RBI hikes repo rate by 35 bps to 6.25%

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. The RBI policy rate is now at its highest level since August 2018. This is the fifth rate hike by the central bank in this financial year. The upward revision of repo rate may have short-term impact on the homebuyers' sentiments according to realtors.

“RBI's decision to hike the interest rates to tackle the inflation and ensure domestic economic recovery was a no-brainer. The sharp acceleration of rates consecutively for the fifth time in a short period will have a short-term effect on the sentiment of homebuyers as low interest rates have been the biggest factor in the resurgence for real estate demand in the last two years. We hope that the State Government will step in again to lighten the homebuyer's load by reducing stamp duty to boost the sentiments,” says Pritam Chivukula, Co-Founder & Director, Tridhaatu Realty, and Treasurer, CREDAI MCHI.

Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory, says, “Consecutive rate hikes by the RBI this year were aimed at re-anchoring the inflation expectations and maintaining financial stability. Thus far, the rising cost of house ownership led by higher EMI, higher stamp duty and other factors has not affected real estate sales, which is a firm indicator of genuine demand for housing. But any further hike in the repo rate might temporarily limit the growth momentum of the real estate sector.”

Samyak Jain, Director, Siddha Group, observes, “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.”

Shraddha Kedia-Agarwal, Director, Transcon Developers, comments, “RBI's decision to hike the policy rates for the fifth consecutive time was anticipated on the back of high inflation and economic recovery. We had already started seeing a vertical movement in the home prices from the past few months which had a minimal impact on the housing demand. But, this decision will further put a dent on the homebuyer's sentiments impacting the overall demand for a short period of time.”

Himanshu Jain, VP - Sales, Marketing and CRM, Satellite Developers Pvt. Ltd. (SDPL), says, “Keeping the current market conditions and inflation in mind, the move by the RBI was expected to keep the economy on the track in the current highly volatile scenario. The rising property prices had already added to the woes of the homebuyers and now the decision of RBI to increase the repo rate will temporarily dent the current demand momentum. Also, for first-time home buyers, acquiring a home is considered as the biggest asset and these short-term decisions are likely to have a major impact on a buyer's decision.”

Bhushan Nemlekar, Director, Sumit Woods Limited, adds, “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.”

“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,” says Dr. Sachin Chopda, Managing Director, Pushpam Group.

Hits: 0