The Reserve Bank of India (RBI) on December 7, 2022, increased the repo rate by 35 basis points. The fifth consecutive hike in the apex bank’s benchmark lending rate has brought it to 6.25% as against 5.90% earlier.
Since May this year, the RBI has increased the repo rate, at which it lends money to scheduled banks in Indian, by a cumulative 225 basis points. (A hundred basis points is equal to one percentage point.)
The rate hike on December 7 was on widely expected lines since elevated inflation targets continue to remain outside the RBI’s upper tolerance zone.
Even though the rate hike would make home loans more expensive for existing as well as new borrowers, industry is of the view that any negative impact would only be short term, thanks to the robust demand.
“While the new repo rate is expected to have a direct impact on home loans and, in turn, home buyer sentiments and sales in the real estate sector, this will only be a temporary phase until the economy stabilises further and is eventually overcome by sustained consumer demand,” Reeza Sebastian Karimpanal, president-residential, Embassy Group,
Expressing similar sentiments, Pinnacle Group CEO Rohan Pawar says that the increase may have a temporary effect but will be of no influence on the housing market in the medium to long term as the demand for housing remains robust.
“The rate hike of 35bps to 6.25% by the Reserve Bank of India was on the expected lines. Although, it will push the interest rates on home loans, but overall strong talent driven job markets , the coming quarter of 2022-23 remains best time to invest in all segments of real estate,” says Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure .
