EMIs on home loans set to rise as RBI hikes repo rate

EMIs on home loan rates are likely to go up as Reserve Bank of India (RBI) Governor Raghuram Rajan raised repo rate by 0.25% to 7.75 per cent in the second quarter monetary policy review on Tuesday.

“As anticipated, RBI has returned to a more normal monetary policy situation by cutting the MSF and raising the repo rate. This may result in further increasing the cost of funds for any industry or end consumers. Further dampening demand and industrial production.

Demand for affordable and mid-end real estate projects may be adversely impacted due to a possible hike or adjustment in home loan rates.  Expensive properties may not be negatively affected drastically as their demand is relatively inelastic and volumes not very large “, says Pankaj Bansal, Director of M3M India

Neeraj Gulati,  Managing Director, Assotech Realty said, ‘At the outset of this festive season which brings a new set of inspirations and hope, we as  developers have a mixed feeling as with increase in repo rate by 25 bps reflects the ongoing revival strategy by the apex bank to cope up with the crisis our economy has undergone. We are certain that very soon we will witness steady growth and a liberal policy which would bolster the real estate fraternity; as of now we need to take measure for countering the financial crunch which the industry is going through.’

‘The sole purpose of increasing the repo rate by the apex bank was to curtail the prevalent inflation regime. As a part of the real estate fraternity we expected relaxation in repo rate and the existing CRR which would have brought sigh of relief from the liquidity crunch most developers are going through.’  Says Gaurav Gupta, Joint Secretary , Rajnagar Extention Association

 “The Central Bank’s decision to hike repo rate by 25 basis point is on expected lines as they are concerned about rising inflation rate and fiscal deficit. Their efforts to check and then reduce inflation’s burden on people will a have far-reaching impact on every sector of the economy. The economy will ultimately benefit from this kind of ‘harsh’ decision.”, said Kunal Banerji, Director, Marketing, Shri Infratech

The central bank however kept CRR unchanged at 4 per cent. This move by RBI is seen as an attempt bring down inflation which has remained high over the last one year.