Sunday, March 30, 2008
Maybe
Maybe it will all end in a big bang. Maybe it didn't begin with a big bang, as they had us believe. Maybe we will drug, smoke, drink, kill each other to death over land, oil, egos. Or maybe curiosity, that killed the cat, will get to us too, with so many ways to know so much more. Maybe we have found our ultimate mass suicide weapon - information - addictive, sweet, manipulative, fatal... Maybe.
Monday, February 18, 2008
US NRI Investment Guide - Part 4 - Real estate
Disclaimer: I am not an expert or even a seasoned investor in the stock market – I am just an interested layman trying to apply some common sense to the market to sustain the value of my assets. Hence, none of this is intended to be investment advice and I do not take responsibility for any consequences that may arise by investing based on this post. Feel free to use or ignore any thoughts proposed here at your own discretion. Thanks.
An NRI can invest in homes or land in the USA, and also in the same in India. Investing in real estate in the USA is more transparent and secure, but is currently under what might be the beginning of a long downturn, where people may not be able to get mortgages approved for at least the next few years. However, once the real estate market bottoms out, it may make sense to buy into US real estate as well. The US also provides investment in real estate through REITs in the form of ETFs – these are simply traded on the exchange and avoid the logistical overhead of buying or selling land directly. Consider for instance, RWX (international REIT ETF) and VNQ (US REIT ETF). However, for the same reasons listed above, this may not be the best time to buy into real estate in any form.
Real estate in India, on the other hand, is a more complex beast, which we will discuss next.
First off, the real estate scenario in India is fraught with legal and bureaucratic risk. Many stories are told of lands that have been sold simultaneously to multiple parties. What documentation is needed for clear transfer of a piece of property to another person is not a universally accepted norm in, for instance, Bangalore, India. Some buyers are satisfied with just a GPA (general power of attorney) transfer, whereas others are particular about all the documents being clearly available. Some legal documents are not being released by the government due to various reasons, and hence the risk associated with purchase of land is higher today in many cases.
Clear land with clear title documents in a reasonably developed location is now exorbitantly overvalued, and the upside potential of such land in most tier I cities in India is suspect.
However, the rewards of buying land in India have been tremendous. Most people who bought land in a then suburban area of a major city in the 90s or early 2000s, and held onto it till date, are enjoying returns that can only be described as astronomical. For example, one piece of land close to the center of the city has grown around 8 to 9 times in a period of about 4 years.
Also note that an NRI is allowed to invest in most real estate, but not in some kinds such as farmlands. (See http://www.rbi.org.in/scripts/FAQView.aspx?Id=52 )
I have listed below a general process for benefiting from real estate investment in India (I have avoided discussion of commercial real estate since I do not know much about it – all these recommendations are related to residential real estate):
1. Focus on city suburbs (land sold in grounds – one ground is 2400 square feet) or rural land (land sold in acres – one acre is 43560 square feet).
2. While purchasing city suburbs, focus on buying land that is less than 500 rupees per square foot. This is because land in most cases plateaus out somewhere in the range of 5000 to 10000 rupees per sq ft. The lesser the price the higher the theoretical potential for growth. As long as the area is growing, or has a reason for growth, the percentage growth of a property worth 500 rupees per sq ft is likely to be higher than the percentage growth of a property worth 5000 rupees per sq ft.
3. An exception may be made to the last rule in case of unusual demand. For instance, you may buy land worth 1000 rupees per sq ft if available in, say, a distress sale, in a more central area of the city that has huge upside potential (which may be measured by close by properties being sold for say, five times that value).
4. While buying rural land, make sure that the land is already converted – conversion is a process where the government has converted formally agricultural land into land that can be used for residential purposes. Conversion is a process that has a lot of risks associated, so, avoid any land that has conversion under process.
5. Avoid agricultural land and farm houses. NRIs are not allowed to purchase such properties in most cases, and they need to be converted to be saleable as residential properties.
6. Avoid buying apartments as an investment – apartments, especially in tier one cities, cost way more than they can get in returns, and the upside potential is also stunted by the fact that the supply of apartments is, in general, increasing by the day. For every apartment complex that is completed, there are at least three or four new ones being built in the neighborhood (in most developing areas). Also, the growth in value of investment in an apartment is automatically slower than the growth of the investment in land – since the cost of construction material does not go up as rapidly as the underlying land.
7. Avoid buying homes as an investment – homes in most developing areas are likely, over time, to be replaced by apartments. Also, in most cases, the land is the appreciating part – the value of materials, etc. increases more gently than the value of the land.
8. Buy land that can be protected from encroachment – encroachment, or illegal occupation of land is a common problem in India – hence, if you are buying land, be sure to fence it, and if possible, have someone you trust watch over the land periodically.
9. Buy land that is recommended by someone you know and trust personally – this is critical for most land dealings in India, as there are several land based scams – people selling land that they do not own, people selling the same land to multiple people, people selling land that has a lien on it, people selling land that has a legal dispute over it, are all cases that have become commonplace.
10. Do not buy land that is too close to a developing government project such as a new highway, or a road widening project, etc. – recalculation of the dimensions could lead to your land being taken over by the government.
11. Preferably buy land (especially city land) that has some construction nearby – this reduces the chance of the land being grabbed by miscreants, or used by government or other projects.
12. Check the price of the land from neighboring sources – before buying any land, ask neighbors or people in the area, what the land in the area is worth – sometimes the easiest scams are where the land is worth a lot less than what you pay, since the prices change very frequently.
