Impact on real estate due to the hiked Repo rates

Q: How the increased repo rates are going to affect the real estate market? Although the finance expert were telling that the Repo rates will remain stagnant but however the Repo rates have been increased by 0.25 percent.

Puneet Laskar,

20th September 2013

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Replies (13)

I was about to apply for a home loan as I am planning to buy an apartment in Bangalore. I think now banks have increased their interest rates.

Nakul Sachdev, Bangalore

31st January 2014

Comment

I would advice you to wait and check the current EMI rates. Currently, may be some of the banks might have increased their home loan interest rates due to the sudden hike in rates by almost 25 basis points by The Reserve Bank of India.

Ravindra Singh,

31st January 2014

I came to know that banks like SBI and HDFC has immediately increased their interest rates on home loans simultaneously. But According to sources, it has been decided that all interest rates including home loans in SBI will remain unchanged.

Lewin G,

31st January 2014

The Reserve Bank of India (RBI) increased the repo rates by 25 base points (bps) to 8% in order to curtail inflation. 'Repo rates' are essentially the rates at which banks borrow short-term money from RBI. With the increase in interest rates for borrowing money, there are chances that home, vehicle and other loans become more expensive. With home loans becoming more expensive, the real estate market will again get affected.

Veena K,

30th January 2014

Comment

The move from the RBI has come at a stage when the rupee value has weakened significantly over the past one year. In order to combat the inflation that has stemmed from the rupee depreciation, the RBI came up with a hike in the repo rates. This, however, is not the first hike during this financial year. The repo rates were increased twice since the new governor was appointed in September 2013. However, the RBI governor has defended the move saying that though the headline inflation has been controlled, the core inflation is still high. He also said that further increase in the rates is unlikely in the short term.

Devraj Shah, Bangalore

30th January 2014

It seem RBI has decided to offer a special repo rate window to the National Housing Bank for festival season. The essence of such a window can be summarized by the fact that it will allow HFCs- Housing Finance Companies, and banks to obtain funds for home loans at minimal rates from NHB.

Ravindra Singh,

15th October 2013

Comment

With the RBI making the big move and increasing the repo rates, private banks have raised their base rate also. ICICI, Yes Bank and Axis Bank raised their base rate by 25 basis points to 10, 10.75 and 10.25 percent respectively.

Furthermore, HDFC has also taken the decision to hike its retail prime lending rate by 25 basis points to 16.65%. On account of the revision, HDFC would offer home loans upto Rs 30 lakh at 10.40%. For loans above Rs 30 lakh, the interest charged will be 10.65% by HDFC.

Lewin G,

27th September 2013

Comment

Which are the banks that has revised repo rates and what is the percent they increased?

Puneet Laskar,

27th September 2013

Comment

According to some property consultants, the resale inventory in the country has piled up to 30% in the past two quarters. One of the prime reasons for such a slump are increased EMIs, courtesy of the the RBI’s new policy. This in addition to economic slowdown has compelled the real estate industry of the nation to take a dip. Properties that have been purchased before by salaried professionals are now set for resale, since the EMI is beyond reason

Veena K,

23rd September 2013

Comment

Why resale properties is preferred?

Puneet Laskar,

23rd September 2013

Primary buyers, who play a key role in the annual sales volume of developers in the realty market, find it convenient to invest in resale properties instead of new homes, due to less risk involved.

The resale inventory is typically concentrated in big metro cities. Potential home buyers are always in search of such opportunities since it offers an option to investors to get close to possession prices and need not to be concerned of the risks included in new projects. Sellers, on the other hand are left with higher returns instead of settling down for poor rental yields.

Veena K,

23rd September 2013

Increase in repo rate by RBI has ruined the prospects of different segments of people in the nation, high-salaried investors being the primary one. With the advent of RBI’s new policy, high-salaried property investors, who have previously reaped the benefits of greater returns, are now left with limited scope and saturated output.

