RBI Maintains Repo Rate at 6.5%: Home Loan Borrowers Face Extended Wait for EMI Reductions

RBI Maintains Repo Rate at 6.5%: Home Loan Borrowers Face Extended Wait for EMI Reductions

The Reserve Bank of India (RBI) announced in its monetary policy review on Wednesday that it would keep the key repo rate unchanged at 6.5%, marking the tenth consecutive decision to maintain the status quo. This decision delays any immediate relief for home loan borrowers, who were hoping for reduced EMIs as the festive season approaches.

The unchanged rate reflects the central bank's priority of managing inflation within its target range, despite a recent rate cut by the US Federal Reserve sparking similar hopes in India. Experts from the real estate sector, however, see this move as a necessary balancing act for the RBI. Anuj Puri, Chairman of ANAROCK Group, stated, "While a repo rate cut would have been preferable, the RBI is managing various macroeconomic factors, particularly inflation."

Impact on Home Loan EMIs

For homebuyers, the RBI's decision means home loan interest rates will remain steady for the near future. This stability comes during a critical time when demand for housing typically increases due to the festive season. "By keeping borrowing costs steady, EMIs remain manageable, encouraging potential homebuyers to invest in property, especially in the affordable housing segment," commented Manju Yagnik, Vice Chairperson of Nahar Group and Senior Vice President of NAREDCO Maharashtra.

While some market observers anticipate a potential rate cut by December if inflation remains under control, home loan borrowers will need to wait longer for any reductions in their EMIs. Adhil Shetty, CEO of Bankbazaar.com, explained, "Loan holders may have to wait until later this year for relief, but in the meantime, EMIs will remain at current levels."

Rising Property Prices and Housing Market Trends in 2024

Despite stable interest rates, rising property prices have added another layer of complexity for potential homebuyers. A recent report from ANAROCK highlighted that housing prices in India's top seven cities increased by 23% in the third quarter of 2024 compared to the same period in 2023. Vikas Wadhawan, CFO of REA India, pointed out that while buyers are adjusting to these price hikes, the higher costs are affecting immediate purchasing decisions. "Over the last few quarters, prices have increased by 3% to as much as 50% in some prime localities of key markets," he said.

The 'Real Insight Residential Report' further revealed that there has been a 25% drop in new housing property launches and a 5% year-on-year decline in sales during Q3 2024 across India's major housing markets. Housing sales declined by 11% in the third quarter of 2024 compared to the same period in 2023, while new project launches fell by 19%. Despite these trends, Anuj Puri expects faster sales momentum in the last quarter of 2024, driven by the stability in home loan rates during the festive season.

Current Home Loan Interest Rates

According to data from Paisabazaar.com, as of October 8, 2024, home loan interest rates for amounts above Rs 30 lakh and up to Rs 75 lakh are as follows:

• State Bank of India: 8.50% to 9.85%
• Bank of Baroda: 8.40% to 10.65%
• Union Bank of India: 8.35% to 10.90%

The RBI's decision to hold the repo rate steady reflects caution in the face of global economic uncertainties and geopolitical tensions, which have influenced central banks worldwide to take conservative approaches. As inflation remains a concern, the RBI appears to be maintaining its 'wait-and-watch' strategy to ensure economic stability.