Friday, July 10, 2009

Beware of taking a home loan from ICICI Bank: Consumer court levies 1 Lakh penalty

From an article in Times of India:

"After completing all formalities needed to avail a loan, Goyal entered into an agreement with a home finance company and the bank. A loan of Rs 37 lakh, which was to be paid in 180 instalments in a period of 15 years, was sanctioned and he started paying the instalments from March 2005 onwards on a regular basis. However, a letter took him by surprise in August 2008. The letter allegedly stated that the repayment schedule through EMIs was being revised to increase the repayment time from 180 to 502 months. He immediately approached the bank's local branch and requested cancellation of the payment rescheduling but to no avail. "

Read the full article here:

This means that first ICICI bank agreed to give a loan for 15 years (180 / 12). Then using some obscure terms and conditions (who reads those anyway?), they hiked the tenure to 42 years (502 / 12).
42 years means your children (and maybe your grandchildren) will still be paying EMIs!!!

It is not humanely possible to read terms of conditions for each financial product, and clearly it is the banks fiduciary duty to adhere to the spirit of the agreement. I think any bank which shows such tendencies to violate fiduciary duty will exploit its customers.

Another issue is that of charging higher interest rates to existing home loan customers, and lower interest rates to attract new customers, but that merits a blog post of its own!

Can we share our experiences of taking home loans with different banks.?I have two home loans, one from HDFC and one from LIC housing finance, and the experience has been good so far (for the past 2 years).

Thanks to Ravi Karandeekar for blogging about the article.


Anonymous said...

Of course selecting the loan providers is important. But it is also important to first have a close look at who you are buying from. Reading this article highlights the bubble potential in India. It also cautions on real estate companies such as Unitech.

Anonymous said...

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

~~~ Thomas Jefferson

"Banking was conceived in iniquity and born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take away that power, and all the great fortunes like mine will disappear — as they ought to in order to make this a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, then let them continue to create deposits.”

~~~~ Sir Josiah Stamp (1880-1941),

Anonymous said...

@Anonymous 10:31 AM, thank you for the link.

The following points were an eye-opening

the Twice Paid Illusion

What is a twice paid illusion? When you buy property, you pay for an illusion. The developer creates the illusion of sustainable infrastructure where there is none and you pay a premium for these facilities in the per square foot price. You pay again through development charges, charges for electric substation and similar add on costs. In a sense you pay for the development of the illusion of infrastructure and then you pay again through a premium on the per square foot price. And that is not all; you pay for the rest of your life. For electricity, ultimately charges for back up supplies are over twice the rates charged by power suppliers. Then when in ten years your electric substation needs repair, you will pay for it again.

FULL PAYMENT in advance

Secondly, buyers were offered a significant reduction in cost to downgrade the quality of the final product; but the buyers who had paid in advance more than the full amount that is payable under the reduced cost scenario were not offered the excess cash paid back.

It is really shocking that the people pay the FULL amount in advance for a project which is only on the paper. The prospective buyer jumps into the fray without doing the due-diligence.

who are these people and why are they so careless about the money?

If you have earned the money in a hard way then there are very rare chances that the hard earned money will be spent in such a reckless manner. It must be speculators with the stock market windfall and crooked elements with the abundant corruption money that are paying FULL amount. Sorry, nobody is going a shed a tear for you!

shailesh said...

DLF sells Akruti JV stake for Rs 200 cr

India’s largest real estate developer DLF has sold its stake in a 50:50 joint venture with Mumbai-based Akruti City to a US-based real estate fund for over Rs 200 crore, two senior executives at DLF said, asking not to be named. The JV firm is developing two office buildings spread over 9 million sq ft area at Andheri, Mumbai. DLF had picked stake in the project over two years ago with the strategy of spreading its foot-print across the country. DLF exited the project as part of its asset sale programme to raise Rs 5,500 crore by the end of this fiscal. Besides existing the Andheri project, DLF has in the past two months raised around Rs 1,000 crore through asset sale across different cities in the country.

When big guys are not investing and exiting Mumbai, why should a retail investor pay premium.

shailesh said...

Govt may relax FDI norms for realty

The department of industrial policy & promotion (DIPP), which handles the FDI policy, in a note drafted for the Cabinet Committee on Economic Affairs (CCEA), has said that FDI should be allowed to flow into realty projects
even if the area covered is only 10 acres.

As of now, FDI is allowed in realty projects only if the minimum area covered is 25 acres (or 10 hectares). The move will help realty projects in metros like Mumbai, Delhi, Bangalore, Chennai and Hyderabad to attract FDI.

Realty players feel that it is not possible to find 25 acres of land in these cities to make their projects comply with Press Note 2 of 2005, which defines guidelines for permitting FDI in this sector.

Anonymous said...

The price of RE that we see today are for year 2025. So, you are right the prices may stay same but not till 2012 but 2025. Or they will go down till 2013-14 by upto 60-70% and then go up again to the prices we see today by 2025.

And there is so much supply/inventory till 2020. Moreover, if there is real demand, rents should go up. If rents go up it means there is inflation. Since we are in a deflationary cycle, rents are going down, 70-80% the demand that we see in the market is speculative demand.

It will all correct to sustainable levels in 3-4 years. This whole thing has already happened in the US. Do not listen to people saying we are different or our area is diferent or India has black money. I think this black money can push the property prices further down as official prices are what get registered and not people take in black. The high availability of houses would take the premium away (which is black money).

Shubh Chintak

Anonymous said...

There is sure to be thousand and one buzzing home loan questions in one’s mind before taking a home loan. I am sure your informative article will help them a lot. Keep up the good work.

Buy Designs said...

ICICI PUNE HOUSING FINANCE is one such corrupt banking example see this

its pathetic ... how ICICI guys take homebuyers for a ride ....shame on ICICI pune

R.Sajan said...

In the current scenario, the borrower would have to again pay at least Rs. 5000/- extra per lakh for each year of the loan, to get his title deeds back in the end even if agreed instalments are regularly remitted. This is because interest has been raised to 1 ½ times arbitrarily after getting the borrower to sign for the loan at 7 to 8% interest. If it be a twenty year loan, he ends up paying Rs. 1 lakh additionally for each Rs. 1 lakh borrowed, over and above the originally agreed repayment. If three instalments are defaulted, the loan becomes an NPA and within 6 months of continued default, this lender moves in under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [SARFAESI], no questions asked. This draconian law was put in place to hide and shift from bank officials, accountability of deliberate bad loans. The take-over of property draws attention away from official misdemeanours in processing, sanction and conduct of the bad loans. The fixing of NPA at the end of three months is even anti-Indian when we admit our slow pace of national life.

Pay day Loans said...

Home loans are now being requested to give proof of their resource of resources in the awaken of a latest NHB rounded. The rounded has instructed all loan companies not to utilize pre-payment expenses if a client repays his loan in progress by using his own resources.

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