13. Always verify all documents associated with the land – have a lawyer, preferably from the same state or region (since laws vary by state in terms of what documentation is needed, etc.) look at the documents and certify that it is in order.
Disclaimer: I am not an expert or even a seasoned investor in the stock market – I am just an interested layman trying to apply some common sense to the market to sustain the value of my assets. Hence, none of this is intended to be investment advice and I do not take responsibility for any consequences that may arise by investing based on this post. Feel free to use or ignore any thoughts proposed here at your own discretion. Thanks.
An NRI can invest in homes or land in the USA, and also in the same in India. Investing in real estate in the USA is more transparent and secure, but is currently under what might be the beginning of a long downturn, where people may not be able to get mortgages approved for at least the next few years. However, once the real estate market bottoms out, it may make sense to buy into US real estate as well. The US also provides investment in real estate through REITs in the form of ETFs – these are simply traded on the exchange and avoid the logistical overhead of buying or selling land directly. Consider for instance, RWX (international REIT ETF) and VNQ (US REIT ETF). However, for the same reasons listed above, this may not be the best time to buy into real estate in any form.
Real estate in India, on the other hand, is a more complex beast, which we will discuss next.
First off, the real estate scenario in India is fraught with legal and bureaucratic risk. Many stories are told of lands that have been sold simultaneously to multiple parties. What documentation is needed for clear transfer of a piece of property to another person is not a universally accepted norm in, for instance, Bangalore, India. Some buyers are satisfied with just a GPA (general power of attorney) transfer, whereas others are particular about all the documents being clearly available. Some legal documents are not being released by the government due to various reasons, and hence the risk associated with purchase of land is higher today in many cases.
Clear land with clear title documents in a reasonably developed location is now exorbitantly overvalued, and the upside potential of such land in most tier I cities in India is suspect.
However, the rewards of buying land in India have been tremendous. Most people who bought land in a then suburban area of a major city in the 90s or early 2000s, and held onto it till date, are enjoying returns that can only be described as astronomical. For example, one piece of land close to the center of the city has grown around 8 to 9 times in a period of about 4 years.
Also note that an NRI is allowed to invest in most real estate, but not in some kinds such as farmlands. (See http://www.rbi.org.in/scripts/FAQView.aspx?Id=52 )
I have listed below a general process for benefiting from real estate investment in India (I have avoided discussion of commercial real estate since I do not know much about it – all these recommendations are related to residential real estate):
1. Focus on city suburbs (land sold in grounds – one ground is 2400 square feet) or rural land (land sold in acres – one acre is 43560 square feet).
2. While purchasing city suburbs, focus on buying land that is less than 500 rupees per square foot. This is because land in most cases plateaus out somewhere in the range of 5000 to 10000 rupees per sq ft. The lesser the price the higher the theoretical potential for growth. As long as the area is growing, or has a reason for growth, the percentage growth of a property worth 500 rupees per sq ft is likely to be higher than the percentage growth of a property worth 5000 rupees per sq ft.
3. An exception may be made to the last rule in case of unusual demand. For instance, you may buy land worth 1000 rupees per sq ft if available in, say, a distress sale, in a more central area of the city that has huge upside potential (which may be measured by close by properties being sold for say, five times that value).
4. While buying rural land, make sure that the land is already converted – conversion is a process where the government has converted formally agricultural land into land that can be used for residential purposes. Conversion is a process that has a lot of risks associated, so, avoid any land that has conversion under process.
5. Avoid agricultural land and farm houses. NRIs are not allowed to purchase such properties in most cases, and they need to be converted to be saleable as residential properties.
6. Avoid buying apartments as an investment – apartments, especially in tier one cities, cost way more than they can get in returns, and the upside potential is also stunted by the fact that the supply of apartments is, in general, increasing by the day. For every apartment complex that is completed, there are at least three or four new ones being built in the neighborhood (in most developing areas). Also, the growth in value of investment in an apartment is automatically slower than the growth of the investment in land – since the cost of construction material does not go up as rapidly as the underlying land.
7. Avoid buying homes as an investment – homes in most developing areas are likely, over time, to be replaced by apartments. Also, in most cases, the land is the appreciating part – the value of materials, etc. increases more gently than the value of the land.
8. Buy land that can be protected from encroachment – encroachment, or illegal occupation of land is a common problem in India – hence, if you are buying land, be sure to fence it, and if possible, have someone you trust watch over the land periodically.
9. Buy land that is recommended by someone you know and trust personally – this is critical for most land dealings in India, as there are several land based scams – people selling land that they do not own, people selling the same land to multiple people, people selling land that has a lien on it, people selling land that has a legal dispute over it, are all cases that have become commonplace.
10. Do not buy land that is too close to a developing government project such as a new highway, or a road widening project, etc. – recalculation of the dimensions could lead to your land being taken over by the government.
11. Preferably buy land (especially city land) that has some construction nearby – this reduces the chance of the land being grabbed by miscreants, or used by government or other projects.
12. Check the price of the land from neighboring sources – before buying any land, ask neighbors or people in the area, what the land in the area is worth – sometimes the easiest scams are where the land is worth a lot less than what you pay, since the prices change very frequently.
13. Always verify all documents associated with the land – have a lawyer, preferably from the same state or region (since laws vary by state in terms of what documentation is needed, etc.) look at the documents and certify that it is in order.
