MoneYoga -Finance , Internet and other Ideas..

At 30 years of age should you buy that 90Lakh(1500 sqft) Apartment in a large city ?   Is the question which many of my friends have asked me over the last 2-3 years and each time i wanted to tell them it is a foolish thing to do because …. But held myself back  and advised them to really think if is makes sense  allowing them to commit hara-kiri. Most of my friends tell try to justify this as retirement planning  , i think that’s a convenient justification  . Today after reading the wonderful article on <Children in parents ego trap> i felt that this needs to be examined in several lights (Practically as well as from a Finance point of view)

Buying an apartment at 30 years  thinking that you are making an investment towards retirement planning  is almost akin to buying a car and using it for the rest of your life , the car will simply not last long enough. Let me explain

• If you decided to buy  a  90 Lakh apartment(1500 sft)  for which you have made down-payment of  30lakhs  and the rest of the 60 lakhs is own loan it would mean that you will pay ₹59k EMI over 20 years . This means that the total cost of apartment would be  Rs 1.4 crores(towards EMI) +1.3 crores (30 lakhs down-payment earning  compounded interest of 8 %). Thus the apartment costs 2.7 crores Rs in practical terms and not 90 lakhs as u imagined . This is the most important aspect which is missed in investment i.e people always say i paid 90 lakhs for my apartment and now it is valued at 1.5 crores  and boost about it to friends.
• Average Life expectancy of Indian male is now 68 years , since this is the average across people living with access to lower income and healthcare level , it would be safe to assume that you and ur wife would live for 75 years. You may live longer , but hey am quoting statistics here
• Average life of a RCC structure is 30-40  years, with enough focus being given on maintenance of the building else  it would be much lower at 20-25 years .  This means that when u are 70 years and still statistically can live for another 5 years your home may not be livable ! or worse you may need to spend money out of your pocket for repairing the home to make it livable. This is the reason why flats are never to be seen as investment opportunity because the value of the building starts to depreciate fast  in fact most bankers start depreciating the value of the building in 10 years !
• Now come to the value of land (undivided share of the land belonging to you) i.e if the building is demolished and sold how much will your share be worth !  . As the building as such is not worth anything after 15-20 years only thing that is valuable is your share of land.  From my personal experience and discussion with several of my friends who  own apartment i understood that a 1500 sq ft apartment  would mean  that you get an undivided share of 600 to 800 sft (depending on project having open amenities like garden , swimming etc) . So the valuable portion of what you have invested in an apartment is only 800 sft (higher side), which means that when you are investing  Rs 2.7 crores towards the 800 sqft of land this translates to Rs 33,000 /sqft in real terms.  Now what is expectation of the land prices after 20 years ?  Will it be more than Rs 33000/sqft  if so by how much more ?  i will leave the judgement to you … If Mumbai was a benchmark i think it is possible that in a city like Bangalore we may have a rate of 33000 Rs  in a normal locality of Bangalore after 20 years . So it really is not an investment as there is no returns or returns if at all would be very low !!!
• Also when we consider the practical issue of flats aging and needing to be demolished . Imagine what would be the situation then ? You need to get all the owners together to agree to demolish the building before you can sell the land to another developer . Each owner would have his /her own dynamics so getting all of them to agree to a common terms will be a big challenge. I know this has been done in Mumbai where apartments over 50 years have been demolished and the land sold to new developers , but imagine the hassle of doing this when u are old !

So what is the practical way out, should one not invest in an apartment at all ?   I think it would be simpler to do the following

• Stay in a rented home  during most of your working life (say till u are 55) => Lets calculate  what this means . Lets us assume you  would spend 15k to rent a apartment of your choice(similar apartment to what you can buy) . Assuming rental inflation of  5% each year you would end-up spending 85lakhs over 25 years. This way you always get to njoy the best maintained properties without the hassles of owning it !!! , but you dont own any asset ..:( . Yes that is a downside but upside is that you have only spent 85 Lakhs as against 2.7 crores , so you still have 1.9 crores in net savings as opposed to a home purchase !.
• Now when it time to retire i think of 2 real options => Move to another city (tier-2 or tier-3) . Remember that 25 years down the line most cities will have all infrastructure that we will take from granted in a major metro cities , so moving to tie-3 town does not mean you are compromising on any thing at all in terms of life style , but yes properties there will be much more lower prices than the major cities. So buy an apartment with your corpus of 1.9 crores …
• Second option would be to continue to stay in rented home , but of lesser requirements i.e move into a 1 bhk instead of 3 bhk now . Anyways kids will not be around then

