RBI keeps repo rate on hold; why home loan borrowers should cheer

The Reserve Bank of India (RBI) on Wednesday kept the repo rate unchanged at 4 percent in its monetary policy announcement, bringing cheers to millions of home loan borrowers. The status quo on the interest rate means that the low home loan interest rates regime will continue in the market and augur well for the housing sector and the real estate sector as a whole, experts said.

As we know, the repo rate is the interest rate the RBI charges commercials banks when they lend funds. So, when RBI keeps it unchanged, it expects the banks to keep it stable for end-consumers. This means the loans offered to the customers will see no change in interest rates, keeping the Equated Monthly Installments (EMI) static.

According to Yash Gupta, Equity Research Analyst at Angel One Ltd, the home loan rates currently are between 6.5 percent-8 percent and these are one of the lowest home loan rates in history.

“The same should stay for some more time. This works well for all home loan borrowers as the environment of affordability will continue,” said Anuj Puri, Chairman at ANAROCK Group.

Echoing Puri’s views, Dhaval Ajmera, Director of Ajmera Realty and Infra India Ltd said that with a low loan interest rate regime, the home sales velocity witnessed across key Indian cities will continue on an upward trajectory.

Suren Goel, Partner, RPS Group further said that it is perhaps the best time to buy a dream home as interest rate along with house pricing is one of the biggest influencers.

According to Ramani Sastri - Chairman & MD, Sterling Developers Pvt. Ltd, the RBI’s decision on keeping the repo rate unchanged will certainly bode well for all interest-sensitive sectors ahead of the New Year when the economy is on its road to recovery.

"For home buyers, this decision will help reinstate confidence and further access to affordable home loans and help foster housing demand. It has also helped the sector to regain its strength as well as stay afloat during these unprecedented times," he said.

Sastri said that the homebuyers should take advantage of the current situation because there are chances that the prices might go upwards later on account of reducing supply and the pressure of increased costs of raw materials.

"There has been a fundamental change in buyers’ expectations and attitude towards homeownership, which has already resulted in the residential real estate sector performing exceedingly well across all segments in the post-COVID-era. We are also seeing a lot of first-time homebuyers, who were not able to reach a decision earlier are eager to conclude the deal now. Real estate is definitely an asset class that one must remain invested in today and in the long term and looking ahead, we do believe that markets will see sustained growth," he added.

Going forward, added Atul Monga, CEO and Co-founder, BASIC Home loan, the focus remains that how long can these rates be sustained with keeping inflation in check.