For 2004 home loan, company secy could have paid EMIs till age 70

New Delhi, June 22: For Raj Kumar Gupta, 35, a company secretary in Jagson Airlines, a private firm, a home loan meant paying installments well beyond retirement.

Gupta borrowed Rs 7 lakh from ICICI Bank at a floating rate of 7.5 per cent for a flat in Sahibabad, Shalimar Garden, in 2004. He was made to believe that the interest rate on his loan would move in only one direction: down. He paid a monthly installment of Rs 5,700, almost half his income of Rs 12,000 four years ago.

Gupta’s loan had a 20-year tenure and he was happy that before retirement he would really own the house, having fully paid off his loan. But he was in for a shock. The floating rate had gone up, on an average by about 50 basis points every six months, and in two-and-a-half years his home loan rate had rocketed to over 10 per cent.

“I had paid only Rs 40,000 of the principal. And four times this, or Rs 1.6 lakh in interest, in the last two-and-a-half years,” he says. What really gave him a sinking feeling was the doubling of the home loan tenure from 20 to 40 years. “I felt cheated,” says Gupta, the sole earning member of a family of four, including wife and two children.

The Central Bank of India did restructure his loan into a fixed rate while taking over the ICICI Bank loan and also cut the tenure by five years, but Gupta had to pay a 5 per cent (Rs 32,500) switching cost on the outstanding amount of Rs 6.5 lakh.

Today, Gupta’s annual income is about Rs 8 lakh and his EMI on the reduced tenure is 14,000 per month.

Given the rising costs with Inflation at 11 per cent plus, the Gupta family sees no hope of owning a car and in fact, had to cut down even on its daily food budget. Gupta himself travels by Delhi Metro to cut costs. Till date, he has repaid only Rs 3 lakh of the principal due to the sharp vagaries of interest rates.

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