RBI hikes repo rate: How will it impact the housing sector?

The Reserve Bank of India (RBI) has increased the repo rate by 50 basis points. This hike will impact the housing sector, as it will make home loans more expensive. experts believe that this could lead to a slowdown in the housing market. It is important for buyers to be aware of these changes and how they will affect their purchasing power.

The action by the Reserve Bank of India (RBI) to raise the repo rate by 50 basis points was along anticipated lines. Still, it would harm homeowners since their monthly installments (EMIs) will rise.

A rise in the repo rate is expected to cause banks to raise interest rates on all types of lending, particularly vehicle loans. When the Reserve Bank of India (RBI) loans short-term cash to financial institutions, they do so at an interest rate known as the repo rate. If the repo rate rises, the cost of mortgages and car loans will also increase.


The Repo rate is the interest at which the Reserve Bank of India (RBI) loans money to financial institutions. When the repo rate rises, financial institutions must pay more to borrow funds through the central bank and pass those costs on to their borrowers. 

RBI Repo Rate News

Since repo prices have just increased, current and prospective borrowers will be required to pay higher interest on their mortgages.

Traders: How does the Repo Rate affect you?

The borrower of a house loan with a variable interest rate agrees to pay back the loan at the then-current market interest rate. The interest you pay on your house loan will increase in tandem with the repo rate because most mortgages are now tied to this cost of borrowing.

While the increase was in line with expectations, experts believe it would have a detrimental effect on homebuyers’ confidence since inflation remained over the RBI’s safety zone, and action was needed to manage it.

What may happen to house demand if 50 basis points increase the RBI repo level?

The Reserve Bank of India (RBI) raised its benchmark interest rate, known as the main repo rate, by fifty basis points, from 4.40 percent to 4.90 percent.

As a consequence of this action, interest rates on deposit and lending plans will climb. The RBI move will be excellent news for bank deposit users since banks are anticipated to hike interest levels on deposits higher in the coming years.

A rise in the repo rate is not good news to borrowers since it means that banks are more likely to increase their benchmark-based borrowing costs, which would increase the cost of monthly mortgage payments (EMIs) and perhaps reduce the demand for homes in the nation.

Speaking on the central bank’s conclusions today, Mr. Suren Goyal, Partner, RPS Group, stated, “they applaud the action by the apex body to boost the total repo rates by another 50 basis points. Stabilizing economic growth and tamping down inflation are both benefits.

An inflation increase might bring a loosening attitude regarding a solid real estate sector. Currently, the cost of raw materials is rising, and an unchecked pace of inflation will significantly push the input prices northward, leading to cost overruns for the said development community.

They would be forced to charge a higher price to their purchasers. However, the administration should also conduct focused steps to lower the surge in costs of raw materials, including cement, brickwork, steel, etc. It would also offer some respite to the industry.”

Statements from several official sources:

The RBI has hiked interest rates several times over the year; however, it has had minimal or no effect on the market for property investment since the Indian economy ranks among the highest functioning economies internationally, and the customer mood is elevated.

Mr Atul Goel, MD, Goel Ganga Group, remarked, “RBI’s latest action to hike the repo rate by 50 percentage points has been along the anticipated lines. It was necessary for the regulatory agencies in India to restrict the flow of money in the economy to reduce inflation. 

For a few weeks, the inflation rate has been over 6 per cent, which is above the RBI’s safe zone. If not contained, price inflation might undermine the otherwise robust Indian market. Home loan rates may rise due to the most recent action, but an unpredictable economy is bad for the real estate market. For the sector to run properly, the economy must keep expanding at a stable, fair, and steady pace.”

High-interest rates may slow low-income housing demand:

However, other analysts predict buyers would be more selective, with some predicting a decline in demand for properties priced below $200,000. Home loan rates would rise, which might dampen consumer enthusiasm.

Home loan rates are likely to level out around 8% annually, which may have a psychological impact on the preference for low and middle-income homes in the near term but should not last for very long.


Real estate client attitudes might be negatively impacted by rising interest rates, increased property building costs, and product pricing pressures.

It would help if you made regular prepayments on your mortgage, whether full or partial payments. Reduce the impact of a higher interest rate by a large margin by prepaying 5% every year. To stop spending higher interest on their current loans, consumers may either refinance to a reasonable interest rate or raise their EMIs.

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