with
the house owner through an SPA,
and theres a dispute later, the buy-
er is likely to lose the case, accord-
ing to lawyers. The sale would be
termed null and void. Lawyers
suggest a property buyer should
avoid purchasing houses that have
government restrictions on sale.
These include state government
housing projects and slum rede-
velopment schemes. Many also
buy agricultural land based solely
on power of attorney not advis-
able, unless the original owner gets
the status changed to non-agri-
cultural. In property matters,
always consult a lawyer before giv-
ing a PoA or becoming a holder.