RBI Rate Hike Impacts Homebuyers
New Delhi/Mumbai: The Reserve Bank of India's recent 25 basis point increase in key interest rates is anticipated to further dampen home sales nationwide. This projection comes amidst rising bank rates, causing builders and bankers to express concerns about the potential impact on the real estate market. Prospective homebuyers are now compelled to re-evaluate their desired property sizes and locations, with many expected to postpone purchases until home prices decrease and interest rates stabilize.
This situation poses a challenge for existing home loan consumers, as banks are likely to increase their home loan rates. The cumulative effect of the last ten rate hikes by the RBI has resulted in a 25 percent increase in EMIs for housing loans, reaching INR 980 per INR 1 lakh borrowed. Consequently, the loan eligibility for prospective homebuyers has decreased by 20 percent. Anil Kothuri, Head of Retail Lending Business at Edelweiss Group, stated, “Housing finance companies have no wriggle room available.”
This latest rate hike serves as a significant cautionary signal for those seeking new home loans, not only due to the increased rates, but also because of the frequency of the RBI's rate adjustments. While prospective buyers have the choice to postpone their purchase, existing home loan customers face a more complex situation. However, Renu Sud Karnad, Managing Director of HDFC, holds a differing perspective, asserting that this quarter percentage point hike will not significantly affect either housing demand or loan off-take.