The Reserve Bank of India (RBI) has increased the repo rate by 25 basis points, bringing it to 5.50%. This is the first interest rate hike since February 2023. This decision was made against the backdrop of rising inflation and global economic conditions, and it may impact both ordinary citizens and the real estate sector.
Following a three-day meeting held from October 5 to 7, the Monetary Policy Committee (MPC) unanimously decided to raise the repo rate. Consequently, the RBI shifted its monetary policy stance to 'calibrated tightening,' meaning that opportunities for interest rate cuts are currently limited.
The rise in the repo rate may increase borrowing costs for banks, which could potentially affect floating-rate home loans. In such cases, the monthly installment (EMI) of existing borrowers may increase, or banks might maintain the EMI by extending the loan tenure. Real estate market experts have analyzed how this will affect the sector.
Manik Malik, CEO and President of BPTP, noted that the RBI's decision indicates a strong Indian economy capable of handling inflationary challenges. He believes that the long-term prospects for the real estate sector remain robust due to rising household incomes, accelerated urbanization, improved infrastructure, and increased housing demand. In his view, if inflation is controlled and economic momentum is maintained, it will strengthen confidence and investment, making residential real estate an attractive option for buyers and investors in good locations and quality properties.
Rajan Yad, Director of Roots Developers, believes that this increase is unlikely to significantly affect real estate demand, especially in markets like Gurugram, where demand is supported by robust infrastructure, the presence of large corporations, and buyer confidence. He added that plotted developments are popular among buyers focused on long-term investments and future prospects. Stable demand is also observed for premium projects with luxury amenities, and a small increase in EMI has a relatively weak impact on buyers of such properties.
Varun Garg, Director of Karyaan Group, described the 25 basis point repo rate hike as a balanced move, expecting its impact on the residential real estate market to be limited. He emphasized that Noida and Ghaziabad are strengthening their positions as rapidly developing real estate markets. Improved metro connectivity, easy access to expressways, and strong social infrastructure make these cities attractive to both buyers and investors. According to him, buyers approach these markets due to more favorable prices, options for larger homes, and prospects for future property value appreciation, so a minor increase in EMI is unlikely to influence their purchase decision. He forecasts that overall, there are good opportunities in residential real estate across the entire NCR, and demand will remain strong in the coming quarters.