Over the last three months, the apex bank has increased the repo rate by 1.40 percentage points, taking it to 5.40 percent which is well above the pre-pandemic level of 5.15 percent. Banks too followed the RBI rate hikes and adjusted their loan rates accordingly. Now, with this hike, consumers will be hit further as their loan interest rates were already raised quite a few times in recent months.
Real estate players are of the view that subsequent transmission of rates by banks is likely to start slowing the pace of growth in residential real estate.
RBI raises repo rate by another 50 basis points. Will FD rates continue to rise from here?
RBI hikes repo rate by 50 bps at 5.4% to tame inflation; home, consumer loans to get costlier
Following the surprise hike in repo rate in May, the home loan rates have already moved up from their all-time lows that have been helping key property markets surpass pre-Covid levels and witness record sales, according to an ET report. With hardening interest rates, realtors will now have to provide offers to stimulate and maintain the momentum of demand.
For consumers who were paying an interest rate of 6.7 percent before May – the month when RBI hiked rate by 40 bps, some banks have already raised this rate to 7.8 percent. With this third upward revision in repo rate by the RBI, banks are expected to hike rates further in coming days.
India’s residential sector is in the middle of a prolonged and sustained growth cycle much similar to the 2010-2012 period, but more driven by real market fundamentals in terms of homebuyer demand, according to ET report. In fact, sales in the first half of 2022 (January-June) were the highest in over a decade on a same-period comparison and second only to the first half of 2010.