Avoid teaser rates that reset upwards after a few months

Compare loans from lenders on a comprehensive set of parameters, not just the offers

- HIMALI PATEL

Last year, Rajesh Arora (name changed on request), a 40-year-old Noida-based businessman, took a loan during the festival season because the interest rate being offered appeared attractive. However, what he realised later was that the low interest rate was applicable for only a year, after which the rate moved up.

During the festival season, the demand for home loans typically rises as many families look to acquire a new house.

This year is no different, with the market abuzz with several enticing housing loan offers.

According to a report by Omniscience Capital, a smallcase manager, the Indian housing finance market grew by around 25 per cent annually between FY22 and FY24. It is further projected to expand at a compound annual growth rate (CAGR) of 15-20 per cent until 2030. Borrowers need to examine home loan offers closely on several parameters to avoid Arora's fate.

What's being offered?

One of the most common offers during the festival season is a partial or full waiver of processing fees.

"This can lead to savings of ₹10,000-50,000, depending on the loan size," says Adhil Shetty, chief executive officer, BankBazaar.com. Another popular offer is a special interest rate. "Lenders lower the spread, reducing the loan cost by 5-10 basis points. However, the reduction is usually time-bound, and the lender may reset the spread after that interval," says Shetty.