Latest news with #AkhilRathi
Economic Times
a day ago
- Business
- Economic Times
Wealth edition 18-Aug-2025 to 24-august-2025
Banks vs HFCs Live Events How a rate fall impacts EMIs Which lender approves faster? Making the right choice The way forward Have you ever wondered why your home loan EMI refuses to budge even when the Reserve Bank of India (RBI) announces a rate cut? If you've borrowed from a Housing Finance Company (HFC), you're not alone in this frustration. While your friend with a bank loan celebrates a lower EMI within weeks, you might wait months—or may not see the benefit at culprit isn't inefficiency but a fundamental difference in how banks and HFCs operate—one that can cost you thousands over your loan's lifetime, making lender choice far more critical than most is where the question of where you borrow from, a bank or an HFC, becomes crucial. While both provide home loans , their business models, funding sources, and regulatory frameworks differ.'Banks raise funds primarily from customer deposits, which gives them access to low-cost capital. This allows them to offer lower interest rates and, importantly, makes it easier to pass on the benefits of a repo rate cut. Since October 2019, banks have been required to link all new floating-rate home loans to an external benchmark, most often the RBI's repo rate,' explains Vipul Patel, Founder & MD, This means that changes in policy rates are transmitted quickly, often showing up in the borrower's EMI within a by contrast, raise funds from banks or from the market, often at higher costs. Their lending rates are usually pegged to their own internal benchmark—the Prime Lending Rate (PLR)—which they adjust at their discretion. These adjustments tend to happen less frequently. As a result, even if the RBI cuts rates, HFC borrowers may have to wait longer to see the benefit, and the reduction may be smaller than the headline cut.'In HFCs, reset periods are typically longer, commonly six to twelve months, so borrowers may face delays. To access lower rates, they usually need to request a conversion and pay a switch-over fee, which is allowed under National Housing Bank (NHB) guidelines,' says Akhil Rathi, Head – Financial Advisory, 1 Finance. While NHB also places limits on prepayment penalties for floating-rate loans, other charges like processing fees still apply when switching between lenders. However, the differences go beyond the past five to six years, home loan borrowers have seen interest rates fluctuate in ways that have had a direct impact on their finances. In October 2019, the RBI's repo rate stood at 5.15%. By May 2020, as the pandemic hit the economy, it was cut sharply to 4%, the lowest in decades, making home loans cheaper than ever before. Rates remained at that level for almost two years, giving borrowers some much-needed breathing space. However, by mid-2022, inflationary pressures prompted the central bank to resume rate hikes, and by February 2023, the repo rate had climbed to 6.50%.Interest rates are passed on faster by a bank, but there are more factors to be much of 2024, rates remained unchanged, but in early 2025, the trend reversed as inflation eased. Between February and June 2025, the RBI cut rates by a full percentage point, bringing the repo to 5.50%. When rates fall, borrowers with floating-rate loans stand to save thousands over the life of their loan. A cut of just 0.25 percentage points on a Rs. 50 lakh loan for 20 years can reduce the monthly EMI by about Rs. 820 and total interest costs by nearly Rs. 2 the cut to 0.50 percentage points, and the savings rise to roughly Rs 1,640 per month, or close to Rs.4 lakh over the tenure. On larger loans, the benefit is even more striking: an EMI drop of over Rs 3,200 and interest savings of nearly Rs 8 lakh for a Rs 1 crore the size of the rate cut announced by the RBI is only half the story. The other half is whether, when, and how your lender passes