Wednesday, June 21, 2006

Home loans and consumer rights

A great piece by Gautam Chikermane. He writes about home loan agreements.

...Buried deep in the bowels of any home loan agreement is a sub-head that goes, ‘events of default’, within which is tucked away a clause that in English means, if the value of the house for which a loan has been taken falls below the loaned amount, the bank, unilaterally, can demand that the borrower make good the difference, or else be declared a defaulter....

He connects it to the broader picture of industries protecting their backs at the cost of the customer.

This is not the first time this industry has been playing with its customers. A decade ago, the con was in showing a low rate of interest, when it was fixed, that is, not on reducing balance. Borrowers who went in for fixed rate loans three years ago, are realising that the rate is not really fixed; the bank has the option to turn it flexible. Why home loans, a car on loan can’t be driven out of the city. Why banking, the risk factors of an IPO are often marketing spiels. Why financial services, an airline has the right to drop you in Bangalore even if your ticket is to Delhi; travel agencies don’t disclose visa or airport taxes; exchange offers of white goods are at the discretion of dealers; telecom companies’ freebies begin to cost after a few months.

I am sure many of us have had similar experiences. We had a bad time with our builder because his brochure and his legal agreement were different and he shortchanged us on many facilities. A friend of mine who bought a house from a "prestigious" builder here had to go through rate revisions (upward) post purchase or a "take it or leave it" clause.
Consumer rights have a long way to go in India.

1 comment:

Anonymous said...

I have seen your blog. It’s quite interesting and informative. Have a look on my services. Have a look on my blog.