This is a post totally opposite to the topics which I write. This is not on markets and is some crazy Sunday Thoughts.
Its a biased/stupid/senseless view of a Full Time Equity Professional and in love with Equity who has bought a Flat recently part EMI ( ah tax benefits etc ) but still stays on rent and has been for many years for various logical reasons. ( Needs a Different Post) .
If you do not like the post its fine 
This is not what am good at so can just trash it.
This is not what am good at so can just trash it.
In my profession i meet people from various backgrounds/profession and a very peculiar section is a lot of mid-aged people frustrated with their jobs or at a plateau in their careers either because they hate the work they do or many other reasons .Constantly in a race to earn more with not much of savings left from their salaries but live in a superb locality thanks to their parents or themselves having pitched in with the EMIs.
Let me tell you about a couple of sample cases. ( One can change the nos as per their city and friends.)
This example only is for a particular sample of working professionals. City in Example - Mumbai.
1) A 35-45 year old Spouse and Spouse with 1/2 kids in a 12 lakhs in hand per annum job. Could be both working or only one. Roughly 18-48 lakhs p.a family income.
( if you are not in the above set or will not be in the future please do not read ahead )
Financial and Personal Condtion.
Parents have either expired or one of them is around and some stay independent. ( Lots of probable medical expenses in future )
Flat of 1 bhk/2 bhk at Khar to Town - Worth 4 crores. ( you can take a good locality in your city.)
So there are 3-6 people staying in this house and family income is roughly 12 lakhs with single earning member or 18-24 lakhs with two earning members.
Annual Expenses - 10-15 lakhs.
Liquid Savings in FD/MFs etc – 10-20 lakhs
LICs ULIPs etc – 5-10 lakhs
Credit Card Loans/Emis. ( Car Loans, Home Loans )
For the last many months Mr X is trying to find a new job or start a new business. Nayi Job mil nahi rahi aur business karne ka risk apetite hai nahi. Totally frustrated and irritated all the time. Not able to give time to the family. Slogging in a job which takes away 10-16 hours a day.
What can he/she do ?
1) Continue to crib about the job he/she has started to hate. ( even people business / self-employed can hate their work.)
2) Remain irritated and frustrated. Watch News Channels on TV and debate about Modi to Indrayani.
3) Keep thinking and dreaming about the great business idea he/she has !! ( never looking at whether it is feasible or not. Every other friend dreams of opening a hotel / restaurant or a startup. )
An interesting solution which is very tough to take !!
Taking a case where only one of the Spouse will quit.
1) Sell the House for 4 cr. ( Log Kya kahenge ? Ghar Bech Diya – Loot Gaya ye to. )
There is not much expense in selling a Flat. ( Stamp Duty et all mainly paid by the buyer )
2) Search a flat in Andheri to Kandivli or even Navi Mumbai / Thane. ( most offices / jobs/ biz are anyways shifting there.)
It will cost you around 2 crores to buy a 2 bhk which will be much bigger then the one in Khar-Town.
3) Invest the money in Fixed Deposits and some in Equity MF. Start the new business.
If you put 1.5 cr in Fixed Deposits should get around 80k-100k in Interest Income. ( This is equivalent to your Current Take Home )
The 50 lakhs in Equity MF can help in creating some Retirement Fund in next 20-30 years. ( would not be anywhere close to what you need but something is better than nothing in equities )
Now you need not worry about the Monthly Income !!
Neither do you need to worry about your Job.
You can start a Business with your earlier Savings and hope to not lose it all. Even if you do your monthly expenses are taken care of. You can even think of a "Sabbatical".
4) Go back to the same Job.
You might start loving your job or find a job which you love even if pay is lesser
But Will you Do This or even Think about it ?
Another solution which is more tougher/crazier according to people.
1) Sell the House for 4 cr.
2) Keep 3 crores in Fixed Deposit. 1 cr in Equity Mfs etc.
