Home loan borrowers may not see immediate interest rate relief
RBI’s decision to reduce the repo rates by 25 bps (to 6 per cent) second time this year was expected to the backdrop of moderating inflation
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Mumbai, Apr 09: RBI’s decision to reduce the repo rates by 25 bps (to 6 per cent) second time this year was expected to the backdrop of moderating inflation.
Home loan borrowers may not see much meaningful or immediate interest rate relief. Banks have not transmitted earlier MPC rate cuts to borrowers because of higher funding costs, pressure on net interest margins, higher NPAs, and a cautious lending climate.
Anuj Puri, Chairman - ANAROCK Group says, “If banks do pass on the benefits of the last two rates cuts, it will be a boost to homebuyers, particularly for those eyeing affordable housing. Many first-time homebuyers who had been hesitating to take the plunge may make their move if home loan rates reduce.
Housing prices have risen across the top 7 cities in the last one year. As per ANAROCK Research, Q1 saw average housing prices rise by anywhere between 10-34 per cent in the top 7 cities, with NCR and Bengaluru recording the highest 34 per cent and 20 per cent jump, respectively. The average prices in top 7 cities collectively stood at approx. INR 7,550 per sq. ft. in Q1 2024-end, while in Q1-end it increased to approx. INR 8,835 per sq ft. – a collective increase of 17 per cent annually.
Home loan borrowers whose lenders don't pass on the rate cut could consider negotiating a lower rate or a balance transfer. They should keep their expectations realistic as there may be only partial relief, if any. Any potential EMI reduction should be used to prepay home loans or invest for higher returns instead of on mere consumption.
Ramani Sastri - Chairman & MD, Sterling Developers said, “We believe the RBI’s decision to cut the repo rate will significantly boost investor confidence, encourage housing demand with improved affordability, and support the overall development of the real estate sector - especially by enabling more first-time homebuyers to enter the market.”
This move will also strengthen market confidence, infuse much-needed liquidity, and trigger greater investment activity in the sector. As India’s economy continues to grow, homebuyers are showing strong intent to invest in residential real estate for long-term returns, he said.
We remain hopeful for further reductions in interest rates, which would provide an added impetus not just to the real estate sector, but also to broader industrial activity and economic growth. With sustained demand and softening home loan interest rates, the sector’s growth momentum is set to accelerate well into 2025, firmly establishing Indian real estate as a key driver of the nation's economic development, he added.
