On welcoming hajjis home, it is mustahab (commendable) to congratulate them and make a banquet for them. But decorating with lights, firing gunshots, and hanging welcoming banners on walls are all forms of extravagance and showing off that should be avoided. Basically, there is nothing wrong in showing happiness for the safe arrival of hajjis when receiving them, yet it should be done without wasting money because this was not the practice of the Prophet (peace and blessings be upon him).
Addressing this issue, the prominent Muslim scholar Dr. Husam Ad-Din ibn Musa `Afana, professor of the Principles of Islamic Jurisprudence at the University of Jerusalem, states the following:

Allah accepts acts of worship when done with sincerity, which is achieved by avoiding all aspects of showing off. My concern is that such acts like putting up banners, colored lights, and firing gunshots as a welcoming gesture might be counted as a form of extravagance and showing off; that is why I suggest that they should be avoided. In this regard Allah says: (O ye who believe! Render not vain your almsgiving by reproach and injury, like him who spendeth his wealth only to be seen of men and believeth not in Allah and the Last Day. His likeness is as the likeness of a rock whereon is dust of earth; a rainstorm smiteth it, leaving it smooth and bare.) (Al-Baqarah 2: 264) The Prophet (peace and blessings be upon him) said: “He who lets the people hear of his good deeds intentionally, to win their praise, Allah will let the people know his real intention (on the Day of Resurrection), and he who shows off, Allah will disgrace.” (Al-Bukhari and Muslim).

Besides, it is unlawful to slaughter sheep and make a hajji pass over it because slaughtering should be dedicated only for the sake of Allah. Almighty Allah says: (Say: Lo! My worship and my sacrifice and my living and my dying are for Allah, Lord of the Worlds.) (Al-An`am 6: 162)

Upon returning home, a hajji should follow the conduct of the Prophet (peace and blessings be upon him). `Abdullah ibn `Umar (may Allah be pleased with father and son) said: “Whenever he was returning from an expedition, Hajj, or `Umrah, the Prophet (peace and blessings be upon him) used to say whenever he went over the crest of a hill, ‘Allah is the Greatest. Allah is the Greatest. Allah is the Greatest. There is no god but Allah, the One Who has no partner. His is the dominion and His is the praise. He has power over everything. Returning, repenting, and worshiping our Lord. He has kept His promise, come to the aid of His servant and defeated the confederates single-handedly.’” (Al-Bukhari)

Receiving people coming from Hajj should be done without exaggeration. There is nothing wrong in using phrases like “May Allah accept your Hajj, grant you forgiveness, and reward you for your efforts.” In another hadith the Prophet (peace and blessings be upon him) said, “O Allah! Forgive pilgrims and those for whom pilgrims have sought forgiveness from You.” There is nothing wrong if the relatives of hajjis prepare a banquet for them and those who come to congratulate them.

Shedding more light on the issue, we would like to cite the following from the Kuwaiti Encyclopedia of Islamic Jurisprudence:

Generally speaking, it is preferable to congratulate a pilgrim on his safe arrival and on performing Hajj, for this is an act of supplication of a Muslim to his Muslim brother. Besides, it is a token of affection and showing mercy and sympathy to one another. In the Qur’an, we read a verse congratulating the believers on the blessings they have in Paradise. Almighty Allah says: ((And it is said unto them): Eat and drink in health (as a reward) for what ye used to do.) (At-Tur 52: 19).

On congratulating one another, people should use phrases and actions that create happiness and conform with the commands of Allah and the teachings of His Prophet (peace and blessings be upon him). Occasions like marriage, birth of a child, `Eid, return from a journey, Hajj, or `Umrah, getting rid of distress are all occasions that need congratulations.

Shafi`is and Hanbalis view that it is recommended to congratulate a person who is coming back from a journey and embrace him or her. The Shafi`is even add that it is also recommended to kiss that person and shake hands with him or her provided that the person is the same sex as the one who kisses or shakes hands. It is also recommended to make a reception banquet and to go out to receive the person.

Ash-Shi`by said, “When coming back from a travel, the Companions of the Prophet (peace and blessings be upon him) would embrace one another.” `A’ishah (may Allah be pleased with her) reported: “Zayd ibn Harith arrived in Madinah while the Prophet (peace and blessings be upon him) was in my room. When he came and knocked on the door, the Prophet, pulling his garment, went to the door, opened it, and hugged and kissed him.”

The Shafi`is opine that it is recommended to receive a hajji by saying, “May Allah accept your Hajj or `Umrah, grant you forgiveness, and reward you for your efforts.”