Disclaimer: I am not an expert or even a seasoned investor in the stock market – I am just an interested layman trying to apply some common sense to the market to sustain the value of my assets. Hence, none of this is intended to be investment advice and I do not take responsibility for any consequences that may arise by investing based on this post. Feel free to use or ignore any thoughts proposed here at your own discretion. Thanks.
US NRI Investment guide - part 3 - Debt
Disclaimer: I am not an expert or even a seasoned investor in the stock market – I am just an interested layman trying to apply some common sense to the market to sustain the value of my assets. Hence, none of this is intended to be investment advice and I do not take responsibility for any consequences that may arise by investing based on this post. Feel free to use or ignore any thoughts proposed here at your own discretion. Thanks.
Disclaimer: I am not an expert or even a seasoned investor in the stock market – I am just an interested layman trying to apply some common sense to the market to sustain the value of my assets. Hence, none of this is intended to be investment advice and I do not take responsibility for any consequences that may arise by investing based on this post. Feel free to use or ignore any thoughts proposed here at your own discretion. Thanks.
Debt is the safest form of investment short of securing your money as cash in an environment proof and heavily guarded fortress. The most secure form of debt instrument is in government backed instruments, such as treasury bonds in the US. However, the returns of such instruments is very low, and barely covers inflation in the US or in India. The minimum amount required to invest directly in such instruments is usually very high for an average retail investor, and so, most people invest in such instruments indirectly, through mutual funds.
Another similar debt investment is bank deposits, which provide similar yields. Such deposits are generally insured by the FDIC upto some limit in the US (usually 100000 USD), but arent generally insured in India. You can find options for bank deposits in the US at http://www.bankrate.com/brm/rate/deposits_home.asp and in India at http://www.ratekhoj.com/fixeddeposit/index.php . Note that the best NRI deposit rates in India are usually in the one year term.
Corporate deposits in India are riskier, but yield slightly higher returns. Again, speaking in general, the risk involved in corporate deposits is usually not worth the associate return potential. I would rather invest in equity if I want more returns, or in bank deposits if I want to minimize risk. Other instruments, such as income or debt based mutual funds are also available in both countries. The US also has exchange traded debt funds, such as BND.
Some guidelines for investing in debt instruments for a US NRI:
1. India provides better returns overall in debt instruments than the US – Indian returns are to the order of 9% per annum, which is much higher than the US returns (of 3.5%) at this time (Feb 2008).
2. Park US money in a money market fund in the US for the best returns: for instance, Fidelity municipal money market funds gave 1 year returns of 3.29% and lifetime annual returns of 3.76% (see http://content.members.fidelity.com/mfl/summary/0,,316048107,00.html ) – since this income is tax free, it beats most US bank deposits – which return about 3.5% (see http://www.bankrate.com/brm/rate/deposits_home.asp ). There are also savings deposits such as those from ING Direct and HSBC, but they also invite tax, and hence do not match the returns of the money market funds. They have an advantage of further liquidity, since money can be removed from it at any time, as opposed to a bank deposit, which has a term.
3. In India, divide the debt portion of your portfolio between NRI Fixed Deposits and fund based instruments - FMPs and quarterly debt interval funds.
a. NRI FDs yield much higher rates in non-repatriable FDs (NRO FDs) than repatriable FDs.
b. FMPs or Fixed Maturity Plans are like debt mutual funds, and they provide the benefit of not being taxable (if held for a minimum period of one year). However, FMPs have gone out of favor among asset management companies after the cost of starting an FMP was increased fourfold (see http://sify.com/finance/fullstory.php?id=14535046 ). A better choice today may be quarterly debt interval funds (QDEFs). Both FMPs and QDEFs have very low expenses as they invest in other debt instruments.
c. Quarterly debt interval funds are mutual funds that in general have a high exit load (i.e, the amount you have to pay if you withdraw), but every quarter, they give the choice to withdraw at no load. This provides a good degree of liquidity, and the benefits of mutual funds – no tax, etc.
The preferred mode for investing in India is in quarterly debt interval funds – though they are slightly riskier than bank NRI FDs (they do not guarantee a fixed return), they provide tax benefits, and also usually provide slightly better interest rates than a bank FD of the same term. In the US, park your debt portion of the portfolio in a money market fund, and maybe a portion in a high yield e-savings account for diversification. Another portion can be put into an inflation protection fund or ETF (such as TIP) which may protect against the event of hyperinflation in the case of a US recession.Disclaimer: I am not an expert or even a seasoned investor in the stock market – I am just an interested layman trying to apply some common sense to the market to sustain the value of my assets. Hence, none of this is intended to be investment advice and I do not take responsibility for any consequences that may arise by investing based on this post. Feel free to use or ignore any thoughts proposed here at your own discretion. Thanks.
US NRI Investment Guide - Part 2 - Investment Avenues
Disclaimer: I am not an expert or even a seasoned investor in the stock market – I am just an interested layman trying to apply some common sense to the market to sustain the value of my assets. Hence, none of this is intended to be investment advice and I do not take responsibility for any consequences that may arise by investing based on this post. Feel free to use or ignore any thoughts proposed here at your own discretion. Thanks.
There are several investment avenues available to the US NRI investor. The choice of which items to invest in, and in what proportion, is driven by a combination of the risk-reward nature of each security, the individual’s understanding of the security, and the risk profile of the individual. For instance, based on my understanding of investment options, the following securities are the only ones I am considering at the current time: debt, real estate, equity, gold and international currencies. Of these, debt, real estate and equity are the growth/sustenance portion, while gold and currency are used to hedge against inflation and currency devaluation risks.
