Buying a dream home is a nightmare

New Delhi: Parthav Phukan is all set to move into his newly bought house. But he's far from happy.

He applied for a home loan of Rs 33 lakh just three months back at an interest rate of 8.5 per cent. By the time it came through, the interest rate had shot up to 9 per cent.

And with the threat of another hike looming large, he is wondering whether he homed in on the right choice.

Gone are the days when having a house of your own was just a home loan away. In fact buying that dream house has now become quite a nightmare.

Home loan borrowers will soon have to brace themselves for another round of rate hikes.

Says Parthav Phukan, "I realised that for moving into a home, I have to pay Rs 28,000 a month. Beyond that there are other costs involved. I am being stretched but this was like a dream for me, so I am taking one step at a time."

Buying a house is anyway an uphill task. And having a home loan bank at every turn is of little help with their ever-increasing interest rates.

For a person who took a home loan in say June last year, the rate of interest was 7.5 per cent.

With more than three rate hikes since then, the current floating rate sits at a whopping 9.5 per cent. And let's not even go near the fixed rate which is as high as 10.5 per cent for some banks.

If that hasn't put you a long way off from your dream destination there's more bad news.

Home loan giants like ICICI are contemplating another hike in interest rates real soon. They say with the current RBI credit policy, it's something we'll just have to live with.

"Looking at all the international regulators, I feel that interest loans will rise further," says Joint MD, ICICI

Kalpana Morparia.

Several banks say this increase will not result in a slowdown in the market. They say that its not rate hikes but unaffordable property rates thats hurting growth.

Even switching over to fixed interest rates won't help. For the first time they're in double digits at 10.5 per cent.

A dream house today is fast becoming just that. A dream. Fixed or floating, interest rates are going in only one direction. And thats up. So dream big, but also save big.

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