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Repo rate increased again, homebuyers may defer deals

By Rishabh Chamoli | 2022-12-08

The Reserve Bank of India (RBI) has announced its fifth successive repo rate hike by another 35 basis points (bps). Experts believe this may result in prospective homebuyers postponing their immediate plans to invest in property, and opt for rental accommodations instead for the next few quarters.

The Reserve Bank of India (RBI) has announced a repo rate hike by 35 basis points (bps) on December 7, 2022 for the fifth consecutive time, taking the cumulative increase to 225 bps in 2022, and the repo rate to 6.25 percent. Soon after the last hike on September 30, 2022, two major mortgage lenders, LIC Housing Finance and Housing Development Finance Corporation announced upward revisions in their lending rates, and others followed suit. Industry experts believe that the recent announcement will push a section of prospective homebuyers to defer immediate plans to purchase property and opt for rental accommodation over the next few quarters.

While the increase in interest rates has not greatly impacted the housing sales so far, the impact might start getting visible now. Higher home loan interest rates may push up the Equated Monthly Instalments (EMIs) for homebuyers, thus slowing the pace of growth in residential real estate.

What do the industry insiders say?
Amarendra Sahu, Founder and CEO, NestAway Technologies, shared, The home mortgage rates are now back to pre COVID levels or even higher. This is likely to increase traction in the rental segment. A higher home acquisition cost and interest rates will make renting far more affordable. Also, homebuyers will likely wait for the current cycle to get over.

Housing loan rates Current status
Five rounds of increases in policy rates have impacted the lending rates. The previous increment had risen the housing loan rates to 8.4 percent from the decadal low of 6.6 percent just a few months back. Experts had predicted the recent hike and expect another one by March 2023, thus taking the interest rates above nine percent and negatively impacting the home ownership appetite and eventually housing demand in the process.