Interest Income would be 175k-200k.
1 cr in Equity MFs will help in retirement income.
3) Take a rented house of 3 bhk. Should cost you max 1 lakhs per month. ( taking this on a higher side as lot of biases about renting.)
Can pay the rent as well as your Monthly Expenses with the interest income.
Now you need not worry about the Monthly Income !!
Neither do you need to worry about your Job.
You can start a Business with your earlier Savings and hope to not lose it all. Even if you do your monthly expenses are taken care of. Also it can be a "sabbatical" or an attempt to try what you like.
4) Go back to the same job
You might start loving the job or find a job which you love even if pay is lesser.
But its tough to do Any of It and doubt anyone will do it or even think about it !!
Hopefully in above solution you will spend more time with yourself and your Family.
In any case the hunt is to strike a Balance where your X square Feet
But !!
You are actually looking at buying another Flat as you read in the newspapers that Real Estate Prices are falling and you can get a good deal. You will find a new job at 15-25% hike so you can pay the EMI for the second flat and when your Son/Daughter starts earning he can continue the EMI or you finish the loan and let the son/daughter get married and stay in this Flat or take a bigger flat in the future or give it in inheritance.
You were a Slave of Your House and do you want your Next Generation too ?
Try calculating the no of Hours you actually spent awake in your house in a week. Its 25% approx of your time.
See how much of your income/networth is going into the house.
Amazing returns given by real estate in last decade or two has never allowed us to think financially. I hope returns continue in the next decade and we need not think and life goes on.
But personally I think Real Estate will not be able to do that over the next decade.
The myth that real estate will always beat inflation is going to start hurting a lot of people.
COMMENTS/SOLUTION FROM READERS
Adding some interesting comments and solutions from readers. Will keep posting this.
1) By Mr Chetan Shah
Hi Nooresh,
Your investment advice is partly in the realm of philosophy. I say this because we refuse to believe that philosophy (mostly not our own but others') is the underpinning of all our choices. Urban people are almost frightened of the word philosophy and spirituality in day to day life.
Let me ask you a question. Why do you stop at two options - selling the downtown home and moving uptown or renting? Why do you not provide a third option - move the hell out of Greater Mumbai.
My third option is exactly that. I ask everyone - is Mumbai gaining more from you, or are you gaining more from Mumbai?
You (age 40 onwards) can only gain more from Mumbai if you are an entrepreneur, or a highly successful executive who cannot have such career in another location. Families with spouses of this age earning between Rs.12-24 lakh (USD 20-40 thousand a year), working and commuting 12-14 hours a day with low probability of furthering income are just like 'kolhu ke bail', beasts of burden. I suspect there are lots of beasts of burden even at higher income levels.
Their option 3 is to move out to a smaller town, with lesser real estate prices, better space, better availability of social infrastructure such as gardens, affordable eateries, better drives around town, more parking space, lesser work/commute per day, better family time, neighbours and friends available for relaxed chat even on a working day and fresher fruit and vegetables. The precondition is that they should try to find a job or a mom and pop business to run that will provide lesser topline, but reasonable bottom-line to maintain or improve lifestyle.
Their kids can of course go to Mumbai for PG studies and stay in a hostel. But they have no benefit from hanging on to Mumbai like commuters hanging almost outside its local trains. Why not lead a dignified and healthy life in Surat, Nasik, Ludhiana, or Coimbatore?
Regards,
Chetan Shah
PS: I am a born Mumbaikar who can see more wrongs with the city than rights, several times thinly escaping physical violence while discussing this issue with devout Mumbai fans! Left Mumbai in 2007 at a mture age.
2) Sebastian
HI Nooreshji,
Good work at weekend,
Its to read and think about people still living hard, with lots of assets as gold and land in Kerala or may be in some other Indian states too
Should say that...
"A thought about tomorrow is good, But nobody still not living Today"
By thinking and lots of tensions of future.
Well done,
Sebastian
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