on that benefit. If your loan rate hasn't moved despite central bank cuts, it could be because you're on a fixed-rate loan that stays unchanged until the reset date, your lender's quarterly or semiannual reset hasn't kicked in, or—especially with some HFCs—their borrowing costs haven't dropped enough to pass on a cut.'Loan sanctioning is usually more complex with banks in comparison to the HFCs,' says Adhil Shetty, CEO, 'Banks have more stringent paperwork requirements for home loans, while HFCs usually have fewer formalities. Banks are also more stringent on the credit score requirements. If you scan the loan marketplace, you'll see that HFCs have more relaxed policies towards customers with low credit scores.' However, with a low score, both banks and HFCs will likely charge you a higher interest rate, and the rate charged by an HFC would be significantly higher than that charged by a are also some misconceptions. One common belief is that HFCs can finance a bigger share of your home's value than banks. Shetty clarifies this is not true because both are bound by RBI's loan-to-value (LTV) rules. LTV stands for the maximum share of a property's value that a lender can finance. For example, up to 90% for smaller home loans (Rs.30 lakh or less), 80% for loans between Rs.30 lakh and Rs.75 lakh, and 75% for loans above Rs.75 buyer must pay the rest as a down payment. 'Neither banks nor HFCs can include stamp duty and registration costs in the property value while calculating LTV,' adds Shetty. Those charges always have to come out of your pocket. So, in terms of how much of the property price they can finance, HFCs have no advantage over banks, though they may be slightly more lenient on the Fixed Obligation to Income Ratio (FOIR), which gauges how much of your income goes to existing loans. If FOIR is too high, the lender may reject the loan or approve a smaller amount.'For someone in a stable, salaried job with a good credit score, a bank is likely to be the better option for the long term,' advises Patel of Mortgageworld. Not only are interest rates typically lower, but the faster transmission of rate cuts can make a significant difference over the life of the individuals, those with irregular income, or borrowers in urgent need of quick disbursal might find an HFC more accommodating. In cases where a property is part of a developer's tie-up with a particular HFC, starting with that lender might be the easiest path, with the possibility of refinancing to a bank later for a lower rate. Borrowers with borderline or low credit scores may also have a better chance of approval with an HFC, although they should be prepared to pay a higher interest the decision comes down to striking a balance between cost and convenience. A bank may save you more money over time, but an HFC may approve your loan when a bank won't or approve it faster. The good news is that with RBI regulation now covering both banks and HFCs, the playing field is more level than it used to be.'While the HFCs may be faster and more accommodating than banks, borrowers should be aware of trade-offs such as slower benefit from rate cuts, potentially higher interest costs, and fees for switching or converting rates,' says Rathi of 1 Finance. Proactively reviewing loan terms and monitoring interest rate movements can help maximise from Mortgageworld says that the remaining gaps between banks and HFCs must be closed. 'HFCs must be told to use external benchmarks that speed up rate transmission for their customers.' Standardising reset cycles, improving disclosure of the 'true' annual percentage rate, and making it easier and cheaper for borrowers to switch lenders would give consumers more power to make the choice that suits them best. 'The ultimate goal is a housing finance market where the decision between a bank and an HFC is based purely on service and borrower fit, not on who will pass on an RBI rate cut first,' he adds.