There are other avenues such as commodities, art, franchises, etc. which we will not discuss here at this time.
In general, the safer (less riskier) the security, the lower the potential of returns, and the higher the predictability of returns. Hence, an ideal portfolio will ideally consist of a mix of low risk, low reward securities and higher risk, higher potential return securities. For example, a sample mix in today’s scenario could be 20-50% in debt, 20-50% in equity, 2-5% in gold, 20-50% in land in India and 2-5% in international currencies. What actual percentage you choose would be based on your appetite for risk, and the risk associated with each security.
Disclaimer: I am not an expert or even a seasoned investor in the stock market – I am just an interested layman trying to apply some common sense to the market to sustain the value of my assets. Hence, none of this is intended to be investment advice and I do not take responsibility for any consequences that may arise by investing based on this post. Feel free to use or ignore any thoughts proposed here at your own discretion. Thanks.Saturday, February 16, 2008
>13% of US households will owe more mortgage than their house is worth
"As for the sub-prime crisis, it is estimated that by the end of this year, 15 million U.S. households could be 'upside down' on their mortgages."
That's over 13% of all US households!
Read entire article here.
That's over 13% of all US households!
Read entire article here.
Tuesday, February 12, 2008
US NRI investment guide - part 1 - background
Disclaimer: I am not an expert or even a seasoned investor in the stock market – I am just an interested layman trying to apply some common sense to the market to sustain the value of my assets. Hence, none of this is intended to be investment advice and I do not take responsibility for any consequences that may arise by investing based on this post. Feel free to use or ignore any thoughts proposed here at your own discretion. Thanks.
An NRI (Non-Resident Indian) in the US has several choices to invest: in the US stock market, in the Indian stock market, in funds in either place, in real estate in either place, in gold, commodities, foreign currencies.
In order to make the right investment choices, the investor should understand the following facts about the US and India.
1. The indian rupee has been strengthening against the dollar.
This means that the number of rupees to a dollar has been decreasing in recent times.
The exchange rate is currently around 39.6 rupees to the dollar. This chart shows the drop in the last five years. Especially note the steep drop in 2007 from around 44 to 39.6.
What caused this trend? (See http://economics.about.com/cs/money/l/aa022703a.htm for a great overview of exchange rates and what causes exchange rates to vary). There are several factors in the rupee dollar trend:
a. The PN problem:
Foreign Institutional investors (FIIs) are allowed to channel investments from individual investors in their country anonymously into the Indian market, using a mechanism called Participatory Notes (PNs).
Recognizing the potential of the Indian stock market, huge fund inflows from such investors, through FIIs, have been pouring in. In order to buy indian securities, foreign investors need to get Indian Rupees in exchange for dollars. This high demand for Indian Rupees and excess supply of dollars caused the rupee to strengthen against the dollar.
b. The Indian stock market has been growing at a rapid pace:
The Sensex, India’s key stock index, has grown from 7000 in Jun 2005 to 21000 in Jan 2008 (see ). This has also led to a demand for Indian rupees, to buy shares in the Indian stock market as opposed to other choices, causing the rupee to strengthen vis-à-vis the dollar.
c. The US stock market has been falling in the last few months. This causes US investors to sell dollars and invest them in other economies. This surplus of dollars in the market also leads to the weakening of the dollar.
d. The real estate market in the US has been falling.
This further weakens the dollar, as US investors look elsewhere to invest their money.
All these factors together have caused the rupee to strengthen relative to the dollar.
2. The Indian stock market has been growing rapidly in the last three years, and a correction is beginning to happen.
As you saw, the Sensex has grown threefold in the last three years (7000 in June 2005 to 21000 in Jan 2008), but it has dropped 5000 points to 16630 from Jan 8th to Feb 11th 2008. This drop was triggered by a combination of recession fears in the US, overestimation of the quick money potential of the Reliance Power IPO by FIIs and the consequent disappointment in the Indian stock market.
Expert predictions range, as usual, from the market reaching back to 4 digit figures, to rebounding at 15000 to already beginning to turn around. That pretty much means anything can happen – but, there seems to be consensus that it is unlikely to see astronomical growth as seen in the last few years.
3. Gold has seen significant growth in the last year: This is a common situation in turbulent economic conditions. However, gold (in rupees) has had almost consistent growth in the last thirty years.
4. Real estate boom in India is also beginning to plateau out:
The BSE realty index launched in mid 2007, is an indirect indicator of the real estate trends in India. It shows that real estate grew till end 2007, and began sliding down slightly from January. This was to be expected, as land and housing costs were growing astronomically. See, for instance, an excellent explanation of why renting makes so much more sense than buying an apartment in Bangalore.
5. Fundamentals of Indian stock market are strong compared to the US stock market.
Real GDP Growth rate
US - 1.9%
India - 8.4%
Inflation
US - 2.3%
India - 4.4%
Current account balance : This is the sum total of money received versus spent through import/export, transfer of fund between residents and non-residents.
US = -788.293 billion USD
India = -32.301 billion USD
In the next part, we will look at the different investment avenues available to the individual US NRI investor, and analyze the pros and cons.
Disclaimer: I am not an expert or even a seasoned investor in the stock market – I am just an interested layman trying to apply some common sense to the market to sustain the value of my assets. Hence, none of this is intended to be investment advice and I do not take responsibility for any consequences that may arise by investing based on this post. Feel free to use or ignore any thoughts proposed here at your own discretion. Thanks.