I am sure these options may be sounding outlandish and too idealistic , but what am trying to highlight is that your 90 lakh apartment is not an investment !!! At best it is a way of saving money up for long term. The same objective can be achieved by putting money into stocks, fixed deposits over a long time. To give you the prespective , it is believed that over long term 20-25 years equities offer 10 -15 % returns thus instead of investing into an apartment you can save up a bigger corpus from the same money spent towards EMI. I can understand the emotional angle to own a house is also there but my point is that we should never mix up the emotional parts and the financial parts.  Purely from financial point of view i think buying an expensive apartment  (90 lakhs +) is akin to buying a lottery and hoping that you make much more than what you have paid for !…

To discuss more you are always welcom to write me @ avinashmkb78@gmail.com …

Rgds

Avinash MB

Hi ,

This would be my second update on our entrepreneurial journey after my previous post <Start of an entrepreneurial Journey>. As i write this update  i sense the adrenaline rush of having gone through a roller coaster ride in the last 2 .5 months hence the title of the post “1st lap” ! . Along the line we have had to unlearn the big company mindset which both me and Santosh had got used to and learn the quickly the world of start-ups . To not let the cat out of the bag , i would first talk about the changes which we have made to our business and then would  i would like to document some quick learning’s which i hope would be useful for startUp enthusiasts.

Business of Complaints -> Venting Platform -> Realtime Feedback for businesses

The title of this section lets it all away . Yes we are no longer in the business of  handling complaints from consumers and we changed our primary business twice in the last 2.5 months !

Business of Complaints: After a month of working on consumer complaints we realised that people who are raising complaints on our platform are hoping to get a resolution by coming to our platform  and the only way we could have happy customers was to resolve their complaints.  The primary premise that companies would respond to negative publicity was not working even after we got 10s of complaints against a single company. This meant that in order to keep our user happy we had to follow up their complaints individually with the companies and soon we realised that the companies were  either too slow in responding to followup from our side or were not approachable because no one person was responsible for complaint handling in the company  . At the same time we met a top-tier VC who advised us that this business is not scale able due to the fact that we need to  hire more employees to followup on complaints to scale up which means that we did not meet the criteria of scale-able businesses. The investors are looking for scale-able businesses to invest  so we decided to move on and try to pivot into another area.

Venting Platform : The venting platform or rather a platform where we could say anything about any product or place was our next idea. The basic premise of this business idea was to provide a platform which is different from FB and Twitter (friends and followers) where i could say anything i wanted to say about a place or product to other consumers who have been to the same place or have used the product. In simple words if you had a great experience about place or product you want to not only share it with your friend but would also love to interact with other people who have had the same experience.

Before executing this idea  we made analysis of what makes a successful B2C product like instagram <Find out the secret sauce of Instagram, Pinterest, Facebook and Foursquare>  and then started to chart our features of our product and also started to work on the product. During this time we met another investor who gave us some insights into B2C business which we did not have earlier . The point made by him was that  the Indian market  is too premature to make a product like this as the user base in India is too low and asked  us not to get carried away by numbers like 100 million internet users in India . He bought out a prospective that even a super successful business like Flipkart has only 2 million consumers only thus we have very low real internet savvy users  and to make a successful B2C product supported by only ad revenue  we need 10 million users or more (FourSquare is still struggling with 20 million subscribers with no revenue model in sight after 5 years). The message was simple this is a long haul game with no investor appetite in India and weaning investor appetite globally and hence not something that 1 st time entrepreneurs should try. We were glad to get this advice as it bought us back to reality and asked us to focus on a problem which can be monetised quickly.

Realtime Consumer Feedback:  During our study of the venting business we realized that there are other problems which we could tackle headon . One of the most obvious ones which struck us was that the businesses don’t have an easy way to understand the pulse of consumers and hence look at many proxies like mystery shoppers , feedback forms (who fills those still !!) , CSAT survey and what not. But still we figured that the forms of gathering feedback are not effective either because they are cumbersome for consumer (e.g  feedback forms) or miss the moment of truth in an experience because they are not gathered then and there !.  This gave birth to our next idea “Realtime Business feedback”. The experience which the user has had is often expressed in a single sentence e.g “The Cafe latte at CCD was super” or “The toilet at Shopper’s stop sucks , will never come back”. The companies don’t ever get to hear such feedback because they don’t make the effort to capture such feedback simply because the tools used by them are not meant for this sort of feedback . Normally a company would give the consumer a feedback form which had loads of unnecessary details in it or could make a CSAT call a week later by when it is probably too late.  This is the need which we want to address and after some study we realised that any easy to use approach for this could be an in-store request to give feedback using an SMS ! . The appeal of SMS is simple as all we are asking the consumer to do is to summarize his experience in a single sentence in a medium he is already used to (SMS) and  that the feedback is captured then and there.  The feedback mechanism also allows businesses to react in real time as we are raise alerts based on the content of the text e.g In case the customer complaints about AC we can immediately alert the facilities manager of a store in realtime. Thus a business can gather feedback and react immediately to correct problems.