Time of India
a day ago
- Business
- Time of India
Why isn't your home loan EMI dropping after RBI rate cuts? Blame your lender
Banks vs HFCs Academy Empower your mind, elevate your skills How a rate fall impacts EMIs Which lender approves faster? Making the right choice The way forward Have you ever wondered why your home loan EMI refuses to budge even when the Reserve Bank of India (RBI) announces a rate cut? If you've borrowed from a Housing Finance Company (HFC), you're not alone in this frustration. While your friend with a bank loan celebrates a lower EMI within weeks, you might wait months—or may not see the benefit at culprit isn't inefficiency but a fundamental difference in how banks and HFCs operate—one that can cost you thousands over your loan's lifetime, making lender choice far more critical than most is where the question of where you borrow from, a bank or an HFC, becomes crucial. While both provide home loans , their business models, funding sources, and regulatory frameworks differ.'Banks raise funds primarily from customer deposits, which gives them access to low-cost capital. This allows them to offer lower interest rates and, importantly, makes it easier to pass on the benefits of a repo rate cut. Since October 2019, banks have been required to link all new floating-rate home loans to an external benchmark, most often the RBI's repo rate,' explains Vipul Patel, Founder & MD, This means that changes in policy rates are transmitted quickly, often showing up in the borrower's EMI within a by contrast, raise funds from banks or from the market, often at higher costs. Their lending rates are usually pegged to their own internal benchmark—the Prime Lending Rate (PLR)—which they adjust at their discretion. These adjustments tend to happen less frequently. As a result, even if the RBI cuts rates, HFC borrowers may have to wait longer to see the benefit, and the reduction may be smaller than the headline cut.'In HFCs, reset periods are typically longer, commonly six to twelve months, so borrowers may face delays. To access lower rates, they usually need to request a conversion and pay a switch-over fee, which is allowed under National Housing Bank (NHB) guidelines,' says Akhil Rathi, Head – Financial Advisory, 1 Finance. While NHB also places limits on prepayment penalties for floating-rate loans, other charges like processing fees still apply when switching between lenders. However, the differences go beyond the past five to six years, home loan borrowers have seen interest rates fluctuate in ways that have had a direct impact on their finances. In October 2019, the RBI's repo rate stood at 5.15%. By May 2020, as the pandemic hit the economy, it was cut sharply to 4%, the lowest in decades, making home loans cheaper than ever before. Rates remained at that level for almost two years, giving borrowers some much-needed breathing space. However, by mid-2022, inflationary pressures prompted the central bank to resume rate hikes, and by February 2023, the repo rate had climbed to 6.50%.Interest rates are passed on faster by a bank, but there are more factors to be much of 2024, rates remained unchanged, but in early 2025, the trend reversed as inflation eased. Between February and June 2025, the RBI cut rates by a full percentage point, bringing the repo to 5.50%. When rates fall, borrowers with floating-rate loans stand to save thousands over the life of their loan. A cut of just 0.25 percentage points on a Rs. 50 lakh loan for 20 years can reduce the monthly EMI by about Rs. 820 and total interest costs by nearly Rs. 2 the cut to 0.50 percentage points, and the savings rise to roughly Rs 1,640 per month, or close to Rs.4 lakh over the tenure. On larger loans, the benefit is even more striking: an EMI drop of over Rs 3,200 and interest savings of nearly Rs 8 lakh for a Rs 1 crore the size of the rate cut announced by the RBI is only half the story. The other half is whether, when, and how your lender passes on that benefit. If your loan rate hasn't moved despite central bank cuts, it could be because you're on a fixed-rate loan that stays unchanged until the reset date, your lender's quarterly or semiannual reset hasn't kicked in, or—especially with some HFCs—their borrowing costs haven't dropped enough to pass on a cut.'Loan sanctioning is usually more complex with banks in comparison to the HFCs,' says Adhil Shetty, CEO, 'Banks have more stringent paperwork requirements for home loans, while HFCs usually have fewer formalities. Banks are also more stringent on the credit score requirements. If you scan the loan marketplace, you'll see that HFCs have more relaxed policies towards customers with low credit scores.' However, with a low score, both banks and HFCs will likely charge you a higher interest rate, and the rate charged by an HFC would be significantly higher than that charged by a are also some misconceptions. One common belief is that HFCs can finance a bigger share of your home's value than banks. Shetty clarifies this is not true because both are bound by RBI's loan-to-value (LTV) rules. LTV stands for the maximum share of a property's value that a lender can finance. For example, up to 90% for smaller home loans (Rs.30 lakh or less), 80% for loans between Rs.30 lakh and Rs.75 lakh, and 75% for loans above Rs.75 buyer must pay the rest as a down payment. 