RBI holds repo rate: Home loan borrowers face longer wait for EMI relief

"If inflation stays under control, a rate cut could come," said the CEO of Bankbazaar.com, Adhil Shetty, regarding the RBI's monetary policy decision

The Reserve Bank of India (RBI) on Wednesday decided to keep the key repo rate unchanged at 6.5% in its monetary policy review. This marks the tenth consecutive time the central bank has maintained a status quo, signalling no immediate relief for home loan borrowers.

Anuj Puri, Chairman of ANAROCK Group, commented, "While a repo rate cut would have been preferable, it is clear that the RBI is on a tightrope walk and must keep various macro-economic factors in mind."

"The recent rate cut by the US Federal Reserve had sparked similar hopes in India. However, the domestic situation remains distinct, with the central bank prioritising inflation management within its target range," said Pradeep Aggarwal, Founder & Chairman, Signature Global (India).

Impact on home loan EMIs

For homebuyers, the impact of this decision means that home loan interest rates are expected to remain steady, at least for the foreseeable future. Home loan borrowers will not see any immediate change in their EMIs, particularly at a crucial time like the festive season when demand for housing traditionally rises.

"By keeping borrowing costs steady, EMIs remain manageable, encouraging potential homebuyers to invest in property, especially in the affordable housing segment," Manju Yagnik, Vice Chairperson of Nahar Group and Senior Vice President of NAREDCO Maharashtra said.

What should borrowers expect next?

"Loan holders may need to wait longer for rate cuts, possibly until December. If inflation stays under control, a rate cut could come. Until then, EMIs will remain at current levels," Adhil Shetty, CEO of Bankbazaar.com cautioned.

Despite the stable interest rates, other factors like property prices play a major role in influencing homebuyers' decisions. A recent ANAROCK report indicated that Q3 2024 saw a cumulative 23% increase in average housing prices across India's top seven cities, compared to the same period in 2023.

Housing market trends in Q3 2024

* Housing sales declined by 11% in Q3 2024 compared to Q3 2023.

* New housing project launches fell by 19% during this period.

* Average prices in top cities increased to approximately Rs 8,390 per sq. ft. from Rs 6,800 per sq. ft. last year.

Anuj Puri added, "The unchanged home loan rates are much-needed demand support in the ongoing festive quarter. We are expecting faster sales momentum in Q4 2024 when compared to the preceding quarter."

Challenges for the property market

"Over the last few quarters, prices have increased by 3% to as much as 50% in some prime localities of key markets, affecting immediate buying decisions. However, we expect buyers to gradually adjust to the new price realities," Vikas Wadhawan, CFO of REA India and Business Head of PropTiger.com, said in a recent report.

The 'Real Insight Residential Report' also pointed at a 25% drop in new housing property launches and a 5% year-on-year decline in sales during the July-September quarter of 2024 across India’s top housing markets.

How global factors are influencing RBI's decision

The RBI's decision to keep the repo rate steady comes in the context of global economic uncertainties and geopolitical tensions, which have prompted caution among central banks worldwide. Even though the US Federal Reserve recently cut rates, the RBI appears to be taking a wait-and-watch approach to avoid destabilising the domestic economy.

Here's a detailed look at the home loan interest rates (as of October 8, 2024) for amounts above Rs 30 lakh and up to Rs 75 lakh, based on data from Paisabazaar.com:

Public sector banks

State Bank of India: 8.50-9.85%

Bank of Baroda: 8.40-10.65%

Union Bank of India: 8.35-10.90%

Punjab National Bank: 8.40-10.15%

Bank of India: 8.40-10.85%

Canara Bank: 8.45-11.25%

UCO Bank: 8.45-10.30%

Bank of Maharashtra: 8.35-11.15%

Punjab and Sind Bank: 8.50-10.00%

Indian Overseas Bank: 8.40-10.60%

Central Bank of India: 8.45-9.80%

Private sector banks

Kotak Mahindra Bank: 8.75% onwards

ICICI Bank: 8.75% onwards

Axis Bank: 8.75-13.30%

HSBC Bank: 8.50% onwards

South Indian Bank: 8.70-11.70%

Housing finance companies (HFCs)

LIC Housing Finance: 8.50-10.75%

Bajaj Housing Finance: 8.50% onwards

Tata Capital: 8.75% onwards

PNB Housing Finance: 8.50-14.50%

GIC Housing Finance: 8.80% onwards