Mumbai/New Delhi: Home Loan and other borrowings will become more expensive reserve Bank of India On Wednesday, it raised its key policy rate by 25 basis points. The increase in interest rates by 250 basis points results in the sixth consecutive increase since the RBI started hiking rates in May 2022.
Monetary Policy Committee voted 4:6 in favor of an increase repo rate – The rate at which RBI lends to banks – 6.5% from 6.25% earlier. The rate hike will have an immediate impact on the individual borrowers And most retail loans as small businesses are repo linked and get revalued immediately. Announcing the decision of the MPC, the RBI Governor Shaktikanta Das Said inflation was coming down, and “the worst is behind us”. “The sustainability of core or underlying inflation is a matter of concern. We need to see a decisive restraint. We have to stick to our commitment to bring down inflation.
The hike is good news for depositors as an increase in lending rates would mean that banks would have more leeway to offer higher returns without sacrificing their margins. Das said that as a result of the rate hike, the real policy rate (the rate adjusted for inflation) has moved into the positive zone.
Many analysts had expected the governor to make policy changes and signal a pause in rate hikes. However, there was no such assurance, and Das said it was impossible to give further guidance.
While some new borrowers with high credit scores can borrow at 8.5% due to competition for home loans, old borrowers who availed loans at 6.5% earlier this fiscal will see their borrowing cost go up to 9%. Das said economic activity remains resilient and urban activity is strengthening, especially in services – travel, tourism and hospitality with domestic air passenger traffic surpassing pre-pandemic levels. “Several high-frequency indicators also point to strengthening of activity.” Investment activity continues to gain traction. Total inflow of resources into the corporate sector increased to Rs 20.2 lakh crore from Rs 12.2 lakh crore a year ago Went.
While the governor remained cautious about inflation, he said he was optimistic about the economy. “The available data for Q3 and Q4 2022-23 indicates that economic activity in India remains resilient. Urban consumption demand is strengthening, driven by a sustained recovery in discretionary spending, especially on services such as travel, tourism and hospitality,” Das said.
Real estate experts said the policy could reduce the demand for housing. “With the appreciation in real estate prices over the past few quarters, any increase in interest rates, which had already breached the 9.5% mark, will put pressure on sales volumes in the affordable and lower mid-range housing segments , who are more cost-conscious,” said Anuj Puri, chairman, Anarock Group.
Shishir BaijalThe Chairman and Managing Director of Knight Frank India said that so far the impact of interest rate hike on the housing sector has been limited. The Knight Frank Affordability Index has declined by an average of 1.4% over the past year. Home loan demand has remained strong over the past year, as seen in the 16% growth in December 2022. “We are hopeful that this rate hike will not adversely affect consumer sentiments towards home purchases in the coming financial year,” Baijal said.
Monetary Policy Committee voted 4:6 in favor of an increase repo rate – The rate at which RBI lends to banks – 6.5% from 6.25% earlier. The rate hike will have an immediate impact on the individual borrowers And most retail loans as small businesses are repo linked and get revalued immediately. Announcing the decision of the MPC, the RBI Governor Shaktikanta Das Said inflation was coming down, and “the worst is behind us”. “The sustainability of core or underlying inflation is a matter of concern. We need to see a decisive restraint. We have to stick to our commitment to bring down inflation.
The hike is good news for depositors as an increase in lending rates would mean that banks would have more leeway to offer higher returns without sacrificing their margins. Das said that as a result of the rate hike, the real policy rate (the rate adjusted for inflation) has moved into the positive zone.
Many analysts had expected the governor to make policy changes and signal a pause in rate hikes. However, there was no such assurance, and Das said it was impossible to give further guidance.
While some new borrowers with high credit scores can borrow at 8.5% due to competition for home loans, old borrowers who availed loans at 6.5% earlier this fiscal will see their borrowing cost go up to 9%. Das said economic activity remains resilient and urban activity is strengthening, especially in services – travel, tourism and hospitality with domestic air passenger traffic surpassing pre-pandemic levels. “Several high-frequency indicators also point to strengthening of activity.” Investment activity continues to gain traction. Total inflow of resources into the corporate sector increased to Rs 20.2 lakh crore from Rs 12.2 lakh crore a year ago Went.
While the governor remained cautious about inflation, he said he was optimistic about the economy. “The available data for Q3 and Q4 2022-23 indicates that economic activity in India remains resilient. Urban consumption demand is strengthening, driven by a sustained recovery in discretionary spending, especially on services such as travel, tourism and hospitality,” Das said.
Real estate experts said the policy could reduce the demand for housing. “With the appreciation in real estate prices over the past few quarters, any increase in interest rates, which had already breached the 9.5% mark, will put pressure on sales volumes in the affordable and lower mid-range housing segments , who are more cost-conscious,” said Anuj Puri, chairman, Anarock Group.
Shishir BaijalThe Chairman and Managing Director of Knight Frank India said that so far the impact of interest rate hike on the housing sector has been limited. The Knight Frank Affordability Index has declined by an average of 1.4% over the past year. Home loan demand has remained strong over the past year, as seen in the 16% growth in December 2022. “We are hopeful that this rate hike will not adversely affect consumer sentiments towards home purchases in the coming financial year,” Baijal said.