RBI policy: EMIs won't go up immediately, housing bull run to continue

The RBI has been raising this rate since May 2022 to tackle high inflation. For borrowers, this meant higher interest rates on their loans

During the Monetary Policy Committee (MPC) meeting, the Reserve Bank of India (RBI) chose to maintain the repo rate at 6.5 per cent, affirming its dedication to stability while gradually scaling back accommodation to align inflation with the 4 per cent target. Repo rates wield significant influence over the interest rates set by banks for various loans, including home loans. Changes in the repo rate directly impact these loan interest rates.

" With the current repo rate holding steady at 6.5 per cent, existing borrowers can rest assured that their Equated Monthly Instalments (EMIs) won't be immediately affected," said Adhil Shetty, CEO of Bankbazaar. 

An unchanged repo rate indicates stability in loan interest rates at banks, making borrowing more affordable. This creates an opportune time to consider loans, especially for significant investments like a home. 

 

" When contemplating loans, explore potential refinancing avenues. If prevailing market rates are notably lower than your current loan rates, refinancing could yield reduced interest costs. Yet, consider associated expenses such as processing fees and tenure adjustments. If feasible, channel surplus funds toward additional loan principal payments. This not only lessens interest burdens but also shortens the loan term, potentially saving money in the long haul," said Shetty. 

New loan borrowers can analyse diverse loan types—fixed versus floating rates—to determine the optimal fit for their financial circumstances. 

Anshul Gupta, chief investment officer at Wint Wealth, advises prospective home look seekers to stay clear of fixed-rate home loans, as the rates will come down once policy rates decrease.

 Prospective homebuyers may find relief in the stable repo rate, allowing them to plan their moves without the imminent threat of rate hikes. This stability is likely to bolster sentiments in the real estate sector, which is already experiencing positive trends in key markets across the country.

"RBI once again decided to keep the repo rates unchanged. This is an extension of the festive bonanza that RBI gave to the homebuyers in its last policy announcement. It gives homebuyers yet another opportunity to make cost-optimized home purchases," said Anuj Puri, Chairman – ANAROCK Group. 

The housing market is on a bull run and unchanged home loan rates will only add to the overall positive consumer sentiments, said Puri. 

As per ANAROCK Research, average housing prices have increased anywhere between eight and 18 per cent across the top seven cities in the last year with Hyderabad recording the highest 18 per cent jump. The current average prices in the top seven cities stand at approximately Rs 6,800 per sq. ft. while in 2022 it stood at nearly Rs 6,105 per sq. ft., thus increasing by 11% collectively in the top seven cities.

"The upcoming festive season is expected to further drive economic activity across segments -- from real estate and FMCG to automobiles, etc. We also anticipate a substantial number of homebuyers to finalise their decisions during the festive season, taking advantage of the repo-rate pause and any developer incentives," said Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE. 

"The unchanged repo rate is a positive step for India's credit economy, particularly for customers in rural areas who can now borrow more freely. This was witnessed during the recent festive season, where vehicle sales reached record highs, largely due to steady interest rates and lenders passing on the benefits to customers," said Aalesh Avlani, Founder and Director, Credit Wise Capital.

Here are the tables compiled by Paisabazaar.com of the home loan interest rates offered by various public sector banks, private sector banks, and housing finance companies (HFCs) as of December 6, 2023.

Public Sector Banks:

While SBI and BoB are offering home loan interest rates ranging from 8.40 per cent to 10.15 per cent for loans up to Rs 30 lakh, PNB’s rates vary from 8.45 per cent to 10.25 per cent. 

 

Private Sector Banks: 

Leading private lenders, like HDFC Bank, Kotak Mahindra Bank and ICICI Bank provide competitive interest rates starting from 8.70 per cent. HSBC Bank’s home loan interest rates start from 8.45 per cent onwards across tenures.   

 

 

Housing Finance Companies (HFCs):

Private home loan lenders, like Bajaj Housing Finance, Tata Capital and PNB Housing Finance, offer competitive rates ranging from 8.50 per cent to 14.50 per cent. LIC Housing Finance provides interest rates ranging from 8.40 per cent to 10.75 per cent.