SCUP: The Unanswered Questions
Acouple of weeks ago, the Dainik Hindustan carried my article on the termination of UTI Mutual Fund’s (UTIMF) Senior Citizens Unit Plan (SCUP). I was shocked to receive over a dozen letters from readers across the country saying that they did not know about the termination of the scheme which had raised Rs254 crore from around 17,800 investors. In fact, its marketing pitch was to bring “sunshine” in the autumn years of their lives with an assured-returns scheme that also offered a comprehensive insurance cover in collaboration with New India Assurance.

Meanwhile, UTIMF’s Asset Management Company (AMC) is planning a public issue to raise Rs2,000 crore and get listed on the stock exchanges. Its pre-IPO advertising campaign claims that it was UTI which taught ordinary Indians the language of the stock market. It is another matter that most investors credit Dhirubhai Ambani with introducing them to the share bazaar while the erstwhile Unit Trust of India was seen more as a government-guaranteed fixed-income scheme offering tax benefits and steady returns.

In any case, investors attracted by the IPO campaign need to understand that UTIMF is a different entity – with no government guarantees and only half its former size. Further, an AMC earns only a percentage of the corpus it raises under different mutual fund schemes. Its income is unrelated to the performance of its schemes. This means that even in a bull market, its income can decline if it fails to attract investors. That is why AMCs, in general, attract a price of just under 5% of their assets under management (AUM) or total corpus when they are sold.

Let’s get back to SCUP, which was marketed under the slogan: “Makes your old age worry free, once and for all” but was summarily terminated. Nita Kulkarni of Jalgaon is among those who ask, ‘what do I do now’? So let me answer some of the questions raised by readers and offer possible solutions. First, SCUP was terminated at the close of business on 18th February at the prevailing NAV of Rs23.22 per unit “after deduction of premium amounts”. A public notice appeared in Business Standard and letters were sent to individual unit-holders. Clearly, many investors have not received the letter and are unaware that their money is simply lying in UTIMF’s coffers without earning interest. They need to hurry and claim redemption by submitting their unit certificates. UTIMF does not say how many investors have not claimed redemption proceeds so far. However, its investor department is working proactively to help investors to complete redemption formalities, switch to other schemes or understand options.

Remember, UTIMF is categorical that unit-holders are not entitled to any interest, costs or compensation after February. So, the first thing to do is move swiftly to collect your money by submitting the duly signed original membership certificate. If you plan to reinvest the money in another UTIMF scheme, please fill the option form that is available.

Subodh Mittal, who is 65, wants to know if he will still benefit from SCUP. Well, everybody above 58 will continue to get hospitalisation insurance cover because of an agreement with an insurance company. Some unit-holders have chosen a ‘Floater Medical Policy’, available for a brief period at a specially negotiated rate.

S Prakash is one of those investors who have heard nothing about the termination of SCUP. Others like him must write to UTIMF immediately and those who have not received their money after submitting their certificate can write to me with their certificate and folio number and I will forward it to the UTIMF investor cell. Better still, they can write directly to UTIMF or contact its toll-free helpline at 1800 22 1230, or SMS it at 5676756 or email it to [email protected] Dainik Hindustan reader Rajiv Gupta of Agra, for instance, asks whether UTIMF’s action amounts to a breach of contract. Well, some investors in Pune, led by investment advisor Stephen D’souza, think so and plan to file a case. Those interested can contact him at [email protected] and join the litigation.

Ms Dalal is the Consulting Editor of MoneyLIFE. Subscribers get free help in resolving their problems with select providers of financial services. She can be reached at suchetadalal


Cost of a War
This book should be a prescribed reading for all Americans, especially before the presidential elections. It explains with chilling facts how people in that country have been hoodwinked – and this despite their constitutional right to information. The authors are clearly anti-war and anti-Bush. But their political ideology apart, they say in the Preface, “Our goal was simple: to determine the true cost of the war. Regardless of whether one supported or opposed US actions in the region, we believed that voters had a right to know the real cost of our policies.” And they are eminently qualified to do so. Joseph E Stiglitz of Columbia University is the winner of the 2001 Nobel Prize in economics and Linda J Bilmes, a professor of public finance at Harvard’s Kennedy School of Government, is a former assistant secretary for management and budget in the US department of commerce.

Apart from its tragic human toll, the Iraq War will prove staggeringly expensive in financial terms. The numbers presented are as mind boggling as they are numbing. If you really want to know what the war will cost, where each of those costs is hidden and what those costs consist of, then this book is well worth the money. This book casts a spotlight on expenditure items that have been hitherto hidden from the US taxpayer, including big-ticket items like replacing military equipment (being used up at six times the peace-time rate) as well as the cost of caring for thousands of wounded veterans for the rest of their lives. With chilling precision, the authors measure what the US taxpayer’s money would have achieved had it been invested in social areas like education or on roads and research. The fact, of course, remains that funds that might have been freed up may not have been spent on such projects – given the political priorities. There have been predictable responses to this book. Those who oppose the war love it and those who support the Iraq War are displeased. One can see these responses in the many reviews that have been posted on the Net.

