There is a power cut at MA Sajan’s one-BHK (bedroom-hall-kitchen) flat in Khandeshwar, at the far end of Navi Mumbai. But even in the candlelight, it’s clear how the furniture and TV set is arranged neatly and how the family — that includes wife Brinda and two children, Vishnu and Jishnu — has mastered the art of living well on a meagre income.
Sajan, 34, an assistant manager at a shipping company, zeroed in on the flat five years ago. “It seemed affordable at Rs 5 lakh and I went in for an ICICI loan of Rs 4.4 lakh,” he says. The interest rate then was 7.5 per cent and the EMI was Rs 4,304 a month. He was supposed to pay back over a period of 15 years.
What Sajan never anticipated was that the interest rate would keep on increasing. Towards the beginning of last year, the bank not only raised the EMI to Rs 4,704 but also the repayment period to 25 years.
Thanks to tips from friends, Sajan shifted his loan to a nationalised bank. “While the earlier interest rate was 12.5 per cent, this bank only charged me at the rate of 9.75 per cent,” he says. Which meant that while the EMI remained the same, he only had to repay for 17 years instead of 21 years. “If the interest rate goes up again, it will be a big burden,” says Sajan, whose monthly salary is yet to touch the Rs 20,000 mark.
Does he regret buying the house with a loan? “No. I could have taken a flat in the same society at a rent of Rs 4,500. But after 15 or 20 years, I would be left with nothing,” he reasons.
Sajan and Brinda have their plan ready to tackle the deadly cocktail of rising inflation and interest rates. Brinda used to work as a teacher earlier, but gave up her job to look after the children. She will start working again. To save every little amount, instead of buying groceries from across the road, the couple joins a group of people once a fortnight to shop at a wholesale market.
Has he ever thought of raising money from some source and closing the loan? “Yes. But what prevents me from doing it is the tax benefit I get,” he says. Even if that means more work for both husband and wife.