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By:

Kaustubh Kale

10 September 2024 at 6:07:15 pm

Silent Money Killer: Loss of Buying Power

In personal finance, we often worry about losing money in the stock market, dislike the volatility associated with equities or mutual funds, or feel anxious about missing out on a hot investment tip. Yet the biggest threat to our wealth is far quieter and far more dangerous: loss of buying power. It is the invisible erosion of your money caused by inflation - a force that operates every single day, without pause, without headlines, and often without being noticed until it is too late....

Silent Money Killer: Loss of Buying Power

In personal finance, we often worry about losing money in the stock market, dislike the volatility associated with equities or mutual funds, or feel anxious about missing out on a hot investment tip. Yet the biggest threat to our wealth is far quieter and far more dangerous: loss of buying power. It is the invisible erosion of your money caused by inflation - a force that operates every single day, without pause, without headlines, and often without being noticed until it is too late.
Inflation does not take away your capital visibly. It does not reduce the number in your bank account. Instead, it reduces what that number can buy. A Rs 100 note today buys far less than what it did ten years ago. This gradual and relentless decline is what truly destroys long-term financial security. The real damage happens when people invest in financial products that earn less than 10 per cent returns, especially over long periods. India’s long-term inflation averages around 6 to 7 per cent. When you add lifestyle inflation - the rising cost of healthcare, education, housing, travel, and personal aspirations - your effective inflation rate is often much higher. So, if you are earning 5 to 8 per cent on your money, you are not growing your wealth. You are moving backward. This is why low-yield products, despite feeling safe, often end up becoming wealth destroyers. Your money appears protected, but its strength - its ability to buy goods, services, experiences, and opportunities - is weakening year after year. Fixed-income products like bank fixed deposits and recurring deposits are essential, but only for short-term goals within the next three years. Beyond that period, the returns simply do not keep pace with inflation. A few products are a financial mess - they are locked in for the long term with poor liquidity and still give less than 8 per cent returns, which creates major problems in your financial goals journey. To genuinely grow wealth, your investments must consistently outperform inflation and achieve more than 10 per cent returns. For long-term financial goals - whether 5, 10, or 20 years away - only a few asset classes have historically achieved this: Direct stocks Equities represent ownership in businesses. As companies grow their revenues and profits, shareholders participate in that growth. Over long horizons, equities remain one of the most reliable inflation-beating asset classes. Equity and hybrid mutual funds These funds offer equity-debt-gold diversification, professional management, and disciplined investment structures that are essential for long-term compounding. Gold Gold has been a time-tested hedge against inflation and periods of economic uncertainty. Ultimately, financial planning is not about protecting your principal. It is about protecting and enhancing your purchasing power. That is what funds your child’s education, your child’s marriage, your retirement lifestyle, and your long-term dreams. Inflation does not announce its arrival. It works silently. The only defense is intelligent asset allocation and a long-term investment mindset. Your money is supposed to work for you. Make sure it continues to do so - not just in numbers, but in real value. (The author is a Chartered Accountant and CFA (USA). Financial Advisor.Views personal. He could be reached on 9833133605.)

Transparency key in trust betn developers, homebuyers

Updated: Oct 21, 2024

ransparency key in trust betn developers, homebuyers

MahaRERA Chairman Ajoy Mehta is retiring on Friday after an impactful tenure that began in February 2021. A 1984 batch IAS official, Mehta has held several key positions throughout his distinguished career. He has served as the Chief Secretary of Maharashtra, Commissioner of the Municipal Corporation of Greater Mumbai, Chairman and Managing Director of Maharashtra State Power Generation Limited, and Maharashtra State Electricity Distribution Company Limited, among others. At each of these roles, his work left a lasting impact. As the Chairman of MahaRERA, Mehta focused on enhancing transparency, accountability, and credibility in the real estate sector, empowering homebuyers through a series of landmark decisions that will shape the state’s realty landscape for years to come. ‘The Perfect Voice’ representative Anand Mishra caught up with him for an insightful discussion. Excerpts...


As you retire from the position of MahaRERA Chairman, how has been your journey since February 2021?

Excellent. It’s been a fulfilling journey. Our objective has always been to enhance transparency, accountability, and credibility in the real estate sector, ensuring that homebuyers feel empowered. I wanted to make a lasting impact, similar to my previous roles as Maharashtra’s Chief Secretary and Commissioner of the Municipal Corporation of Greater Mumbai.


One of your major initiatives was enhancing transparency through project information disclosure. Could you elaborate on how this has impacted homebuyers?

Transparency is key in building trust between developers and homebuyers. We insisted that developers share all important project details with the public. Now, crucial information about a project is available on the MahaRERA website, enabling homebuyers to make informed decisions. This initiative has empowered them to keep track of their investments and increased overall transparency in the real estate sector.


Other states have adopted some of MahaRERA’s decisions. Can you tell us more about this influence?

Yes, some of our decisions, such as setting up micro-control rooms for regulatory compliance, have been replicated by regulatory bodies in other states. We also mandated that developers submit Director Identification Numbers (DIN) and performance details on a self-affidavit during project registration. This system has been instrumental in enhancing accountability, and I’m glad to see other states following suit.


What were some other major steps taken to protect homebuyers and ensure the quality of projects?

We took several measures, such as requiring developers to issue a ‘Quality Assurance Certificate’ annually. This guarantees the construction quality of projects. For senior citizens and retirement homes, we implemented a detailed framework outlining minimum amenities. Additionally, developers are now required to open three separate bank accounts for each project to ensure proper transaction monitoring and prevent fund mismanagement.


MahaRERA has also implemented initiatives to address grievances and improve compensation recovery. Could you explain these?

To ensure timely resolution of disputes between homebuyers and developers, we created a Grievance Redressal Cell and appointed a retired Additional District Collector to oversee compensation recovery. The establishment of a conciliation forum has also helped resolve post-sale issues amicably. These steps have significantly improved our ability to address homebuyer concerns efficiently.


You’ve made it mandatory for developers to follow a standardized Agreement for Sale and Allotment Letter. What was the reasoning behind this decision?

Standardising these documents ensures that critical aspects, such as carpet area, defect liability period, and conveyance deeds, cannot be altered to the detriment of homebuyers. This provides legal clarity and protection for both parties, ensuring fair transactions.


What are your thoughts on the future of MahaRERA after your retirement?

I am confident that the foundations we have built will continue to strengthen the real estate sector. MahaRERA’s initiatives, such as the three-tiered scrutiny during project registration and the mandatory disclosure of information, will have a long-lasting positive impact. I believe these measures will continue to empower homebuyers and enhance transparency in the sector.

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