An NRI (Non-Resident Indian) in the US has several choices to invest: in the US stock market, in the Indian stock market, in funds in either place, in real estate in either place, in gold, commodities, foreign currencies.
In order to make the right investment choices, the investor should understand the following facts about the US and India.
1. The indian rupee has been strengthening against the dollar.
This means that the number of rupees to a dollar has been decreasing in recent times.
The exchange rate is currently around 39.6 rupees to the dollar. This chart shows the drop in the last five years. Especially note the steep drop in 2007 from around 44 to 39.6.
What caused this trend? (See http://economics.about.com/cs/money/l/aa022703a.htm for a great overview of exchange rates and what causes exchange rates to vary). There are several factors in the rupee dollar trend:
a. The PN problem:
Foreign Institutional investors (FIIs) are allowed to channel investments from individual investors in their country anonymously into the Indian market, using a mechanism called Participatory Notes (PNs).
Recognizing the potential of the Indian stock market, huge fund inflows from such investors, through FIIs, have been pouring in. In order to buy indian securities, foreign investors need to get Indian Rupees in exchange for dollars. This high demand for Indian Rupees and excess supply of dollars caused the rupee to strengthen against the dollar.
b. The Indian stock market has been growing at a rapid pace:
The Sensex, India’s key stock index, has grown from 7000 in Jun 2005 to 21000 in Jan 2008 (see ). This has also led to a demand for Indian rupees, to buy shares in the Indian stock market as opposed to other choices, causing the rupee to strengthen vis-à-vis the dollar.
c. The US stock market has been falling in the last few months. This causes US investors to sell dollars and invest them in other economies. This surplus of dollars in the market also leads to the weakening of the dollar.
d. The real estate market in the US has been falling.
This further weakens the dollar, as US investors look elsewhere to invest their money.
All these factors together have caused the rupee to strengthen relative to the dollar.
2. The Indian stock market has been growing rapidly in the last three years, and a correction is beginning to happen.
As you saw, the Sensex has grown threefold in the last three years (7000 in June 2005 to 21000 in Jan 2008), but it has dropped 5000 points to 16630 from Jan 8th to Feb 11th 2008. This drop was triggered by a combination of recession fears in the US, overestimation of the quick money potential of the Reliance Power IPO by FIIs and the consequent disappointment in the Indian stock market.
Expert predictions range, as usual, from the market reaching back to 4 digit figures, to rebounding at 15000 to already beginning to turn around. That pretty much means anything can happen – but, there seems to be consensus that it is unlikely to see astronomical growth as seen in the last few years.
3. Gold has seen significant growth in the last year: This is a common situation in turbulent economic conditions. However, gold (in rupees) has had almost consistent growth in the last thirty years.
4. Real estate boom in India is also beginning to plateau out:
The BSE realty index launched in mid 2007, is an indirect indicator of the real estate trends in India. It shows that real estate grew till end 2007, and began sliding down slightly from January. This was to be expected, as land and housing costs were growing astronomically. See, for instance, an excellent explanation of why renting makes so much more sense than buying an apartment in Bangalore.
5. Fundamentals of Indian stock market are strong compared to the US stock market.
Real GDP Growth rate
US - 1.9%
India - 8.4%
Inflation
US - 2.3%
India - 4.4%
Current account balance : This is the sum total of money received versus spent through import/export, transfer of fund between residents and non-residents.
US = -788.293 billion USD
India = -32.301 billion USD
In the next part, we will look at the different investment avenues available to the individual US NRI investor, and analyze the pros and cons.
Disclaimer: I am not an expert or even a seasoned investor in the stock market – I am just an interested layman trying to apply some common sense to the market to sustain the value of my assets. Hence, none of this is intended to be investment advice and I do not take responsibility for any consequences that may arise by investing based on this post. Feel free to use or ignore any thoughts proposed here at your own discretion. Thanks.
Monday, February 11, 2008
India as compared to the US in 2007
The following is a mail I wrote in reply to a friend (AV) in the US, after coming to India for a few months break after many years in the US.
The context is whether my friends should send the chequebooks that the Indian bank mailed to the US due to a flaw in their address change process, or whether I walk up to them in India and have them delivered to my Indian contact address.
I have altered the mail slightly to remove specific names of people and organizations, but have retained the basic spirit of the essence:
AV wrote:
My reply:
Your argument is amusing - it captures the gestalt of the difference between how you perceive India to be when you are in the US, and how it actually feels when you live in India. I have been meaning to capture the essence of that difference, and this is as good a chance as any to do it. So be prepared for a long essay below - read at your leisure:-)
Taking this specific instance, I'll elaborate on your three arguments below from an 'NRI slowly turning Desi' approach:-):
1. In order to help them correct and update your address, the only true recourse I have is to fill out a change of address form, which i have done already, and submitted, and it has been accepted (I am cutting a long story short here - I had to fight with the manager of the main branch here, to get to even meet the only guy in that branch who could do it. I have spent well over 5 hours, and a few thousand rupees in taxi cabs in my trips to the bank, and I learnt that the baseline for everything else - getting a card, etc. - is to get my change of address done, which they have screwed up.). Most likely, if I go to them, they will be confused, as one part of their records will tell them that the change of address has been executed already. They may even refuse to take the form as the change of address is done. It is a bit like one of the tasks in the twelve tasks of Asterix, where they go to a government building and almost go mad getting the right forms as they are kicked around between contradictory responses
2. "if they have made a mistake they should be correcting it" - Ah, that is the very essence of the difference between the US and India - it is not about whose mistake it is. It is about (once you have identified a mistake) how much you can get someone to do to address your needs - I did think like you when I started interacting with
a) The apartment we live in collects maintenance fees to take care of all electrical, wiring and plumbing issues - however, the wiring needed for phones is only in the living room, and we have been asking them to fix it for the bedroom since we moved in - they promise everyday that they'll come in tomorrow (at least they are consistent with that:-))
b) I bought a music system from a shop that turned out to have bad sound quality, and when I tried to return it, he refused to even consider a refund. He told me to take something else. He had nothing that I needed. Now, i am forced to take whatever I can from his pile of junk, including rechargeable batteries, etc. to make up the money.
