For 500kms a month i feel petrol is a good choice.
Sedan or hatch it depends on your friend , its upto him to decide whether he needs a boot or not.
Firstly hatches 6.5Lakhs is a good budget! Choices are:
i20 Asta ABS
-Exceeds your budget by around 10k i guess but you can try to manage that with discounts if possible. A bit sluggish in pick-up but after 2nd gear its a rocket. Good FE , good A.S.S from Hyundai , amazing features. On the down side not much fun to drive , ride quality is a bit bumpy at high speeds. If running is going to be within city this should not be a major concern.
Punto- A great choice! A superb handler , loaded with features just like i20 , well built only concern is TATA'S A.S.S though i am seeing many happy Fiat customers around. Re-sale value might be slightly lesser compared to i20.
Polo- Though has got that german driving pleasure and build quality , i wont recommend this much. Not much VFM IMO
when compared to Punto and i20. And also maintenance will surely be much costlier.
Figo- A sensible and VFM
hatch and the top end titanium version must fall under your budget i guess. Only concern is low GC. Don't need to worry about A.S.S and maintenance , Ford has improved a lot!
In sedans i think the only options are Manza , Etios , Dzire and Accent.
Leave out Accent , it may get discontinued anytime. Etios is new to market but being a Toyota don't need to worry about maintenance and reliability. Dzire is the safest bet , being a Maruti. Manza is also good and i feel is the most spacious of all the above.
Ask your friend to TD all the above cars and decide the car which suits him and his family the most.
PS: I have not mentioned cars like Swift , Ritz , i10 , Micra because your friend has a very good budget.