'Neither banks nor HFCs can include stamp duty and registration costs in the property value while calculating LTV,' adds Shetty. Those charges always have to come out of your pocket. So, in terms of how much of the property price they can finance, HFCs have no advantage over banks, though they may be slightly more lenient on the Fixed Obligation to Income Ratio (FOIR), which gauges how much of your income goes to existing loans. If FOIR is too high, the lender may reject the loan or approve a smaller amount.'For someone in a stable, salaried job with a good credit score, a bank is likely to be the better option for the long term,' advises Patel of Mortgageworld. Not only are interest rates typically lower, but the faster transmission of rate cuts can make a significant difference over the life of the individuals, those with irregular income, or borrowers in urgent need of quick disbursal might find an HFC more accommodating. In cases where a property is part of a developer's tie-up with a particular HFC, starting with that lender might be the easiest path, with the possibility of refinancing to a bank later for a lower rate. Borrowers with borderline or low credit scores may also have a better chance of approval with an HFC, although they should be prepared to pay a higher interest the decision comes down to striking a balance between cost and convenience. A bank may save you more money over time, but an HFC may approve your loan when a bank won't or approve it faster. The good news is that with RBI regulation now covering both banks and HFCs, the playing field is more level than it used to be.'While the HFCs may be faster and more accommodating than banks, borrowers should be aware of trade-offs such as slower benefit from rate cuts, potentially higher interest costs, and fees for switching or converting rates,' says Rathi of 1 Finance. Proactively reviewing loan terms and monitoring interest rate movements can help maximise from Mortgageworld says that the remaining gaps between banks and HFCs must be closed. 'HFCs must be told to use external benchmarks that speed up rate transmission for their customers.' Standardising reset cycles, improving disclosure of the 'true' annual percentage rate, and making it easier and cheaper for borrowers to switch lenders would give consumers more power to make the choice that suits them best. 'The ultimate goal is a housing finance market where the decision between a bank and an HFC is based purely on service and borrower fit, not on who will pass on an RBI rate cut first,' he adds.
Time of India
11-08-2025
- Business
- Time of India
How homebuyers can protect themselves from being scammed by builder-bank nexus when buying under-construction houses
Devil in the details Academy Empower your mind, elevate your skills Games builders play A cosy club Builder stops paying EMIs. Bank holds buyer liable (since the loan is in buyer's name). Buyer must start paying EMI, even if... — The house is not delivered. — The builder is insolvent or absconding. If staying on rent, buyer pays EMI + rent. lCredit score gets damaged due to missed payments. What should homebuyers do? Ensure the project is registered with RERA and check its status online. Avoid schemes that lack escrow accounts. Demand clear documentation of payment schedules and possession timelines. Seek independent legal and financial advice before committing. Prefer projects backed by reputed banks that conduct thorough due diligence. It was an offer homebuyers could not resist. Buy a pricey apartment for a small upfront payment of 5-10%. Borrow the rest from a lender with an added sweetener: your EMI payments are deferred until you get possession of the flat. The developer agrees to bear the interest burden until the buyer receives the keys to the house. What could go wrong? A lot, as it turns widespread defaults by cashstrapped developers on their commitments, banks have been demanding repayment from purchasers, despite homes remaining undelivered. Following petitions from thousands of aggrieved homebuyers, the Supreme Court this year directed a Central Bureau of Investigation (CBI) inquiry into a housing scam by builders and banks. The CBI in July filed multiple cases against various Delhi/NCR-based builders, as well as banks, for duping homebuyers. This may be just the tip of the iceberg. The rot runs deeper. Real estate developers have, over the years, employed a wide array of tactics to