c) I have employed a driver, who is quite a nice guy - an average driver, but a good sincere person, etc. I pay him 5000 rupees a month, although we dont use the car most days. However, he lives near electronic city. If we get back home later than 8:15 pm, he misses his last bus and needs to be paid auto charges over and above the salary (anywhere from 100 to 150 rupees a trip). There are other drivers who are local, but they are not as dependable as this guy. I wouldnt trust them alone with my car as I can trust this guy. The result? I am paying this guy an additional 1000 to 2000 rupees. I have asked him to get a scooter or something so he can ride back if it is late. Discussions are ongoing:-)
d) The gas in our kitchen leaks through a nut, though very slowly. We have notified the owner, and they did bring out a guy, which took nearly three weeks - apparently the guy who does the copper and nut work is heavily in demand and hard to get. He did fix it, and even charged for some new nuts, etc., but it still leaks. Now, we have no real option but to call him again. The issue is still open in our bug database:-)
e) My driving instructor, apart from the fee charged by the driving school, requires a tip everyday - he even has the audacity to ask for it as 'gurudakshine' (tribute paid to the master by a student in ancient Indian schools) :-)
f) Some places accept rental agreement as address proof, but banks and some places do not. Some people need a gas connection proof or a ration card, etc. It is never clear what is needed unless you spend the half day in traffic (and petrol, other expenses) to get to the office and talk to the persons there.
g) We had a bunch of stuff delivered to our house, but they almost never come at the time they give. If they say they'll come in the evening, they land up in the morning. S and I were stuck inside the house even though we had a lot of things to do outside, mainly because of this for the last month or so. Only after we bought our car, we are able to move around.
h) Everyone we ask about anything (directions, what form to fill to get something done, etc.) has an answer - a confident answer, and there is exactly a 51% probability of their being right. It is the 1% above the mean that is keeping this place from collapsing under its own inefficiency.
I could go on and on, but I guess you get the flavor of the way things work out here.
3. 'Why I should pay for their screwup' - this is a question that I started with, but it doesnt quite work that way here. I went in a cab to a friend's house. I had called the friend out of his apartment, which takes a few minutes as it is a large apartment. We were waiting outside his apartment, when a cop harrassed my cab driver to pay a bribe/fine claiming it was a no parking zone. We were still standing with the engine running, and we were in the car, but such technicalities fall short when facing a cop determined to make his bribe. And that makes sense - why should the guy even consider your arguments when his goal is dishonest to begin with? Now, I landed up paying the driver, as it may have cost him from his salary.
OK, so all that said, you must be thinking that I hate it out here and regret my decision of coming out here. To the contrary, I absolutely love this place.
I live in a beautiful 8th floor apartment with a view of a lake, the freeway a little beyond, and high rise apartments at a distance. During diwali, due to a large number of communities along the horizon, we had an all night fireworks display, all across the horizon. It was better than most fireworks I have seen anywhere. The apartment has 24 hour security, round the clock power and water supply, and I have installed a water purifier that brings water that is even better (tastewise and healthwise) than the bottled mineral water we get here. There is a nice walking track around the house with some greenery, children's playground, etc. and it is fun to walk around when it is not raining. This apartment is neither too near nor too far from the main road, so there is lesser noise and dust, and at the same time, the city and the airport are near by (about 10 minutes and 20 minutes distance respectively in low traffic - double that if there is moderate traffic).
We have a rented apartment, a car, a maid, a cook, a driver, and may retain an all day baby helper as well. All of this would ring in at less than 30k (where the car was bought outright) a month. I can go out wherever I want, whenever I want, and as long as I am inside an Air conditioned car, I can read, work, anything, while stuck in traffic. Traffic is also not as bad as it seems - there are certain pockets where you get stuck especially at peak hours, but since I am not commuting in peak hours, I can get away without much traffic if I time my trips right. If I plan in advance, I can fly to any place within India for less than 5000 rupees. Even better, we can get anything delivered to our house - from a pack of milk to food to groceries to clothes to furniture - most deliveries happen same day or next day, and are usually free.
I just need to embrace rather than fight the realities of things out here. We were born in this environment, and used to know how to live here. If we realize that most of the ambiguity is a direct consequence of poverty, then we can learn to be much more tolerant with the things here. For instance, I was initially indignant when our driving instructor had the audacity to ask for a tip, and even that as gurudakshine which has some very pure connotations. However, later, I learnt from him that he earns just 3000 rupees a month! His entire survival relies on tips. I asked him why he didn't opt for a driver job, where he would get 5000 or more. The difference he said is in the timings. Driver jobs are not timebound - instructor job is strictly 6 am to 6 pm. Now I have no qualms tipping him.
