RBI MPC: Home loan borrowers get no relief with unchanged repo rate

Hopes of home loan borrowers for a relaxation in interest rates were extinguished n Friday after the Reserve Bank of India (RBI) decided to keep the repo rates unchanged at 6.5%.

This means no relief in the amount of interest people pay when they borrow money for home loans. This decision was made after a three-day meeting held by the RBI’s monetary policy committee from June 5 to June 7.

The repo rate is important because it's the rate at which the RBI lends money to other banks. By keeping it steady, the RBI aims to keep things stable in the economy.

This decision affects people who have loans, like home loans. Since the repo rate hasn't changed, their loan payments are likely to stay the same for now.

Home loan interest rates saw an increase following the RBI's decision to raise the repo rate by 2.5% between May 2022 and February 2023.

This hike caused borrowers to face much higher EMIs, prompting many to hope for a reduction in interest rates to ease their monthly payments.

Experts largely agree that the period of rising interest rates is nearing its end, and a decrease in rates is anticipated in the near future. However, the expected decline in interest rates has been postponed due to the current pause in the repo rate.

Mr. Anshul Jain, Chief Executive India & SE Asia & APAC Tenant Representation, Cushman & Wakefield said that earlier this week, with the European Central Bank and Bank of Canada beginning to cut policy rate, we can expect that other central banks could follow suit in the near future.

"More optimized lending rates will provide a further boost to housing transactions, and with the projected continued focus from the government towards infrastructure and affordable housing, such a move would very well spur demand in the segment as well," said Jain.

Samir Jasuja, CEO and MD of PropEquity said that the decision of RBI is on the expected lines, and with overall inflation falling within the RBI range, a policy rate cut may not be very far away.

"Real estate prices have gone up substantially and a future rate cut will give much higher purchasing power to the customer which is the need of the hour. Such a move would be a welcome news for homebuyers across cities, including metro cities as well as tier II and III cities," added Jasuja.

Ramani Sastri, Chairman & MD, Sterling Developers said that a future repo rate cut would serve as a big boost to homebuyer sentiment and enable better affordability, which is an extremely sensitive factor in the housing market.

"We will continue to see a multi-fold growth in real estate investments since the real estate market is less volatile than other investment markets and delivers higher returns," he added.

RBI Governor Shaktikanta Das has announced an increase in the projected real GDP growth for the financial year 2024-25, setting it at 7.2%, up from the previous estimate of 7%.