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TOI : PUNE: Until two weeks ago, N. Rajaram was seriously considering buying his dream home in one of the housing complexes coming up on the city’s outskirts. However, the 30-something finance manager in a city-based engineering firm is now backtracking on his idea, at least for some time, thanks to inflation.

He is facing a double whammy of staggering household expenditure and a rise in the interest rate on housing loans, which will leave a big hole in his pocket, making it difficult for him to run the house.

Many like Rajaram are in no mood to buy a house for the same reasons. The home loan interest rates, which were hovering around 10 per cent, have jumped to over 14 per cent.

The country’s largest home loans company, HDFC, and the largest private sector bank, ICICI Bank, have led the way and announced a rise in their lending rates. It is only a matter of time before other banks and institutions followed suit.

From the monthly repayment of home loan, which was around Rs 9,500 for every Rs 10 lakh till recently, the borrowers will now have to shell out Rs 12,000 for the same amount.

“The situation is such that the estimates of monthly household expenses have gone up, thereby reducing the amount of loan a borrower is eligible to borrow. Also, because of the high rate of interest, the equated monthly instalment (EMI) will be higher, further cutting into the amount available for spending on routine needs,” said a real estate sector observer.

“Even those who have borrowed earlier on a floating rate basis will feel the pinch. The repayment period in their cases will be extended to accommodate the extra burden if the EMI is to be maintained at the present levels and to those who don’t have enough time before they superannuate the…More