R N put it nicely, about driving in India versus the US, and I am paraphrasing - in the US, the rules dictate how you drive, so you can drive with your mind shut. In India, your intuition dictates how you drive, and as long as you give your intuition complete control, you can drive quite comfortably and it is far more enjoyable as well. This statement is equally true for getting things done in the two places. In the US, there is a law that determines what you should do, so you can turn to the law (or the policy book) to decide how to get things done. In India, you have to focus on what to get done (and pick your battles there depending on what matters more and what matters less) and how you can get it done the way that you have decided is the right resolution for you. In many cases, this may involve things we hate doing such as lying, bribing, being 'diplomatic', listening to crap from guys you wouldnt even want to talk to otherwise.
One last anecdote: when I was in *an Indian software company* about ten years ago or so, they had a rule that required employees to wear a tie one day a week. Some of us found that rule ridiculous, and protested it in whatever ways we could. A senior colleague there gave me some advice that I remember to this day: if you want to fix something that you dont agree with, then argue it out, but follow the rule when you are arguing. Dont stop following the rule while arguing it, since you will be the one who suffers the most. This could well be out of Machiavelli or Chanakya Neeti or the 48 Laws of Power as well... I think we need to try and fix it, but assume that it may or may not get fixed. In fact, I have learnt to start with the assumption that nothing will get done on time, and many things wont get done at all out here. If I have that as the assumption, then every little thing that actually gets done (and they all do eventually) turns out to be a joy.
Re the bank issue - you are right. It is their incompetence that is responsible for the misdelivery of cheques. However, given the time and the effort already spent on them, the best algorithm I have found (for such issues in general) is as follows:
1. Call them,
2. Tell them the problem,
3. and send them whatever letters they need
The context is whether my friends should send the chequebooks that the Indian bank mailed to the US due to a flaw in their address change process, or whether I walk up to them in India and have them delivered to my Indian contact address.
I have altered the mail slightly to remove specific names of people and organizations, but have retained the basic spirit of the essence:
AV wrote:
We think that while we could send you the cheque book via mail/courier, it probably makes more sense to request another cheque book from your bank for the following reasons:
1. Help them correct and update your address (they have the US address right now)
2. If they have made a mistake, they should be correcting it
3. Sending across the cheque book by courier could be unsafe, not to mention expensive (why should you pay 30-50$ for their screw-up?)
My reply:
Your argument is amusing - it captures the gestalt of the difference between how you perceive India to be when you are in the US, and how it actually feels when you live in India. I have been meaning to capture the essence of that difference, and this is as good a chance as any to do it. So be prepared for a long essay below - read at your leisure:-)
Taking this specific instance, I'll elaborate on your three arguments below from an 'NRI slowly turning Desi' approach:-):
1. In order to help them
2. "if they have made a mistake they should be correcting it" - Ah, that is the very essence of the difference between the US and India - it is not about whose mistake it is. It is about (once you have identified a mistake) how much you can get someone to do to address your needs - I did think like you when I started interacting with
a) The apartment we live in collects maintenance fees to take care of all electrical, wiring and plumbing issues - however, the wiring needed for phones is only in the living room, and we have been asking them to fix it for the bedroom since we moved in - they promise everyday that they'll come in tomorrow (at least they are consistent with that:-))
b) I bought a music system from a shop that turned out to have bad sound quality, and when I tried to return it, he refused to even consider a refund. He told me to take something else. He had nothing that I needed. Now, i am forced to take whatever I can from his pile of junk, including rechargeable batteries, etc. to make up the money.
c) I have employed a driver, who is quite a nice guy - an average driver, but a good sincere person, etc. I pay him 5000 rupees a month, although we dont use the car most days. However, he lives near electronic city. If we get back home later than 8:15 pm, he misses his last bus and needs to be paid auto charges over and above the salary (anywhere from 100 to 150 rupees a trip). There are other drivers who are local, but they are not as dependable as this guy. I wouldnt trust them alone with my car as I can trust this guy. The result? I am paying this guy an additional 1000 to 2000 rupees. I have asked him to get a scooter or something so he can ride back if it is late. Discussions are ongoing:-)
d) The gas in our kitchen leaks through a nut, though very slowly. We have notified the owner, and they did bring out a guy, which took nearly three weeks - apparently the guy who does the copper and nut work is heavily in demand and hard to get. He did fix it, and even charged for some new nuts, etc., but it still leaks. Now, we have no real option but to call him again. The issue is still open in our bug database:-)
e) My driving instructor, apart from the fee charged by the driving school, requires a tip everyday - he even has the audacity to ask for it as 'gurudakshine' (tribute paid to the master by a student in ancient Indian schools) :-)
f) Some places accept rental agreement as address proof, but banks and some places do not. Some people need a gas connection proof or a ration card, etc. It is never clear what is needed unless you spend the half day in traffic (and petrol, other expenses) to get to the office and talk to the persons there.
g) We had a bunch of stuff delivered to our house, but they almost never come at the time they give. If they say they'll come in the evening, they land up in the morning. S and I were stuck inside the house even though we had a lot of things to do outside, mainly because of this for the last month or so. Only after we bought our car, we are able to move around.
h) Everyone we ask about anything (directions, what form to fill to get something done, etc.) has an answer - a confident answer, and there is exactly a 51% probability of their being right. It is the 1% above the mean that is keeping this place from collapsing under its own inefficiency.
