It is 6 in the evening. The sun has just set and the sky has turned maroon as it often does on random evenings. Pooja watches the setting sun from her rented flat in a central suburb, talking to her mother-in-law or mother-in-law on the phone.
“Remember Chintu?” Mother asked.
“Yes,” she replied. “The elder son of your younger sister.”
“Yes,” said Mummy. “He bought a 3BHK in Bengaluru in January.”
“But wasn’t he fired after that?”
“Yeah, but he still has the flat,” replied Maa irritably. “And my sister reminds me every time I call.”
scene 2
Later that evening. Around 9 pm. Pooja’s husband Rahul has come back from work.
“so how was your day?” He asked.
“It was spent trying to further improve my PhD subject,” she replied. “Besides, your mother called in the evening.”
“And?” she asked, as always, a little apprehensive when she talked about her mother.
“She wants us to buy a flat.”
“Nothing new there.”
“Yes,” she said. “But she was a bit emotional today.”
“Hmm. So, what are you suggesting?” He asked. “Should we buy one?”
“I mean there’s no harm in doing some basic thinking,” she said. “Either way, this is not a decision that can be made overnight.”
scene 3
Next morning early. Around 7 o’clock. Pooja has a serious face and is staring into her laptop. Her husband has just made coffee.
“Did you sleep well?” she asked, as he handed her the cup of coffee.
“Yes.”
“I couldn’t sleep at all. The conversation with mummy really bothered me.”
“It’s no good,” she replied.
“Well, I got up and did some basic research.”
“And?”
“So, I understood the maths behind taking a home loan.”
“While it’s not a conversation, I’d like to talk first thing in the morning,” he replied, “but now that you’ve started…”
“First things first. I have taken a break from work to pursue my PhD. Hence, I do not have a regular income and this limits the total amount of loan that we can take.”
“Hmm. Of course, two incomes go a long way than just one.”
“I saw your salary slip. your take home salary is approx 2 lakh per month.”
“Oh is it?” He asked. “You know I have no idea about these things.”
“So, looking at our expenses, I think we should be comfortable paying the EMI roughly 70,000 per month.”
“that makes sense.”
“If we are ready to pay EMI 70,000, will get a home loan 80.7 lakhs to be repaid over a period of 20 years at an interest of 8.5%.
“My my, that’s impressive,” he said. “You’ve already figured out the math.”
“It’s pretty straightforward if you know the right functions to use on the spreadsheet,” he replied.
“Hmm. What if we are not able to get a home loan at 8.5% per annum, but get a loan at 9%, then what happens?” He asked.
“At 9%, EMI of 70,000 loan can be repaid in 20 years 77.8 lakhs, which is approx. 3 lakh less than the loan we can get at 8.5%.”
“Interesting. So, the loan amount may come down with the increase in interest rates.”
“Yes. And the reverse is also true.”
“opposite of this?” He asked.
“Like if we managed to get a loan early last year, when the home-loan interest rate was 6.5%.”
“What would have happened then?”
“At 6.5% interest, 20 years tenure and one EMI 70,000, we could avail a home loan of approx. 93.9 lakhs, which would be approximately 13 lakh more than what we can take at present.”
“Oh damn!”
“Also, house prices have gone up in the last one year.”
“It’s a double whammy!”
“Not really,” she replied.
“How?”
“Since interest rates have risen over the last one year, the benefit of low interest rates does not last that long. Of course the prices have also increased and one cannot do anything about it.”
scene 4
Noon time, same day. Pooja is staring at her laptop and wondering if she should really pursue a PhD, given that this one decision has left everything else behind. As she was lost in her thoughts, her mobile started ringing. Mummy was calling.
“So, done with Beta’s cooking?” Mummy asked.
“Mummy,” he said, “you know Rahul cooks in the evening.”
“Oh yes, my son cooks very well,” replied the mother, never leaving a chance to praise her son. “But you should also learn to make her favorite recipe.”
“Which he’s already doing, Mommy,” he replied, ignoring Barb.
“Did you guys talk?”
“About what mommy?” he asked, trying his best to hide his irritation.
“About buying a house.”
“Oh, that,” she said. “I’ve started a conversation.”
“Good to know,” Mummy replied happily. “Rahul is very bad with money decisions.”
scene 5
Same day, late night. Husband and wife are ready to sleep.
“You know Pooja,” said Rahul, “I spoke to my colleague Ashish today.”
“And?”
“He said we were too conservative.”
“not generous?” he asked, trying to make a bad joke.
“Pooja yaar…”
“Okay, okay. Conservative about what?” He asked.