attract buyers. Beyond freebies, discounts and creative sales pitches, builders have also offered convenient financing options promising 'no EMI till possession' subvention schemes and deferred payment plans linked to construction progress. Akhil Rathi, Head, Financial Advisory at 1 Finance, says, 'Subvention and deferred payment schemes aim to reduce the initial financial burden for homebuyers, especially those currently paying rent, by offering lower upfront costs and delayed EMIs .'However, there is often a devil residing within the fine print. In a subvention scheme , a tri-party agreement is executed among the homebuyer, the builder and the lender. The builder agrees to pay the pre-EMIs till possession. Even so, the actual borrower remains the homebuyer. So if the builder defaults on the interest payments, it is the homebuyer who is exposed. If he can't repay the loan, the buyer's credit rating the offer clearly specifies a timeline for this arrangement. Some developers promise to cover the interest cost only for the initial 18 to 24 months. 'Subvention plans are always timed. The builder offers to pay interest only for a specified number of years,' indicates Adhil Shetty, CEO, Beyond this period, the buyer is obligated to make EMI payments even if the project is not completed. Rathi adds, 'Builders also charge a much higher price for houses if bought through a subvention scheme. This hidden cost defeats its purpose.'As many buyers have discovered, delays in under-construction houses are a common occurrence in India. Thousands of homebuyers across Delhi/NCR, Mumbai and Pune have fallen victims to this. Data analytics firm PropEquity found in 2024 that one in five under-construction houses, totalling over 5 lakh units, remained undelivered as 1,981 projects across 44 cities were stalled in the preceding eight the remaining four under-construction houses were delivered after a substantial delay of 3-4 years. 'Construction delays are a standard feature of Indian realty for several reasons. This means that the subvention plan leaves borrowers high and dry in case of a serious project delay,' remarks be sure, the RBI had banned banks from entering into such arrangements. It had also barred lenders from making upfront disbursements to builders in underconstruction projects. Loans must be disbursed in tranches linked to construction progress. However, several NBFCs and fintech platforms continue to tie up with builders to offer variants of such construction-linked plan (CLP), a staple offering among builders, has proven to be a mirage. Under this arrangement, the buyer pays in tranches, linked to construction milestones. The builder receives payment only when the work is completed, supposedly reducing the risk for buyers. Surely, it is in the builder's interest to execute the project on time?Not quite. Experts point to a critical flaw in construction-linked plans. These are often not aligned with the builder's cash flow. 'The payment plan is designed in a manner that you would have to pay 90% of the apartment price upon 'laying of the top floor of the building'. However, that is not how the project expenses are allocated. By the time the structure is complete, the builder usually has spent approximately 40-50% of the project cost. The rest 60% of the money is needed later,' observed Anurag Singh, Founder, Ansid Capital, in a recent post on X. Once the builder has received a majority of the project cost (via CLP), he slows down construction deliberately. He has already pocketed a sizable chunk of profits, but his costs are yet to materialise or flow out. He stops construction rather than pay for the remaining work. That is why buyers often find projects getting stalled in later stages, not initially. In the meantime, the builder diverts attention to new launches. Money received under CLP for Project A is diverted to buy land or finance construction in Project B or C. If Project A is delayed or abandoned, the builder has still made his in five under-construction houses were undelivered across major cities and towns in are notorious for gaming this arrangement. A builder claims a milestone (say, 10th or 15th slab) is complete even when actual work is pending. If a lender is involved, they may furnish forged completion certificates to get the lender to release the next tranche. This results in front-loaded payments even when the construction activity lenders carry out due diligence while choosing builders? Surely banks would not want any erosion in the value of their collateral. On the contrary, lenders have been lax in this regard. Many banks don't lend to builders (other than grade A) directly, given the risk in the real estate business. Instead, they offer home loans to individual buyers, which indirectly fund the builder. 'Essentially, the consumer is financing the builder in the name of 'construction-linked plan',' observes Singh. 