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Repo rate increased again, homebuyers may defer deals

By Rishabh Chamoli | 2023-02-08

The Reserve Bank of India (RBI) has announced the sixth consecutive repo rate hike in the current Financial Year (FY) 2022 to 23. With the new repo rate standing at 6.5 percent post a 25 bps hike, experts believe this may deter potential homebuyers from investing in property.

The Reserve Bank of India (RBI) has revised the repo rate to 6.5 percent, raising it further by 25 basis points (bps). With six consecutive hikes totalling 250 bps in the Financial Year (FY) 2022 to 23, the apex bank has been taking steps to contain the inflationary pressures on the economy. The last repo rate increment was announced on December 7, 2022. The RBIs decision was soon followed by similar revisions by various banks and financial institutions, resulting in a hike in their lending rates. This time, too, interest rates are expected to witness upward revisions as an after effect of the repo rate revision.

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. Although the increase in interest rates has not greatly impacted 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 preCOVID 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
Six rounds of increases in policy rates starting May 2022 have impacted the lending rates. The previous increment had risen the housing loan rates to 8.6 percent from the decadal low of 6.6 percent just a few months back. Experts had predicted the recent hike and expect similar revisions throughout the upcoming FY 2023, thus negatively impacting the home ownership appetite and eventually decreasing housing demand in the process.