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‘Teaser rates were actually helping builders’

india Updated: Dec 05, 2010 21:08 IST

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Mint, Hindustan Times and NDTV, bring you a personal finance show, Let’s Talk Money. The weekly call-in show, anchored by Monika Halan, editor, Mint Money, and Manisha Natarajan, editor and senior anchor, special programmes, NDTV, aims to answer viewers’ questions about money-related issues. Here are edited excerpts from the show that aired over the weekend on NDTV Profit and NDTV 24x7.

Natarajan: HDFC and ICICI Bank have ended teaser rates on home loans. The RBI, in its review of the monetary policy, had made it clear that it was uncomfortable with teaser rates offered by banks on home loans. Banks were asked to make additional standard provisioning for teaser loans. Monika, does this signal the end for teaser rate home loans? And is that good in general?

Halan: They were not harmful, but they were not helpful either...two-thirds of all home loans were construction-linked, which means by the time you came on to your full EMI, that low-rate period was already over. Also, after the LIC Housing Finance issue, there is panic with regulators and they are pushing banks to stop these loans. They were not helping you, they were helping the builders.

Dhruv Shah, 32, businessman from Canada: I moved from India to Canada six years back. I make R50 lakh a year and my wife makes R14 lakh a year. I started an LIC policy five years back for R50 lakh and R1 crore two years back. Both will give me monthly returns after the age of 50. I also started two years back a R25-lakh LIC policy for my wife which will give monthly returns after she turns 47. Recently, I have started SIPs in three funds: Birla Sun Life Frontline Equity Growth — R5,000 per month; HDFC Top 200— R5,000; ICICI Prudential Infrastructure Fund —R5,000. We also bought a two-bedroom apartment for R1.8 crore on mortgage, for which I have made a down payment of 10%. Will I be able to support my family if I retire at 50 in India?

Halan: You have an income of `50 lakh a year. You should have at least `2 crore of insurance cover. Choose a term insurance plan, go to ApnaPaisa.com, go to PolicyBazaar.com, search for the cheapest term plans. There are companies that will be able to give you one in Canada, you don’t have to come here.

Rekha Pillai, 47, teacher from New Delhi: My money worries: income — R34,000 per month, investments —R23,000 per annum in LIC Money Back policy; R10,000 per annum in LIC pension policy; R40,000-50,000 per annum in National Savings Certificates/Kisan Vikas Patra; R1 lakh invested in tax-saving mutual funds for last three years; R5,000 per month in post office saving scheme; R3,000 per annum on LIC mediclaim policy. I have a house of my own and an EMI of R6,000 per month on my car due to end on April 2012. I think I need to look at a little more at aggressive investing. I would also like to know a little about demat accounts.

Natarajan: Just a few names which we would like to see in your portfolio — diversified equity funds like HDFC Top 200, Birla Sun Life Frontline Equity. You can also look at DSP BlackRock Top 100. Start an SIP (systematic investment plan) with your surplus of R10,000-15,000. You can look at R5,000 in a diversified equity fund, start another SIP of R5,000 in a balanced fund. HDFC Prudence, HDFC Balanced, Tata Balanced and Reliance Regular Savings Balanced are good names to go with. You will have to open a demat account with any of the broking houses. Go with a reputed name. Once you open a demat account, you will naturally get a little bit aggressive about your money, you can look at IPOs (initial public offerings) and FPOs (follow-on public offerings), which are likely to come up in the next six months to one year. So a lot of possibilities will open up in terms of equities once you open your demat account.