'So a developer, to whom no bank lends money, can actually get easy finance from the buyers at 0% interest, while the borrowers pay the EMIs with interest,' he system has conveniently kept the builders well fed. In many cases, builders and lenders have pre-arranged cosy tieups. Banks sanction loans for new projects without batting an eyelid, even if these are missing clearances from local authorities. Some lenders may skip physical inspection of construction progress entirely, relying on the builder's documents. This lack of hygiene checks is because banks have no real skin in the game, say experts. How so? If the builder falters and the house (collateral) value shrinks, the bank can recover its value through auction and yet hold the homeowner liable for the outstanding builders and lenders have led homebuyers into a storm. 'Builders have often exploited subvention schemes to attract buyers without ensuring timely delivery. In many cases, they were used to mask delays or financial instability. Banks, too, have played a role by approving loans without adequate scrutiny of the project's viability, especially during periods of high market activity,' remarks Ravi Shankar Singh, Managing Director, Residential Transaction Services, Colliers India. 'Builders used these schemes to collect funds early while construction lagged. Banks, aiming to grow home loan portfolios, at times overlooked due diligence,' suggests a tri-party agreement project gets delayed or builder guardrails are now in place through the Real Estate Regulation and Development Act (RERA), but these lack sufficient enforcement mechanisms. This encourages builders to play the devil with impunity. 'A law is only as strong as its enforcement. RERA orders have no enforcement power. Even if you win interest penalty for delayed completion, you can take that victory certificate where you want to. The builder is not going to pay anything,' Singh laments in his post. 'We created a system that was designed to finance the extremely low-credit builder and rob the consumer of his lifetime earnings with no recourse to justice,' he unsuspecting homebuyers are now paying a hefty price for pursuing their housing aspirations. The dream abode has turned out to be a millstone around the neck rather than a means for achieving financial freedom. For those looking to buy, vigilance remains the only Pharande, Managing Director of Pharande Spaces, insists, 'Buying a home should be driven by at least as much awareness as sentiment. Homebuyers must always approach a real estate deal in the spirit of caveat emptor—buyer beware.'Verify the builder's track record and financial stability. Ensure the project is registered with RERA and check its status online. Seek independent legal and financial advice before committing. Shetty avers, 'Scrutinise all the documents, approvals, sanctions, etc. It does not matter whether the lender or the builder have done the legal legwork. As a buyer, you are the one investing your and your family's emotional, physical, and financial well-being in the property. So make sure you have a lawyer to make all the checks on your behalf.'Do not take blind comfort in easy financing offers. 'Subvention schemes and deferred payment plans are means by which buyers can pay for their homes in a more flexible manner, based on how far along the construction is. While this makes it easier for them to pay, such schemes are only useful if they are clear and have explicit terms, and if the developer can be relied upon to complete the project as per schedule,' says Pharande. Buyers should clarify who will be responsible if the builder misses interest payments, as such lapses can lead to missed payments that negatively impact the buyer's credit score, even though the disbursed funds were for construction, not personal use, insists the builder's track record and financial IndiaWatch out for front-loaded payment schedules. Paying 70-80% of the flat cost within 18 months while the project is scheduled for completion years later is a red flag. 'Make sure the payment schedule reflects the stages for actual completion of your flat and also till the handing over of all the legal documents like no-objection certificate (NOC) and occupation certificate,' asserts Shetty. You do not want the bank to advance the entire amount even if the entire post-completion paperwork is pending. This change needs to be made in the sale deed before it is signed and registered, he says. Further, insist on third-party verification of construction milestones before any payment. Relying solely on builder statements or certificates increases don't fall for incentives offered by the builder while overlooking crucial aspects of the Shankar Singh of Colliers asserts, 'It's important to focus on the fundamentals, location, builder credibility, legal clearances, and construction quality, rather than flashy incentives.
