Well-Written Article
The Cover Story “Timeshares Are a Bad Deal” in Moneylife (30 May 2013) is well written after thorough research. It brought out the plight of middle-class investors who have put in their hard-earned savings into these, thinking that these are inflation proof—based on the advertisements and promotional materials provided by these companies. Most of these companies have not kept up many of their promises and, when confronted, hide under the few clauses mentioned in such agreements. However, the following issues—many of them covered by you—need to be noted.
 
a) Promoting these as inflation-proof is misleading and should be stopped immediately. A disclaimer to this effect should be published in every advertisement—print or visual.
b) Continuously rising AMC (annual maintenance charges) based on inflation or citing other reasons is not acceptable as most of these companies have collected a substantial portion towards these expenses initially at the time of selling/buying.
 
c) Continuously rising utility charges without any basis or proper explanation and charging a flat rate at the resorts for water & electricity is perhaps another source of revenue.
 
d) Suddenly introducing a guest fee and increasing it in a short span de-motivates investors from selling them or gifting them to friends and relatives.
 
e) Not assisting the investor to sell his holidays or timeshare, is being non-cooperative.
 
f) Putting roadblocks if someone tries to sell the holidays or disinvest the timeshare—by making it more expensive for the buyer, so that he will approach the company directly, instead of buying from a reseller, leads to non-utilisation of the holidays by the original user. This enables the company to sell it to outsiders and make more money from the same property. 
 
g) Availability is another issue.
 
h) Transparency is lacking in most of the cases.
 
i) Food prices are exorbitant at these resorts, as most of these resorts are located far away from the towns/ cities. We are forced to buy food at such high prices from them. 
 
j) Resorts being far away from civilisation has made travelling more expensive and over-dependent on the resorts expensive travel facilities.
 
k)  Exit option is practically difficult, for those who find this expensive later.
 
l) Highly illiquid and cannot be sold easily in the market. Money is locked.
In the United Kingdom, timeshare business is regulated by a separate Act. In India, it should be brought under SEBI’s Collective Investment Scheme Regulations, 1999. This fits into the definition u/s 11 AA of the SEBI Act. It is high time these investments are regulated by SEBI. We are in the process of collecting and documenting the information, after which we are thinking of taking it up with the regulator.
Nagappan V, president, Securities & Timeshare Owners’ Association, by email
 
Nucent Clarifies 
This refers to a comment in Moneylife (page 39, 16 May 2013). Nucent Estates Limited was earlier a finance and leasing company—namely, Pressman Leasings Limited (changed to Nucent Finance Limited). In view of the defaults in financial services business, the management decided to exit the finance and leasing business. Since it exited the finance business, as per directive from Reserve Bank of India, the name of the company had to be changed. Accordingly, this was changed to Nucent Estates Limited as the management’s objective was to enter real estate business. 
 
Unfortunately, the real estate business did not take off.  To revive the company, the management decided to merge Pressman Advertising Limited, an established advertising and PR agency, with the company. The merger is being carried out to revive the fortunes of the company by the merger of a profitable, debt-free company.
 
The Scheme of merger has been approved by Mumbai Stock Exchange and National Stock Exchange, where the shares are listed as well as the regional stock exchanges, namely, Calcutta Stock Exchange and Delhi Stock Exchange. The Scheme has been approved by the shareholders of the company and is presently pending before the Hon’ble High Court at Kolkata.
RL Sureka, director, Nucent Estates Limited, by email
 
Media Propaganda
This is regarding the article “Focus on the India-focused” in Moneylife (2 May 2013). The author seems to believe the media propaganda that Indian IT industry is mainly a sweat-shop where nothing more than back-office work takes place. I would like to express a strong objection to it.
 
I work in the software services industry and can confidently say that the industry has come a long way from the Y2K years to the state it is in now, giving employment to millions of youth and has emerged as the fourth largest employer in this country in a short span of 15 years.
 
If the author wants to see some products developed by Indian IT industry, he can look at Finacle by Infosys, companies like Zoho, Tringme, etc.
Abinash Deepak, by email
 
Rightful Remuneration 
This is with regard to “Why don’t funds promote trail commissions instead of upfront commissions?” on Moneylife website. I am in favour of upfront plus trail model. The problems generated by higher upfront commissions should be dealt with other innovative measures rather than banning upfront and depriving of the small distributor of his rightful remuneration for introducing a new investor or new investment to mutual funds. There is definitely a case for upfront commission. 
 
Do we have a doctor who takes money only after the patient is cured? Or any advocate who takes fees only when the case is settled and the client wins? Or any builder, architect, travel company, school, tuition class, magazine subscription takes money only after buying their product or service, only when the customer is satisfied? Whether you are satisfied or not, there is some cost involved before manufacturing or providing the service which should be recouped. And, in all cases—any product or service—the end-user has to pay. Does the government collect tax after providing the civic amenities to the citizens? Whatever is offered free is said to be dangerous by experts. Why are only mutual fund distributors singled out to work for free and wait for their dues? What if there is subsequent switch, change of broker, redemption, change of rules, end of mutual fund industry or anything unknown comes into existence? Who will then pay the distributor? 
 
The regulation has come up only because nobody is able to think of any other way of curbing malpractices. I am fully in support of eliminating bad practices from the industry but not at the cost of the small retail individual distributor, more so for those who are working in remote areas where nobody has dreamt of reaching. Commission is not extracted from asset management companies (AMCs) by distributors. If big distributors are paid by AMCs, action should be there against such AMCs and not against distributors. I hope someone will see the issue in right perspective and put forth the arguments.
DB Desai, by email
 
Fear of Holding Cash
This is with regard to “Fortnightly Market View: Critical Juncture” by Debashis Basu. Equities were down from 2008-2012 and great companies were available for a song. But individual investors were busy crying foul and were scared of buying equity.
 
Anyone who has not invested in equities in the past five years, or has sold off in panic and incurred a loss, must stay away from equities forever. But this is easier said than done because, when interest rates head southwards, most individuals suffer from Rhinophobia (fear of holding cash).
Nilesh Kamerkar
 
Domestic Infotech Vendors’ Woes
This is with regard to “Are Depositors at the Mercy of Bank IT Systems?” by Sucheta Dalal. When we want to, our domestic infotech vendors can set up cash management tech for DMRC or passenger reservation systems for Indian Railways which set global benchmarks.
 
However, our domestic infotech vendors can, and do, screw up simple things like vehicle registration records, toll collection systems and, of course, banking tech. It is all a question of what the person in charge wants the vendor to deliver. I do feel that as far as the banking verticals are concerned, we are in for much worse.
Veeresh Malik
 
Pass the Blame
This is with regard to “The Customer Is Always right. But There Are Exceptions” by Sucheta Dalal. Congratulations for this other side story. The instances quoted are stark and there is a tendency to pass the blame and not give credit when due. This is rampant in our society. Such people also need to be exposed.
Anil Agashe 
 
Hats Off!
This is with regard to “Lease land fraud: Shailesh Gandhi sends notices to revenue secretary, collectors of Mumbai and suburbs.” I think every citizen of Bombay should join this petition. Hats off to Shailesh Gandhi! Please let us know, Sir, if we could join in and strengthen the cause. I think every reader of Moneylife should.
R Balakrishnan
 
QE is a Disaster
This is with regard to “Quantitative easing myths debunked.” The growth induced by QE—a couple of percentage points—is negligible compared to the amount of increase in central bank’s balance sheet. QE is like a dose of steroids—you have to keep taking it to keep going. The moment you stop it, everything around you will collapse. 
Chandragupta Acharya

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