Repo Rate Hike To Have Short Term Impact On Homebuyers

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) hiked the repo rate by 35 basis points (bps) to 6.25 per cent with immediate effect, RBI Governor Shaktikanta Das announced. 

As per Samyak Jain, Director, Siddha Group, "The RBI has come far from synchronised rate hikes in its policy, as inflation outlook is beaming. Attempting to taper inflation, the Central Bank's hike in the repo rate, much to expectations, will force the banks to increase lending rates impacting the quantum of home loans off - take and pushing EMIs upwards. The EMI - driven housing market will thus have a cumulative effect and gradually it will slower the housing inventory turnover by weakening the homebuyers' affordability shadowed by increased interest rates. A lesser repo rate hike would have helped tackle inflation, yet managing growth. Mumbai's residential realty market, which has already been hit by increased interest rates, will further get impacted for the homebuyers in the pricing category of Rs 1 crore and above."

Bhushan Nemlekar, Director, Sumit Woods Limited stated, "Due to the pandemic and the geopolitical issues, the input costs were already high and now with these consecutive rate hikes, it will only dampen the spirit of the entire real estate value chain. The cost of borrowing for both developers and buyers will be impacted and this will result in undesired rate hikes across the spectrum. However, we did not see much impact on the buying spree in the last couple of quarters since there are genuine buyers in the market to keep the momentum going." 

Dr. Sachin Chopda, Managing Director, Pushpam Group swhared, “RBI's decision to hike the policy repo rate was anticipated, factoring the rise in inflation. The rate hike is likely to shrink liquidity in the economy overall, especially impacting the investor’s sentiments. There will be a short-term pause on the minds of the investors while assessing the volatility of the current market dynamics. However, they are bound to return soon in the market once it is stable.’’