Richa Pant, 28, has been planning for sometime to quit her job so that she gets to spend more time with her nine-month-old daughter. Her husband, Deep Prakash, 34, has been looking to take a break and go abroad for higher education.
Both husband and wife, who are well-paid executives at multinational companies, have now put their plans on hold, thanks to the sharp rises in home loan rates.
In May 2005, the couple borrowed Rs 35 lakh from IDBI bank to buy a three-bedroom apartment in Indirapuram — a burgeoning town adjoining New Delhi. The 20-year loan came with 7.5 per cent interest that translated into a monthly payout (EMI) of Rs 28,200.
But as interest rates began rising from early 2006, the bank first extended the loan tenure to 22 years and thereafter increased the EMI to Rs 34,000 — up almost Rs 6,000, or 20 per cent from the time of taking the loan. With the latest round of interest rate hikes, the EMI burden is set to go up by another Rs 2,500.
“Though my daughter needs much more attention and care, I won’t be able to quit my job now,” said Richa. “We are earning good money but all our plans have been unsettled and we are mentally stressed.”
Deep has also deferred his education plan by a year because of inadequate savings, a result of higher EMIs and spiralling household expenses on account of rising inflation.
The sharp spike in interest rates also means a larger part of the EMI paid by the Pant couple goes towards servicing interest charges, rather than reducing the principal.
Even after paying more than Rs 11 lakh in EMIs over the past three years, their outstanding loan amount has come down by only Rs 1.5 lakh.
One way to reduce the interest burden would be to prepay a part of loan.
Richa and Deep have been thinking of it, but “that will take away our savings kept for other purposes”.