RBI holds repo rate: No relief for home loan borrowers amid inflation surge

"A steady rate ensures consistent repayment terms, which increases the confidence of homebuyers," said Manju Yagnik, vice chairperson of Nahar Group and senior vice president of NAREDCO Maharashtra

The Reserve Bank of India (RBI) on Friday kept the key repo rate steady at 6.5% in its monetary policy review. This marks the 11th consecutive decision to maintain the status quo, offering no immediate relief for home loan borrowers. For potential homebuyers, this means home loan interest rates are likely to remain stable for now.

 

The decision comes shortly after India’s real GDP growth fell to a seven-quarter low of 5.4% in the July-September 2024 quarter, which economists have flagged as a concern. The RBI's primary focus remains on bringing retail inflation down to 4%.

 

"With India's GDP forecasted to grow between 6.5% and 7% in FY 2024-25, and the real estate sector contributing 7% to the economy, maintaining stability is crucial to sustaining economic momentum," said Manju Yagnik, vice chairperson of Nahar Group and senior vice president of NAREDCO Maharashtra.

 

Impact on home loan EMIs

 

For homebuyers, steady interest rates translate to consistent EMIs, at least in the short term. 

 

"A stable rate ensures predictable repayment terms, which boosts buyer confidence and encourages investment in the sector. With rising property prices, steady lending conditions play a pivotal role in driving real estate growth, contributing substantially to India's economy," added Yagnik.

 

 "The central bank is currently juggling several challenges: a depreciating rupee, softening bond yields, persistent inflation, and a slowdown in growth," said Shishir Baijal, Chairman and Managing Director, Knight Frank India. "While the growth slowdown isn’t alarming yet, it gives the RBI enough room to keep rates steady as it focuses on controlling inflation and stabilising the currency."  

Baijal noted that the RBI's shift toward a neutral stance hints at a gradual pivot from inflation control to supporting growth. "A rate cut would be a welcome move for consumers, especially home buyers, as borrowing costs remain elevated despite the unchanged repo rate. Growth in home loans has slowed, and consumption among lower-income groups has dropped significantly, as seen in the sharp decline in affordable housing sales," he explained.

 

Anuj Puri, Chairman of ANAROCK Group, added, "A repo rate cut would have helped boost housing sales momentum, particularly since sales have tapered off over the last two quarters. That said, relatively affordable home loan interest rates will still attract borrowers, especially given the significant rise in housing prices last quarter." 

Also Read: No rate cut: Lock in fixed deposit interest rates now for maximum returns

 

Tips for existing home loan borrowers

 

Adhil Shetty, CEO of Bankbazaar.com, advised existing home loan borrowers to use this period of stable rates to optimise their debt management. "With no immediate increase in EMIs for floating-rate loans, this is a good time to take proactive steps," he said, offering the following suggestions:

 

Review your loan terms: Check your current interest rate. If it’s higher than the market rate, consider refinancing or transferring to a lender offering better terms.

Negotiate with lenders: New buyers or those refinancing could benefit from banks offering competitive rates during this stable phase.

Prepay when possible: Use surplus funds to reduce your loan principal and lower your long-term interest burden.

Plan ahead: While EMIs are stable now, inflation risks could lead to rate hikes in the future. Build an emergency fund to prepare for potential increases.

 

"The current environment is an opportunity for borrowers to strategise and minimise their debt burden while interest rates remain steady," Shetty said.

 

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.

 

Here's a detailed look at the home loan interest rates (as of December 4, 2024) for amounts above Rs 30 lakh and up to Rs 75 lakh, based on data from Paisabazaar.com:

 

Public Sector Banks

1. State Bank of India: 8.50% - 9.85%

2. Bank of Baroda: 8.40% - 10.65%

3. Union Bank of India: 8.35% - 10.90%

4. Punjab National Bank: 8.40% - 10.15%

5. Bank of India: 8.35% - 10.85%

6. Canara Bank: 8.45% - 11.25%

7. UCO Bank: 8.45% - 10.30%

8. Bank of Maharashtra: 8.35% - 11.15%

9. Punjab and Sind Bank: 8.50% - 10%

10. Indian Overseas Bank: 8.40% - 10.60%

11. Indian Bank: 8.40% - 10.30%

 

Private Sector Banks

1. Kotak Mahindra Bank: 8.75% onwards

2. ICICI Bank: 8.75% onwards

3. Axis Bank: 8.75% - 13.30%

4. HSBC Bank: 8.50% onwards

5. South Indian Bank: 8.70% - 11.70%

6. Karur Vysya Bank: 9% - 11.05%

7. Karnataka Bank: 8.75% - 10.87%

8. Federal Bank: 8.80% onwards

9. Dhanlaxmi Bank: 9.35% - 10.50%

10. Tamilnad Mercantile Bank: 8.60% - 9.95%

11. Bandhan Bank: 9.16% - 13.33%

12. RBL Bank: 9% onwards

13. CSB Bank: 10.49% - 12.34%

14. HDFC Bank: 8.75% onwards

15. City Union Bank: 8.50% - 10%

 

Housing Finance Companies (HFCs)

1. LIC Housing Finance: 8.50% - 10.55%

2. Bajaj Housing Finance: 8.50% onwards

3. Tata Capital: 8.75% onwards

4. PNB Housing Finance: 8.50% - 14.50%

5. GIC Housing Finance: 8.80% onwards

6. SMFG India Home Finance: 10% onwards

7. Sammaan Capital (formerly Indiabulls Housing Finance): 8.75% onwards

8. Aditya Birla Capital: 8.60% onwards

9. ICICI Home Finance: 9.30% onwards

10. Godrej Housing Finance: 8.55% onwards