Time of India
23-06-2025
- Business
- Time of India
Rising prices for shrinking houses: How lavish lifestyle comes at the cost of higher loading factor; check this before you buy
Imagine an Olympic-size swimming pool, a swanky multistorey clubhouse, badminton and tennis courts, and landscaped gardens. A few years ago, you would have been picturing a luxury retreat nestled somewhere in the hills. But what was once a dreamy escape is now part of everyday life for many. An oasis of calm, comfort and luxury awaits Indian homeowners within plush housing complexes mushrooming amid the hustle-bustle of its big cities. However, this elevated living comes with a sharp trade-off: homebuyers are paying through the nose for open spaces, while making do with less living space. Lavish living, cramped spaces When you buy an apartment, you do not just pay for the liveable area within its four walls. A portion of the cost also goes toward shared spaces in the housing society—this is known as the ' loading factor '. It refers to the proportionate share of ancillary common areas and amenities added to the carpet area (usable inner home area) and included in the price charged to the buyer. It essentially refers to the difference between the super built-up and the carpet area of an apartment. To put it simply, the carpet area refers to the floor space where you can actually lay a carpet. The built-up area includes the carpet area plus the space taken up by the walls and ducts. The super built-up area includes the built-up area along with a proportionate share of common spaces such as the staircases, lift shafts, entrance lobbies, corridors, parking areas, and amenities. 'In India, property prices are usually calculated based on the super built-up area. While developers market homes based on this figure, the real value lies in the carpet area,' points out Akhil Rathi, Head– Financial Advisory at 1 Finance. A recent report by ANAROCK throws light on the steep premium homebuyers are paying for their lap of luxury. According to the real estate consultancy, the average loading factor in apartments across India's top seven markets has climbed sharply from 31% in 2019 to 40% in January-March 2025. This means that of the total space you are paying for, only 60% is the home interior, while 40% of the cost is for the common areas and amenities. In the past, a loading of 25-30% was the norm. Loading factor has surged MMR faces highest loading; Bengaluru sees steepest rise Homebuyers' preferences for a certain lifestyle is contributing to this trend. Nowadays, homebuyers covet expansive lounge areas with cafes, state-of-the-art gymnasiums, rooftop decks and multi-purpose utility areas. Experts point out that the loading factor is directly proportional to the amenities in a project. The cost of additional amenities provided by the developer is usually passed on to customers in the form of loading charges. Invariably, loading will be higher for larger projects, where more space is allotted to amenities and common areas. Live Events Prashant Thakur, Regional Director & Head–Research & Advisory, ANAROCK Group, observes, 'Today, higher amenity loading has become the norm across most projects partly because homebuyers are no longer satisfied with basic lifestyle amenities— they expect fitness centres, clubhouses, park-like gardens, and grand lobbies.' Additionally, regulatory and safety requirements, such as fire escapes, utility zones, and larger elevators, further increase the common areas, thereby adding to the loading, points out Rahul Purohit, Cofounder & Chief Business Officer, Square Yards. But the flip side is that homebuyers end up giving up on actual living spaces. Buyers often end up paying a premium for homes with less actual living area because the pricing is based on the super built-up area, not the space the residents actively use, Rathi explains. 'While such facilities may enhance the community living experience, they also reduce the size of individual units, resulting in tighter bedrooms or smaller living spaces,' he says. Jayesh Rathod, Co-Founder and Director of The Guardian Real Estate Advisory, asserts, 'Homebuyers are increasingly paying a significant portion of their total home cost for shared spaces rather than actual liveable space.' 'While high loading doesn't automatically lower resale prices, it may narrow the pool of interested buyers due to perceived space inefficiency", says Akhil Rathi, Head – Financial Advisory, 1 Finance. According to the ANAROCK report, Mumbai Metropolitan Region continues to see the highest loading among the top seven cities, with 43% in January-March 2025. Bengaluru has seen the highest percentile jump in average loading over the last seven years–from 30% in 2019 to 41% in January-March 2025. The ANAROCK report suggests this dovetails with the increasingly higher saturation of modern amenities that developers now include to cater to the higher lifestyle ask in the IT hub. Chennai, on the other hand, has the least average loading rise in January-March 2025 with 36%, aligning with a city-specific demand profile where homebuyers prefer to pay more for