The Reserve Bank of India’s (RBI) decision to increase repo rate by 50bps was on expected lines, however, it is likely to impact homebuyers negatively as EMIs are set to get costlier. Apparently, the repo rate will prompt the banks to increase rates on all kind of loans, including auto loans. The repo rate is the interest rate at which the RBI lends short-term funds to banks. Hence, with the increase in repo rate, home loans and auto loans are expected to go up.
Experts though feel the hike was on the expected line as inflation remained above the comfort zone of the RBI and measures were required to tame it, however, it will impact homebuyer sentiments negatively. Any increase in the interest rate will further impact the costs of doing business and hence the move will hurt business sentiment too as the economy is still recovering from the pandemic,
Already raw material prices in building construction are increasing and an unbridled rate of inflation will further drive the input costs northwards, therefore resulting in cost overruns for the developer fraternity. In such a case, they will have no option but to pass on the price to the homebuyers