“At my salary level, banks and housing finance companies will give us bigger home loans than just home loans 80.7 lakhs you worked. And that we can easily scale it up a bit more. And given that incomes generally increase, there is some risk involved in buying a home.”
“Which one is correct. I have been searching and checking home eligibility calculators on the websites of various banks and home finance companies.”
“And?” He asked.
“The rule of thumb is that banks and housing finance companies are comfortable giving home loans up to 60 times the monthly salary.”
“Hmm.”
“Which means when you take home 2 lakhs, we can possibly get a home loan of 1.2 crores, which is almost 50% more than the home loan amount 80.7 lakh with which I feel comfortable.”
“So, what’s the catch?”
on the home loan of 1.2 Crore @ 8.5% p.a. to be repaid over 20 years, Works EMI 1.04 lakhs. at 9%, it works 1.08 lakh.”
“I see where this is going.”
“I am not making any money currently. But 1.04 Lakh, more than 50% of our monthly income will go towards the EMI. This will really stretch us and we will have to cut down on many of our other expenses. Besides, we won’t save anything and I don’t like that.”
scene 6
Next day around 3 pm. Mummy calls but her daughter-in-law is taking afternoon nap and ignores the call. Mummy ji immediately calls her son, who has failed to meet last month’s sales target. Mummy ji throws the phone on the bed and goes to make tea. Nothing bothers her more than her kids not picking up the phone.
“I don’t know why they do this to me,” she cries in despair.
scene 7
Late evening, same day. Rahul has come early from office. Pooja has gone out for jogging. Just as Rahul is about to make himself a cup of coffee, the doorbell rings. Pooja comes back. They look at each other and immediately know they’ve had a rough day.
“Are we in a position to take that much home loan? 84 lakh?” asked Rahul.
“In theory yes,” replied Pooja. 73,000.”
“Hmm. I came across this nice One BHK in a neighboring building. Owner wants 1.1 crore for this. But the agent I am talking to is a friend of Ashish and he can ask the owner to reduce the price 1.05 crore.”
“Hmm.”
“Exactly. We have to pay stamp duty and also commission to the agent. So, net net, the total cost should work out to 1.15 crores. with a loan of Down payment of 84 lakhs We can buy that flat for 21 lakhs. and we’ll need at least another 10 lakhs for other expenses.”
“The thing is, we’ll need at least around 31 lakh from our savings ( 21 lakh down payment plus 10 lakh for other expenses),” she explained.
“Yes, it is true,” she replied.
“Our total savings amount 40 lakhs. It means losing a good chunk of our savings and I really don’t like it.”
“But did Ashish say we have to stretch?”
“Well. Ashish doesn’t know about our financial situation, does he?” He replied with a bit of annoyance. “We are paying for the flat, not him.”
scene 8
Late night, same day. Rahul and Pooja are ready to call it a day when Rahul’s mobile rings. Ashish is calling.
“Good time to talk to the boss?” Ashish asked.
“Yes,” replied Rahul.
“Okay. So, my brother-in-law wants to sell a BHK flat in which he had invested. He wants to 90 lakh more are not ready to budge.”
Rahul had put the phone on speaker mode, so Pooja was also listening. He looked at her and raised his eyebrows and head slightly to ask what she thought about it. Pooja indicated that he should keep talking.
scene 9
a few weeks later. Rahul and Pooja have bought the flat. has taken a loan of Down payment of 75 lakhs more 1.5 million. He had to shell out a few lakh more to pay for stamp duty and other moving expenses in the new flat. their savings were down to about 18 lakhs. The savings position was better than where they would have ended up if they had gone ahead and bought a flat in the next building, which would have cost them dearly. 1.15 crores. In addition, the EMI on the loan of was around 75 lakhs 65,000 and approx 8,000 less than the EMI on a loan of Rs. 84 lakhs. However, they had to cross the creek and stay further away from the city.
“So, Mummy must be happy now,” said Pooja.
“Yes,” replied Rahul. “Finally we’ve done something that should make him happy.”
“And now he will finally have something to talk about when his sister talks about her son, Pintu.”
“His name is Chintu,” replied Rahul.
“Same difference,” said Pooja.
scene 10
Rahul and Pooja have moved into their new apartment. Mummy is coming. Rahul has gone to pick her up. The door bell rings. Pooja goes and opens the door. Mummy ji quickly comes inside and quickly inspects the new flat. Thirty seconds later, she walks into the living room with a look of despair on her face.
“It’s even smaller than my father’s official bungalow,” she said. “And it’s just one BHK… Now, what do I tell my sister? Her Chintu has three BHKs.”
Pooja gives that look to Rahul.
(Example is imaginary).
Bad Money is written by Vivek Kaul.
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