Hyderabad: The Reserve Bank of India has once again increased the repo rate by 50 basis points (bps), taking the cumulative increase in rates in a period of just two months to 90 bps. Although this rate increase was on expected lines, many industry analysts and experts suggest that it could impact home buying (…)
Published date – June 10, 2022, 11:02 pm
Hyderabad: The Reserve Bank of India has once again increased the repo rate by 50 basis points (bps), thus taking the cumulative increase in rates to 90 bps in a period of just two months.
Although this rate hike was on expected lines, many industry analysts and experts suggest that it may impact home buying sentiment in the short term, although the overall segment may remain bullish.
After a surprise increase in rates in May, the central bank decided to increase the repo rate again to fight inflation. The hike will also lead to an increase in lending rates between banks and non-banking financial companies, resulting in higher EMIs for existing borrowers.
Kaushik Desai, real estate funder Walton Street Blacksoil Fund, said, “With repo rates being hiked for the second time in a short time, EMIs for home loans are expected to increase as banks and financial institutions have already started extending their lending ” Rates. While increased home loan rates may impact sentiments in the short term, we believe the increase is expected to be offset by growth in disposable household income over the past two years and home loan interest rates compared to their peak in 2019. Rates will still remain attractive.
Sharad Mittal, director and CEO of Motilal Oswal Real Estate Fund, said decade-low mortgage rates along with government-driven incentives during the pandemic provided stability to the sector. “With mortgage loan rates now rising, we may see a slight slowdown in demand in the short term, but the overall outlook for the sector remains quite bullish in the longer term,” he said.
While the rate hike could push the repo rate up by about a percentage point over the past month to 4.9 percent, it is still lower than the pre-pandemic level of 5.15 percent. “This is an opportune time for home buyers to take advantage of the current home loan rates when prices are expected to rise across most of the market due to improvement in demand,” says Ramesh Nair, CEO, India and MD, Markets. Vikas, Asia, Colliers.
Most experts also argue that they see more rate hike announcements in the future to curb rising inflation and keep GDP growing. Trehan Group MD Saransh Trehan said the increase could impact construction costs by 5 to 7 per cent.
Anarock Chairman Anuj Puri calls this increase inevitable and says, ‘We are now entering the red zone and the impact of the increase will be on the affordable and mid segment. “This is a difficult step in the best of circumstances. The rate hike will add to home loan interest rates, which had already started rising after the surprise monetary policy announcement last month,” he said.
Ramani Shastri, Chairman and MD, Sterling Developers Pvt Ltd, believes that a major change in buying sentiment has been witnessed and it will withstand minor fluctuations in lending rates. Ltd., “There is still an increase in demand and even after the repo rate hike, affordability is still high and home buyers need to take advantage of this in the short term,” he says.
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