RBI Repo Rate Hike To 5.50% May Raise Home Loan Costs, But Experts Expect Housing Demand To Stay Resilient
Mumbai: The Reserve Bank of India (RBI) has increased the repo rate upwards by 25 bps to 5.50%, while simultaneously changing the stance from “neutral” to “calibrated tightening”, signalling strict vigilance against inflationary pressures stemming from external volatilities and elevated crude prices. The Central Bank also noted that global headwinds could potentially become stronger, given recent…
The Reserve Bank of India (RBI) has raised its repo rate by 25 basis points to 5.50%, shifting from a neutral to a "calibrated tightening" stance. This move aims to curb inflationary pressures arising from global uncertainties and high crude oil prices. While this increase in the benchmark lending rate may elevate borrowing costs and potentially dampen near-term demand in the housing market, experts anticipate that India's housing sector will maintain its resilience.
Colliers India's Vimal Nadar states that underlying fundamentals in the Indian economy are strong, which should help offset the impact of higher borrowing costs across most asset classes. In the residential segment, developers may absorb some of the financing pressure and offer incentives to attract homebuyers, particularly in price-sensitive categories.
However, developers might need to adjust their financing strategies and balance sheets to manage potential margin pressures and dampened demand if further rate hikes are implemented.
Akshay Saraf, Founder & CEO of Reloy, notes that while global bond markets face pressure, India's relative stability and the measured rate hike offer reassurance. The stability of the Indian economy, driven by rising household incomes, urbanization, and infrastructure improvements, should help maintain demand in the housing market. Despite the potential challenges posed by higher mortgage rates, the overall outlook for the Indian real estate sector remains positive.
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