Homeowners will need to wait before their EMIs come down as the Reserve Bank of India (RBI) has maintained the status quo with repo rates at 6.5 per cent. Also, potential homeowners will need to stay cautious.
“The unchanged repo rate, while beneficial in the short term, does not signal lower interest rates in the near future. Banks are likely to maintain their current lending rates, keeping home loans costlier compared to pre-pandemic levels. This situation might particularly impact first-time home buyers and those seeking affordable housing, as they are more sensitive to interest rate fluctuations,” says Atul Monga, CEO and Co-Founder, Basic Home loan.
Agrees by Priyatham Kumar, Founder of Homes247, a proptech platform, “Although banks have the flexibility to adjust their own interest rates, overall, we can anticipate them to be similar to last year's rates, keeping them stable.”
In its last meeting in April 2024, the RBI had kept the repo rates unchanged at 6.5 per cent. The last hike was in February 2023, when it raised the rate by 25 bps to 6.5 per cent, after which it has now kept the repo rate unchanged eight times in a row. Between May 2022 and February 2023, it increased the rate by 2.5 per cent to 6.5 per cent.
First experts were of the opinion that RBI would cut interest rates in the latter half of 2024, but then the likelihood of that became less likely. With the gross domestic product (GDP) growing at seven per cent and food inflation continuing to remain high, the RBI is expected to wait for a while before it cuts interest rates.
Home loan interest rates for existing home loan borrowers is thus expected to continue to remain high. When RBI increased its home loan interest rates, home loan owners had to bear the brunt as their EMIs went up substantially, after which they had no option but to increase their home loan tenures. The impact was such that many could not extend their tenure further as it meant that they could not pay off their home loans before retirement.
While sales in the luxury segments are expected to be strong, those looking for homes in the affordable segment may put off buying homes as they are the most price sensitive.
“Unchanged home loan rates alone are insufficient to induce new vibrancy in the affordable segment. It is hoped that the government will soon introduce further incentives to support it,” says Anuj Puri, Chairman - ANAROCK Group, a real estate services firm.
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