1 min read.Updated: 12 May 2022, 12:19 PM ISTLivemint
The surprise hike by the central bank is likely to dampen the sentiment of home buyers, hence affecting the real estate sector
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For the first time in almost two years, the Reserve Bank of India (RBI) has hiked the repo rate by 40 basis points to tackle inflation. The surprise hike by the central bank is likely to dampen the sentiment of home buyers, hence affecting the real estate sector.
“The recent regulations by the Reserve Bank of India on increasing the repo rate by 40 bps, bringing them to 4.40%, may affect the real estate sector to an extent," said Rohit Malik, Founder, Clicbrics.
Right after RBI's announcement, many banks started increasing interest rates in lending and deposit schemes. To put it in simple terms, a repo rate hike makes borrowing costlier.
Rohit Malik, Founder, Clicbrics said the implication of a repo rate hike will be felt across all categories of loans. All the loans that come under Repo Linked Lending Rate (RLLR), like home loans and loans against the property, will now cost higher, and there will be an increase in other loans and EMIs as well. In addition, most banks have started increasing the Marginal Cost of Lensing Rate (MCLR) since the beginning of this fiscal year. These factors might affect consumers’ buying behavior.
"On the flip side, the continued wage and job growth in the services sector will provide a cushion in the short term for the purchasing decisions. There is still pent-up demand post covid in affordable housing, and even after the repo rate hike, affordability is still at a multi-decade high and the home buyer needs to take advantage of that in the short term." he added.