Four years ago, he mobilised Rs 1 lakh from his savings and planned to build a house over 8,000 square feet by taking a Rs 2.90 lakh loan. With a tenure of 20 years and an EMI of Rs 2,340, LHFL projected that he would clear the loan in 2024, seven years before he retires in 2031. But the latest figure incorporated in the file indicates he will not be free from the debt before 2041 when he will be 70. “This is what nobody can dispute,” said LHFL’s agent Subhash Singh, who processed and got his loan application approved.

LHFL reviews the interest rate every three months (January, April, July and October), based on the prevailing market conditions. Parvez took the loan at a 7.5 per cent floating rate. Four years down the line, it had gone up to 10.75 per cent and the tenure of his loan was stretched to 2041.

Not once did he default during the past fours years. Parvez had paid EMIs amounting to Rs 70,322. Still the total amount deducted from the principal was a meagre Rs 26,421 as on April 1. This means he carries a burden of more than Rs 2.63 lakh even today.

To wriggle out of the debt, Parvez can sell this house whose value has appreciated to Rs 7 lakh. But even this is not going to provide him relief, as he has already spent over Rs 6 lakh (Rs 1 lakh saving, Rs 2 lakh for the land, EMIs of Rs 70,322 and unpaid principal of Rs 2.63 lakh).

... contd.