The problem I have with The Three Trillion Dollar War is not one of content but of emphasis. Only someone with the credentials of Stiglitz could have attempted calculating the cost to our planet. But unfortunately, he does not. He restricts the costs to the American people and the economy. Had he done a wider study, we would have known how the earth’s scarce resources were wasted on a war that perhaps enriched some of USA’s defence manufacturers but impoverished the world for all times to come. – Dr Nita Mukherjee


Weekend Homes
The new, confident Indian homeowner has discovered the joys of weekend getaways. She works hard through the week and then wraps up to travel to a fancy getaway in semi-rural surroundings to unwind and enjoy gourmet dinners with friends. Khandala and Karjat, Chondi and Kashid, all boast designer homes with every conceivable comfort.

Second homes are status symbols. The best designers, globally sourced interiors & accessories and superb landscaping have become the norm for the rich and famous. Stone finishes, rustic tiles, rough wood and lots of glass (to frame great views) are standard. Barbecue pits, shaded verandahs, waterfalls, tennis courts and children’s playgrounds are added attractions. An international look – with Zen feel or spa ambience – is getting increasingly more popular and includes plunge pools, reflecting pools, rain showers, pebbled courtyards and candle niches as must-haves for the weekend experience. Most homes include special guest spaces – Indians still need friends and family surrounding them! Sometimes, this is an entire outhouse with a separate pool and pantry so that everyone is assured of their own personal space. Private jets and speedboats ensure quick accessibility to these getaways. There is now a whole market that caters to only designing and furnishing of weekend homes. Some homeowners prefer architects who have worked in a particular precinct, since they know the existing conditions and constraints. Local contractors are used for plumbing and electrical work and given annual maintenance contracts while the finishes are ensured by using imported labour. Stores sell rattan furniture and easy-to-maintain glass and rough wood pieces. Stone benches, solid teakwood beds and flamed granite tables are all available. Eclectic mixes of the traditional and the modern can add charm to the house.

There are some very well-designed homes – structures that use traditional building methods to ensure ventilation and some that incorporate site features at the core of the design. One home is built on black rock that forms the flooring while another incorporates huge wrought-iron trusses to form a shed-like structure. There is a lot of innovation and playfulness that is evident in many of these homes. Most owners are very aware of design, since they are well-travelled and often incorporate features that they have seen in, say, Thailand or Spain into their homes.

Such luxury comes at a price. Land is extremely expensive when it is closer to the city or better linked by expressways or catamaran connections that allow urban dwellers to reach their suburban hideaways in one to three hours. Beach plots and valley view sites are prohibitively expensive and often force homeowners to strike complicated deals requiring multiple certificates to patch together contiguous land owned by a number of locals. Stories of land value doubling over a week abound. One has to look beyond just the price of land – exorbitant as it may be. Good construction will cost between Rs1,000 and Rs2,500 per sq ft while the cost of interiors can go up to Rs5,000 per sq ft for good, solid workmanship. There are many hidden costs too – travelling to your second home is expensive. Tolls on the Mumbai-Pune expressway set you back by Rs140 one way with the cost of petrol to be considered. A ticket from the Gateway of India to the Mandwa jetty is Rs100 on the catamaran; most owners maintain a second car on the shore across. The fuel for a private speedboat for the same journey will cost Rs10,000 one way!

Maintaining your house is also expensive. A full-time caretaker with family living on the premises eases your stress but stretches your pocket by Rs10,000 to Rs15,000 per month. You also pay their mobile bills so that you can reach them anytime. At the same time, maintaining your home is obligatory – you cannot simply land up every few weeks and expect to spend an idyllic weekend, unless someone keeps the place operational for you. This includes regularly cleaning the house, paying sundry bills and also establishing contacts with the local electrician, plumber, vegetable vendor, gas supplier and other help on call. Usually, the mobile phone is used extensively to contact and follow up whenever there are problems. Drinking water has often to be purchased and delivered to your home. The costs of maintaining a weekend retreat can start from a basic Rs20,000 per month to anywhere, depending on how elaborate are the arrangements you require.

Like the super-rich, the upwardly mobile middle-class person also wants a piece of the action and has often settled for a wadi plot or row house, but the demand for some weekend hubs has been so great that they have reached a breaking point with over-development forcing a cheek-by-jowl existence with neighbouring plot-owners. Often, it ends up re-creating a situation that most owners want to escape from. On the other hand, building a stand-alone bungalow on an isolated plot is an invitation to robbery and encroachment.

But those who have their heart set on a second home need not despair. Newer options are opening up for the upwardly mobile middle class wanting to get away from the hurly-burly of a metro existence without the maintenance factor turning into a burden. The new townships coming up in Maharashtra and elsewhere offer picturesque homes with common amenities such as clubhouses and swimming pools with centrally managed maintenance and security. Amanora, the township near Pune being developed by Aniruddha Deshpande, plans a hugely sophisticated data centre to manage every need of the township’s inhabitants (see MoneyLIFE, 5 June 2008). Lavasa, a hill station project also near Pune, whose development Deshpande was overseeing earlier, has a similarly comprehensive plan, while Satish Magar’s Magarpatta is already popular with senior citizens because of its well-oiled township maintenance. These are turning out to be great options as a first as well as a second home or even an investment capable of generating rental income. (additional reporting by MoneyLIFE staff)


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