The latest 50 basis points (bps) rate hike by the Reserve Bank of India (RBI) is set to make home loans costlier. The RBI's action will automatically push up the cost of mortgages as over 90% of bank home loans are linked to the repo rate. With the last increase, the EMI on a Rs 10 million, 20-year home loan rose by Rs 3,029 from Rs 77,530 to Rs 80,559. Taken together with the latest hike, there will be a total increase of Rs 5,500 per month on such a loan.
Realty experts said middle income group (MIG) home buyers’ will be discouraged to buy new homes as they are most sensitive to change in home loan rates. Banks have already raised the interest rate on home loans by 30-40 bps since the first hike in May. Most banks are likely to pass on the latest rate hike in the coming days.
Experts opined that costlier home loans can affect developers’ sentiments and they would wait and watch to launch new schemes. Reacting to the rate hike, President of CREDAI Ahmedabad GIHED Tejas Joshi said, “Since 65 to 70 per cent of the residential projects are in the affordable category in the city, the lower-middle class and middle class will be affected the most.”
