Conservative advice?
I have no clue whether I am being conservative, old, scared while giving advice!
Here are a couple of cases:
One person with an annual income of Rs. 200,000 per annum supporting parents, wife and 2 children wanted to buy a house. Hold your breath, he was being given a Loan of Rs. 8L by a mortgage lender. Do I need to tell you the name of the most aggressive home loan giver who also sold him a life insurance plan?
I was aghast. I said with your current income, I am surprised you are able to live.
He was living hand to mouth, depending on handouts from friends and relatives – and continues to live so. His wife was clear that she would not live in a rented house. He lost his mother (she was draining him medically speaking). His father gets a pension of about Rs. 9000 – which takes care of the household expenses.
Another case is a young couple with 2 young children. The Husband works in a company which seems to have no great future. The wife works in different companies at different points in time – and both are not very qualified. I guess they both will barely qualify to be called graduates. This graduation too is by some correspondence course. At least the H is over paid and if his company was to close down he may not get a job elsewhere. They have 2 children – the second is an accident I heard, hey but the kid is a reality!
This young couple have committed to a Rs. 50L loan – used to fund a Rs. 70L house. The 20L has come from his parents (her father is dead and step mother could not care). Now they are struggling to pay the EMI, school fees, creche,..You would think they would cut down all expenses and repay the loan, right?
Wrong. She potters around with the equity market and trades regularly. THEY recently went for a vacation to Sri Lanka. They must have spent money in 6 digits I presume? He has mortgage which will clear off in 20 years. Well well. No comments.
Yes I know she lost a bunch, but I have no clue how is her overall market. In a rising market everybody looks like a winner, does he not?
Was I being conservative? Are these people taking too much risk?
How does a person earning Rs. 200,000 supporting 1 parent and 2 school going kids SURVIVE?
i HAVE NO CLUE…WHAT SAY?
Ameya Gondhalekar
Sir – Just reading that gives me goosebumps. But as they say – “risk” is a subjective word.
Ganesh
Sir,
It is an increasing phenomenon that people want to enjoy today and not worry about future. The old school thought of “stretching one’s legs to the extent of mat” is lost. By the time reality hits, it might just be too late.
Frankly, I feel these guys are blessed to have received advice from you. I sincerely hope they take it seriously and do some corrective actions.
Jeet
Most of India, (if you believe income tax numbers, then 99% of India) makes less than 2lakh per year. And I guess they are surviving… I understand that this situation is bad. This is a good example that living in cities having super rich friend circle biases how we look at things.
subra
99% of them do not buy a house for Rs. 28L with almost nil upfront payment. Why, 99% of Indians do not know that this blog exists….
sandeep
Dear Subra,
Non-event(s) is our lives has been a big “Ram Bharose” driver…I have had hard beating and tough time to deal with 2nd kid… so far so good!
Krish
Do the survey among zero income earners who could be students, home makers, retirees who misspent their corpus, debt ridden farmers and so on, you would see shocking phenomena of jumping in to the bandwagon instantly when you offer a loan.
Students want to show off to their girl/boy friends. Home makers want to supplement H/W income. Retiree thinks they can avoid mistreatment of DIL with the side income and Farmers thinks govt would dissolve the loan one day.
I don’t fault loan takers but certainly loan givers.
MiraD
In a metro, this 9000 for monthly household expenses just wont work for 4 adults +2 kids. In my humble opinion. And I run a tight budget.
Mohit Goyal
Sir,
Pardon me if I didn’t get the overall crux of article correctly, because I have to differentiate here.
(1) how is this person surviving in 2L/yr. I agree, and empathise too (one of my first cousin also has similar plight. But trust me – he still sends his 2 children to one of the better schools). As for ‘wanting’ a house, again I see nothing wrong. Look the wife knows their situation. She is making a smart move here indeed, as for a couple of such meagre income – the retirement will be virtually non-existent. Atleast a house then (they may have to really stretch themselves now) would be a big cushion!
(2) H is overpaid and W is not too well qualified. Agree. However, you didn’t share their incomes. It is impossible for us readers to judge if 50L loan over 20-years is justified or not here. Also they go to Sri Lanka means they spend 1.25-50L easily. As a “reader”, I’d presume their monthly combined take-home to be 1L+ Again I see nothing wrong then, for a home loan of 50L here…
It is like saying, because you have a loan, you should stop living currently? That would defeat the very purpose of taking a loan & paying interest on it…
Narasimmamurthy Radakrishnan
The writer mentioned the burden of a house EMI which the debtor finds difficult to service.
Milder but more wasteful is the education of children in management quota (read – fees not affordable) by liquidating ancestral assets. The parent overlooks the fact that the (lack of ) merit of the child who could not bag a seat in Government college. Even counselling has no effect on parent since they feel that they are fulfilling their duty !
It is another story that the child if it all it passses may not land a job paying more than Rs 6,000