We are now working in full flow on this business idea by speaking to several businesses to validate the idea before starting our development. As of now we have started to develop our product which would take SMSes from end consumers and analyze the sentiment of the sentence (positive , negative , neutral). Apart from this we would use NLP (Natural Language processing)

This was a short summary of our journey as a start-up and boy it has been a wondeful exciting journey till date.

After 8.5 years with NSN family and total 13 years if workexperience I have decided to part ways  and to focus on my dream of creating a service which would add value to the people .  The decision to move is something which has been in the planning phase for the last 3 years.   During the last year we evaluated several ideas and then finally landed with the idea of using the power of internet to fight back the companies which are providing shoddy services and products . This was the thought process with which we have created www.shoutout.co.in  in beta version using our own funds. This venture would be co-founded with Santosh AR who happens to be  NSN employee too. During the last several weeks I have spoken to several of you and received some super feedback and new ideas which would help us make us effective , I would like to extend my thanks to each one of  you to give me a opportunity to speak to you and explain what Shoutout is all about  , for those of whom I could not meet in person , here is a short summary of what we intend to do at Shoutout…

What Shoutout is and what it is not ….

Shoutout is a consumer complaints board which would help you to amplify your complaint using the power of Internet so that the companies are forced to respond fearing negative publicity .  This means that logging a complaint with us on our portal  may not result in a immediate resolution of your problem , but then why should you use our platform ? .. The picture below shows how we intend to add value to consumers  . While a single complaint may not see a resolution immediately , over time we would have sufficient complaints which would adversely affect a company’s online reputation and then we would be approaching these companies to tie up so that they can look into individual complaints . On our part we would invest in a setup which validates the complaints by reviewing it in detail to  ensure that it is genuine complaint  and has all relevant information for the company to resolve the complaint.

Now that I have explained what we are , I also would like his article to clarify what we would not be doing

•  We don’t promise to followup on individual complaints , but we would be following up on a group of complaints by tying up with the companies .We would  exploiting the fear of  negative publicity on our  platform to get them to look into complaints and resolve them.
•  We don’t accept complaints against government bodies and personal complaints as we believe that our approach of using the power of internet would not work in these types of complaints.

If you like to follow how ShoutOut initiative is progressing I suggest that you like our Facebook page https://www.facebook.com/ShoutoutIndia  or subscribe to our twitter feed http://twitter.com/#!/shoutoutIndia .

Avinash MB

New Email : Avinash.mb@shoutout.co.in

Phone number : +919845328822

What’s a scrollable comic, you might be wondering? Head to ShoutOut to get a glimpse.

It is one of the coolest ways to interactively convey website’s message to people. You don’t need to use lots of text, you simply use visual cues manipulated by the arrow keys (or whatever navigation mechanism your device has) and you can move around inside the comic. As you scroll down the comic, story of the comic builds up and you will understand more of the website’s message.

A quick background on ShoutOut: It is a new service to empower you and me, the consumers in India. You can compare this service to Yelp.com but instead of reviews you have complaints. Yes, we are all aware of how lousy companies and organisations can act in India simply because there is no redress mechanism. There is a consumer court but it hardly does anything when you approach it. Besides, instead of approaching the courts, sometimes you just want to register a complaint somewhere so that the others can see them and be warned.

The ShoutOut team is also looking for like-minded investors who are passionate in creating a people-forum for consumer redressal. Up till now the founders have funded the entire idea themselves but in order to give it a required marketing push, more funds will be required. Send email to googly.media@gmail.com if you are interested.

So why scrollable comic? And why Rajnikanth?

Have you had enough of Rajnikanth?.  Definitely no, according to the promoters of ShoutOut. That’s why, “Rajni Sir” is the central character in the comic who moves around and shares his experiences. Since he is adorned hero, his superpowers are further augmented by the information he gets from, yes, you guessed it right, from ShoutOut.

