Several lending institutions have recently increased their lending rates following the off-cycle rate hike by the Reserve Bank of India (RBI) in May. The central bank increased the repo rate – at which it lends short-term money to banks – by 40 basis points to 4.40%. HDFC has announced that it has increased its benchmark lending rate by 5 basis points, a move that will increase EMI For new and existing borrowers. One basis point is one hundredth of a percentage point. This is the third time that HDFC has increased its RPLR in the last one month. In May, it hiked rates twice for a total of 35 bps. ICICI Bank and Punjab National Bank (PNB) have announced a hike in their marginal cost based lending rates (MCLR).
The hike in these rates will have an impact on the real estate market and the sentiments of home buyers.
“A 1% increase in home loan interest rate reduces the ability to buy a home by 7.4%. We are in a scenario of rising interest rates and rising property prices, which will put pressure on affordability going forward from earnings growth. Currently, strong earnings growth supports the homebuyer’s affordability. Therefore, a comfortable affordability level coupled with a renewed enthusiasm for home ownership will help keep it strong. housing sale momentum in the near term,” said Vivek Rathi, Director – Research, Knight Frank India.
According to a Reuters poll of property analysts, property prices in india This year is expected to grow at 7.5% on an all India basis. The polling for 13 property analysts was held during May 11-27. In a March poll, analysts had expected growth of 5.0% for the year.
Prices in Mumbai and Delhi, including its surrounding National Capital Region, are expected to rise between 4% and 5% this year and next, according to a Reuters poll. Prices in Bengaluru and Chennai are projected to increase by 5.5%-6.5% during the next two years.