When you handle personal finance you need to be a little soft, a little hard and sometimes cruel. It is like giving medicines to a kid. Not many clients want to listen to bitter advise.

Imagine a professional who wants to invest Rs. 3 crores in a business, where I think he will earn only about Rs.  17-18 L from that business. I do not expect that business to be active for more than a period of 7-8 years…LOL who said finance is easy to understand or intuitive ?

Recently a 42 year old wanted to buy a house. To me it makes no sense at all – his salary just does not justify such an expensive home! He was short by Rs. 10-12 lakhs. He approached me to talk to his dad. Now his dad is happier listening to me than listen to his son. The parents do have Rs. 15L and sparing the money would not have been a cash flow problem either. However the father (who has two sons) did not want to set a precedent – so he was hesitating. Also he realised that the son had a very limited repayment capacity, and was hoping that he could collect his share of his dad’s property in advance.

The father mentioned it to me albeit a little reluctantly. Now I had the delicate job of conveying it to the son.

The CA degree came in handy. I said we need an agreement – and the rate of interest will be the same floating rate as Hdfc’s floating rate. The ITO will ask for it, the son was told. One of the witnesses would be the other son so that he knows the transaction and the brothers know how the final estate had to be settled.

I also wanted the agreement franked, so that meant officially there was a contract. I insisted that the loan should be for a short period – say 5-7 years. This would ensure a quick repayment….

Yuck why do I have to render such free advice….and keep 2-3 people unhappy, one person very unhappy…and others reasonably bored with such advise? search me!!

When the son saw all this, he hesitated and has now decided to look for a smaller house…                QED

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  1. What is ITO ? The Income Tax Office ? Franked is making a loan a formal contract ? Do these seem very basic questions to you ?

  2. Income Tax Officer, Franked is stamping a loan document – in this context I meant creating a formal document.

    the standard deviation of blog readers is too great. Aiming at the average reader is tough. May not be too basic..but I guess Google and Investopedia can help, na?

  3. subra! “agreement”, interest, and stamp duty too… just brilliant.
    bahu saru chey.
    hats off, boss.
    after all your real estate posts, I have put word out for the smallest apartment in my area. Fraction of net worth etc. but thank you for reminding me of opportunity costs/ relative returns.

  4. Subra,

    Isn’t financial advisory free in India ? Why should the receipient pay ? Is there a value or a price which you would want to use as a base ? When u buy a car.. there is base price. How do u quantify intangibles , as in the advisory ?

    These you could use as the topic for the next blog…..

  5. as long as people think what i write is advisory, they will not pay. God bless them. To pay for advisory you should at least know what is advisory and what is global gyaan. God bless them again.

    I have nothing against those who pay or those who do not pay.

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