It’s definitely an innovative way to communicate a website’s message. It immediately grabs attention of the visitors. There is constant interactivity as you have to scroll downwards or upwards in order to experience the storyline. Different events and triggers take place as you reach particular spots. Since there is always something or the other happening, you cannot take your eyes off the screen unless you have reached the end and drawn the conclusion Isn’t this every copywriter and advertiser aspires to achieve?

The online scrollable comic at ShoutOut is complete HTML 5 stuff. This is a new web design and development protocol that is quickly eliminating the need of Flash and embedded videos. This latest technology stores animation data locally (in cache) so that there is no lag while using the graphics needed for smooth transitions. HTML 5 also makes it possible to view heavy duty graphics and videos across devices. So whether you’re viewing the ShoutOut scrollable comic on your computer/laptop screen, or your latest iPhone or Samsung smart phone, you practically get the same experience.

There is another salient fact about this comic; despite using cutting-edge technology all the talent that has gone into creating this marvellous comic has come from within India. All graphic designers, programmers and developers came together from their respective locations (collaborating in the cloud, of course).

So enjoy the comic and then use the website to empower yourself

This is one of my older articles which i republishing this for the reference of people .

Retirement Planning – Have you thought it through ?

Yesterday during lunch we had an interesting discussion on the need for retirement planning and this is a topic which on my mind for a long time and have been considering different options and tools to arrive at a solution for retirement planning. Realizing that most of us think that retirement is too far away why should i plan for it type of mindset i decided that i should bring awareness about this topic and this article attempts to do the same by considering my own personal example to arrive at a decent plan for retirement . What is retirement ? I believe it means many things to different people . To simplify the definition i would keep it as a state where one is not working in a regular full time job and you would spent your time with things that u are passionate about without having to worry about day to day needs from being taken care of. As the tagline of ICICI Prudential says -> ‘Retirement Matlab World’s Best Jobs’ , do the best job without worrying about financial consequences. Given this as a definition lets get down to do the retirement planning for Mr Joe.

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Name : Mr Pradeep – 30 YEARS

Monthly Expenses : 25 ,000 Rs (excluding the cost of housing).

Retirement Possibilities : 40 YEARS or 50 YEARS (Lets calculate for both)

Average Inflation over the next 10 to 20 years: 6%.

Monthly Expenses at Age 40 : Using inflation of 6% , it would be around 45,000 Rs.

Due to inflation the value of money comes down , so what costs Rs 25k now would cost 45k after 10 years.

Monthly Expenses at Age 50: Around 90,000 Rs.

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Now based on certain reasonable assumptions we have arrived at monthly requirements at age 40 and age 50. Now we should look at various means by which we can earn regular income at age 40 and 50. As we have assumed that at retirement you would not be working in a fulltime job and doing something which u are passionate about lets for a moment assume that you don’t earn too much money doing things u are passionate about (i know we can argue differently , but given that we are talking about something which would happen after 10 or 20 years it is a fair assumption to make that we have no means of income and have an own house to stay in.)

So we need to build a CORPUS of fund ! Now lets estimate the CORPUS of money which we need to get a regular income of Rs 45 k or Rs 90k. Again we need to make some assumptions for this.

Rate of Return Expected from CORPUS : 6 %(conservative ,mix of debt and equity)

• CORPUS Need to Get 45K/MONTH (Retire at 40) : 90 LAKHS CORPUS
• Need to Get 90K/MONTH(Retire at 50) : 1 CRORE 60 LAKHS.

So now that we know what kind of money that is needed at 40 and 50 years we need to build this corpus of money and how are we going to do the same. By saving regularly right ? (cant think of any other way:) ) so to have a CORPUS which is close to what i have mentioned what is to be done . We need to save regularly either debt/equity , again for this we need to assume some rate of return .

Average Rate of Return over 10 YEARS and 20 YEARS : 8 %

• To save 90 lakhs of Corpus to retire at 40 years Monthly saving needed : 48000Rs.
• To save 1 Crore 60 LAKHS of corpus to retire at 50 years Monthly saving needed : 27000 Rs.

Please note that the above saving requirements are just for retirement planning , am not talking about other expenses like childs education , marriage etc etc…. So did the number shock u ???? It did shock me !!! I remember a line from an ad which said retirement planning the earlier the better … The same number would have been much lesser if i had started saving from 21. Hope this short article gives an insight into retirement planning . Remember we are in a generation where GOVT does not take care of you by paying pensions. I envy my father and all Govt servants who get paid pensions from Govt… !!

comments and feedback at avinashmkb78 (at) gmail.com