usable space within their homes rather than for common areas. In 2019, Chennai's average loading percentage was 30%. Same budget, different loading factors Knowing the loading factor helps assess value. Balancing act For homebuyers, the loading factor of an apartment is critical when evaluating projects with extensive amenities and open spaces. It is indicative of the functionality of the house. It also reveals the real value behind the price tag. Loading ratio tells you how much space you get for the money you spend. If the ratio is higher, it implies that you are paying a higher price per square foot than the advertised cost. Homebuyers can effectively compare relative value proposition of different projects. For example, if two apartments—Unit A and Unit B—each have a super built-up area of 1,000 sq ft and are priced atRs.75 lakh, but their loading factors are 25% and 33% respectively, it means Unit A offers more liveable space at 800 sq ft compared to Unit B's 750 sq ft. This trade-off between amenities and functional space begs careful consideration. 'This trade-off, paying more for less private space, has become a growing concern among urban homebuyers, especially in cities where affordability is already a challenge,' says Rathi. Individual preferences may differ, so buyers should evaluate offers accordingly. 'Higher amenity loading has become the norm across most projects partly because homebuyers are no longer satisfied with basic lifestyle amenities," says Prashant Thakur, Regional Director & Head -Research & Advisory, Anarock. 'For buyers who value access to curated amenities and community experiences, the premium associated with such projects can be well worth it, even if it means a slightly smaller functional space,' avers Purohit. Conversely, for those who prioritise maximum carpet area and functional layouts over lifestyle features, choosing a project with minimal loading and fewer amenities might be more suitable, he adds. Loading may also impact the resale value of your house. It can bolster or dilute the appeal of the tenement, depending on buyer preferences in the secondary market, experts say. Housing prices have shot up sharply Bengaluru has seen highest jump; Mumbai commands biggest premium. 'On one hand, projects with premium amenities and lifestyle-driven features often appeal to a certain segment of buyers looking for comfort, convenience, and community living. However, if the functional space feels significantly compromised, it could limit the resale pool or affect price appreciation over time,' contends Purohit. 'Higher loading may affect the resale value in some cases, particularly when similar properties in the vicinity or even nearby locations offer more usable space at the same price,' Thakur remarks. How to calculate loading factor Buyers must verify charges to avoid overpaying for less space. If super built-up area is 1,000 sq ft and carpet area is 750 sq ft: Older or more thoughtfully designed homes with minimal loading and better space distribution often attract greater interest during resale, Rathi points out. However, if a new project is developed by a well-known builder and offers premium amenities, some buyers may still find value in the overall lifestyle offering. 'So, while high loading doesn't automatically lower resale prices, it may narrow the pool of interested buyers due to perceived space inefficiency,' Rathi adds. Get clarity on the loading factor For homebuyers, clarity on the loading factor and actual living area is essential. Unfortunately, the practise of 'loading' in real estate is shrouded in a web of secrecy. Developers conveniently do not mention the loading factor in their glossy sales brochures. Regulations do not mandate developers to disclose this figure either. This leaves homebuyers in the dark about the value they are getting. To be sure, the Real Estate (Regulation and Development) Act, 2016, requires developers to mention the total carpet area provided to homebuyers. But not all states enforce the law. 'In most cases, buyers across cities, except in Maharashtra, are unaware of how much they pay towards the overall usable space within their apartment,' avers Thakur. Besides, there is no law that currently limits the loading factor in residential housing. It is left to the discretion of the developers, who justify higher loading for the amenities provided. In the absence of any regulation, some developers charge loading as high as 50% or more for their projects, experts point out. The onus is on buyers to remain vigilant. Here's what you can do: Ask your builder, the exact carpet area you are paying for and compare it with the super built-up area. 'Request a clear breakdown of costs, what portion goes to actual usable space and what is for common amenities,' says Rathod. Compare carpet-to-super built-up ratios across similar projects, thoroughly study floor plans, and, if needed, consult an architect or a real estate adviser. 'Comparing loading percentages across projects can highlight anomalies and offer a strong basis for negotiation, especially if the loading appears excessive,' Purohit comments.
