NEW DELHI: The RBI’s decision to hike repo rate by 50 basis points (bps) doesn’t augur well for the Indian housing market, especially during the festive season when consumers don’t shy away from making big ticket purchases.
According to Anuj Puri, Chairman of ANAROCK Group, home loans will get dearer soon and this could impact residential sales to some extent this festive quarter, particularly in the affordable and mid-range housing segments. ANAROCK’s recent Consumer Sentiment Survey also highlighted that at least 61% respondents saw high inflation as a major concern for them, seriously impacting their disposable incomes.
Shishir Baijal, Chairman & managing director, Knight Frank India, says a rise in home loan rates will further impact affordability across the markets and this might slowdown homebuying decisions for a short-to-medium term. The fresh 50 bps hike takes the total rate hike since May 2022 to 190 bps. Interest on home loans offered by commercial banks has seen a steep hike in the last 4 months.
While the country’s largest lender SBI is offering home loans at rates ranging between 8.05% and 8.55%, HDFC Bank’s interest on home loans vary between 8.10% and 9.05%. According to analyses by JLL India, after Friday’s 50 bps repo rate hike, home loan interests may go up by at least 20-30 bps. This will be over and above the 80bps average hike in home loan interest rates that homebuyers have faced since May, taking the total hike to 100-110 bps, JLL noted.
“With today’s hike in repo rate, the revised home loan EMI would increase by an average of 8-9% as against 6 months back. The continuous rise in home loan EMI is hence expected to act as a sentiment disruptor,” said Samantak Das, chief economist and head of research and REIS, India, JLL. Ramani Sastri, Chairman & MD, Sterling Developers, said due to consecutive rate hikes, home-buyers might adopt the wait-and-watch sentiment. “Subsequent rate hikes will also mean a deterioration of affordability as low interest rates have been the biggest factor in the resurgence for real estate demand in the last few years,” added Sastri.