<p>With <a href="https://www.mid-day.com/business/business-news/article/rbi-mpc-rbi-hikes-repo-rate-to-55-per-cent-rules-out-rate-cuts-in-near-term-23653790" target="_blank" rel="none noopener">the Reserve Bank of India (RBI) increasing its repo rate</a>, the real estate sector expects the costlier home loans to have some impact on the housing sales during the festive season.</p>
<p>The apex bank on Wednesday had increased its benchmark repo rate by 25 basis points to 5.50 per cent, its first hike in nearly four years, while adding that rate cuts are off the table in the near term.</p>
<h2>Rate hike could affect affordable buyers</h2>
<p>According to real estate consultant Anarock, the average residential prices increased 7 per cent year-on-year, and with the rate hike, dearer home loans will make buyers more selective and cause decision timelines to extend, particularly in the price-sensitive segments.</p>
<p>"The rate hike will put pressure on consumer sentiment and discretionary spending &ndash; this has a direct correlation to housing demand. The festive season is a key period for housing demand, and an increase in borrowing costs will affect buyer sentiment," <a href="https://www.mid-day.com/business/business-news/article/repo-rate-reduction-set-to-benefit-first-time-homebuyers-and-real-estate-says-anuj-puri-of-anarock-group-23479680" target="_blank" rel="none noopener">Anarock Group Chairman Anuj Puri </a>said.</p>
<p>He added that even a modest increase in EMIs will result in deferred purchase decisions or budget recalculations among affordable housing buyers.</p>
<h2>Rate hike could impact festive season sale</h2>
<p>Industry bodies CREDAI and NAREDCO said the increase in the repo rate would lead to a rise in interest rates on home loans, which could have some impact on housing sales, according to news agency PTI.</p>
<p>Confederation of Real Estate Developers' Associations of India (CREDAI) National President Shekhar Patel said that the RBI's first rate hike since February 2023, would have a bearing on the cost and availability of funds.</p>
<p>"We are also entering the festive season, which is an important period for the housing market, and the increase in borrowing costs could have some impact on sales during this period, although the underlying demand for housing remains strong," Patel said.</p>
<p>"We should understand that for a homebuyer, the interest rate at any particular point is only one part of a much longer decision," he added.</p>
<p>"A home loan is generally a commitment of at least 15 years. During that period, there will be times when rates go up and times when they come down. We should not look at <a href="https://www.mid-day.com/business/business-news/article/what-is-repo-rate-heres-why-the-rbis-august-5-decision-is-crucial-23643011" target="_blank" rel="none noopener">repo rate changes</a> in isolation. What matters is the long-term outlook for the economy and overall growth," he further said.</p>
<h2>Housing demand remains strong</h2>
<p>According to &nbsp;National Real Estate Development Council (NAREDCO) President Parveen Jain, the impact would be limited and expects the real estate sector to remain resilient with a strong housing demand.</p>
<p>"We expect the impact of this increase on the residential market to remain limited, supported by strong buyer sentiment, festive demand and the long-term need for homeownership," Jain said.</p>
<h2>Banks increase lending rates</h2>
<p><a href="https://www.mid-day.com/business/business-news/article/several-psu-banks-hike-lending-rates-after-rbi-raises-repo-rate-by-25-basis-points-23653953" target="_blank" rel="none noopener">Several banks such as Punjab National Bank, Indian Bank</a>, Bank of India, Bank of Baroda, have increased their lending rate with effect from Thursday, in line with the RBI's monetary policy decision.</p>
<p><em><strong>(With inputs from PTI)</strong></em></p>

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Costlier loans post repo rate hike could impact housing sales during festive season

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