I could go on and on, but I guess you get the flavor of the way things work out here.
3. 'Why I should pay for their screwup' - this is a question that I started with, but it doesnt quite work that way here. I went in a cab to a friend's house. I had called the friend out of his apartment, which takes a few minutes as it is a large apartment. We were waiting outside his apartment, when a cop harrassed my cab driver to pay a bribe/fine claiming it was a no parking zone. We were still standing with the engine running, and we were in the car, but such technicalities fall short when facing a cop determined to make his bribe. And that makes sense - why should the guy even consider your arguments when his goal is dishonest to begin with? Now, I landed up paying the driver, as it may have cost him from his salary.
OK, so all that said, you must be thinking that I hate it out here and regret my decision of coming out here. To the contrary, I absolutely love this place.
I live in a beautiful 8th floor apartment with a view of a lake, the freeway a little beyond, and high rise apartments at a distance. During diwali, due to a large number of communities along the horizon, we had an all night fireworks display, all across the horizon. It was better than most fireworks I have seen anywhere. The apartment has 24 hour security, round the clock power and water supply, and I have installed a water purifier that brings water that is even better (tastewise and healthwise) than the bottled mineral water we get here. There is a nice walking track around the house with some greenery, children's playground, etc. and it is fun to walk around when it is not raining. This apartment is neither too near nor too far from the main road, so there is lesser noise and dust, and at the same time, the city and the airport are near by (about 10 minutes and 20 minutes distance respectively in low traffic - double that if there is moderate traffic).
We have a rented apartment, a car, a maid, a cook, a driver, and may retain an all day baby helper as well. All of this would ring in at less than 30k (where the car was bought outright) a month. I can go out wherever I want, whenever I want, and as long as I am inside an Air conditioned car, I can read, work, anything, while stuck in traffic. Traffic is also not as bad as it seems - there are certain pockets where you get stuck especially at peak hours, but since I am not commuting in peak hours, I can get away without much traffic if I time my trips right. If I plan in advance, I can fly to any place within India for less than 5000 rupees. Even better, we can get anything delivered to our house - from a pack of milk to food to groceries to clothes to furniture - most deliveries happen same day or next day, and are usually free.
I just need to embrace rather than fight the realities of things out here. We were born in this environment, and used to know how to live here. If we realize that most of the ambiguity is a direct consequence of poverty, then we can learn to be much more tolerant with the things here. For instance, I was initially indignant when our driving instructor had the audacity to ask for a tip, and even that as gurudakshine which has some very pure connotations. However, later, I learnt from him that he earns just 3000 rupees a month! His entire survival relies on tips. I asked him why he didn't opt for a driver job, where he would get 5000 or more. The difference he said is in the timings. Driver jobs are not timebound - instructor job is strictly 6 am to 6 pm. Now I have no qualms tipping him.
R N put it nicely, about driving in India versus the US, and I am paraphrasing - in the US, the rules dictate how you drive, so you can drive with your mind shut. In India, your intuition dictates how you drive, and as long as you give your intuition complete control, you can drive quite comfortably and it is far more enjoyable as well. This statement is equally true for getting things done in the two places. In the US, there is a law that determines what you should do, so you can turn to the law (or the policy book) to decide how to get things done. In India, you have to focus on what to get done (and pick your battles there depending on what matters more and what matters less) and how you can get it done the way that you have decided is the right resolution for you. In many cases, this may involve things we hate doing such as lying, bribing, being 'diplomatic', listening to crap from guys you wouldnt even want to talk to otherwise.
One last anecdote: when I was in *an Indian software company* about ten years ago or so, they had a rule that required employees to wear a tie one day a week. Some of us found that rule ridiculous, and protested it in whatever ways we could. A senior colleague there gave me some advice that I remember to this day: if you want to fix something that you dont agree with, then argue it out, but follow the rule when you are arguing. Dont stop following the rule while arguing it, since you will be the one who suffers the most. This could well be out of Machiavelli or Chanakya Neeti or the 48 Laws of Power as well... I think we need to try and fix it, but assume that it may or may not get fixed. In fact, I have learnt to start with the assumption that nothing will get done on time, and many things wont get done at all out here. If I have that as the assumption, then every little thing that actually gets done (and they all do eventually) turns out to be a joy.
Re the bank issue - you are right. It is their incompetence that is responsible for the misdelivery of cheques. However, given the time and the effort already spent on them, the best algorithm I have found (for such issues in general) is as follows:
1. Call them,
2. Tell them the problem,
3. and send them whatever letters they need
4. Expect them to screw up again. So assume that the issue will never get fixed, and take all other precautions (which is why I want to retain the chequebook that they sent to the US, as I assume that they will screw up again)
5. If I dont hear back I ping them once a week to remind them. They usually promise a resolution by next day, and then, nothing happens.
6. If they still screw up, go back to 1.
7. Eventually, they will fix it - I cannot be sure when, what effort it would take, and as long as I assume they will screw up, I get a little pleasant surprise when they eventually fix it:-)
If you got this far, congrats:-)
...
- A
5. If I dont hear back I ping them once a week to remind them. They usually promise a resolution by next day, and then, nothing happens.
6. If they still screw up, go back to 1.
7. Eventually, they will fix it - I cannot be sure when, what effort it would take, and as long as I assume they will screw up, I get a little pleasant surprise when they eventually fix it:-)
If you got this far, congrats:-)
...
- A
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