Devraj Shah, Bangalore

23rd September 2013

Comment

In regard to the present market scenario, investors who have put their money in real estate some 10-15 years ago, now find it to be a back breaker to service their home loans. To make matter more worse, with the increasing interest rates and rental yields heading for a fall, servicing home loans has become a pretty expensive venture.

Vinu S,

23rd September 2013

But my point of view is that during the festive season housing demand generally springs up and contributes to the annual sales volume of a developer. In the present monetary policy, with an increase in repo rate, the borrowing cost has gained few pounds. This has cast a black shadow on the housing demand of the rest of the country, other than Bangalore, and gave the developers all the reasons to worry.

Neeraj Rao,

23rd September 2013

Comment

Rise in finance cost, together with the construction cost and the rapidly changing economy is likely to cut down the profit margins of the developers in the country. Such a crisis in the nation, which is almost crippling the prime realty markets such as Mumbai, Hyderabad, Chennai (except Bangalore) can be dealt by the government by putting into action certain reforms.

Yogendra, Bangalore

23rd September 2013

Will high EMI hurt salaried investor’s sentiments ?

Puneet Laskar,

23rd September 2013

Will the hike in the repo rates affect the buyer sentiments in Bangalore?

Girish Gupta, Bangalore

23rd September 2013

Comment

According to property consultants, the sudden hike in the repo rate will affect the buyer sentiments momentarily in Bangalore. The good news is, increasing the Repo rate by 25 bps may help to put a lid on inflation, to some degree. Impact is evident with increased repo rates, however, developers are not going to feel the heat of it in Bangalore

Amarnath, Bangalore

23rd September 2013

Hi Everyone!! I have read a news about the recent hike on repo rates. Please read it

In what has been rumored as one of the biggest newsmakers for the year, the RBI has disappointed the home loan borrowers by increasing the Repo rate by 25 basis points. Such a move has let down the real estate sector significantly, since increase in borrowing cost will affect property transactions adversely.

Increase in Repo rate will shoot up the home loan interest rate and escalate the cost of capital for the developers to construct housing and infrastructure projects simultaneously. Rise in the cost of construction will take away the realty sector by a storm.

Given the deadweight of inflated EMIs, buyers may put a damper on any kind of investment in the coming festive season also. This will act as a bane for the developers, affecting the demand stasis significantly.

According to property consultants, hike in the benchmark interest rate from 7.25% to 7.50% will cast a black shadow on the realty sector (with increased input cost and liquidity issues), which is already plagued by sluggish sales.

The new policy will surely dampen the investor sentiments, particularly in the residential real estate sector. This will eventually lead to low sales and make it difficult for builders to sustain in a high interest regime that can contribute to increased NPAs.

It will be very crucial to see how the developers respond to this decision when festive season is coming shortly.

Hike in repo rate will shrink the sales volume significantly and take a toll on the profit margin of the developers. With increased finance cost for developers, real estate climate of the nation is expected to drop down several Fahrenheit. This, as a result, will affect the infra-lending status in the country disparagingly, and may lead to reduced number of project launches in the coming days.

Link : http://www.commonfloor.com/guide/rbi-repo-rate-impact-on-real-estate-30971.html

Pranab Malakar,

23rd September 2013

Comment

The article is very nicely written as well as informative but I want to know what are repo rates.

Amreesh Murugan,

15th October 2013

Repo rate is the rate at which RBI lends money to banks. In the present scenario, banks acquire funds from the RBI at 7.5% via the repo rate window.Under the special repo rate window facility, NHB will be authorized to get make use of the new RBI scheme, and fund banks and HFCs at low rates. According to experts, special repo rate window is likely to cut down the cost for lending home loans to several degrees.

Ravindra Singh,

15th October 2013

HA HA HA Look what they are trying to do. Today for an investor what are the options.
1) Gold - On Tuesday they have increased the tax from 10 - 15% which will future increase the gold price in comparison to the international market.
2) Real Estate --- With the increasing in Repo rate does not make real estate a wise option to invest at present
3) Stocks - --Very Very unpredictable :(
4) FD: Here comes the winner :) FIXED DEPOSIT

With the in =crease in deposit rate as well as in repo rate the only viable option a common man has today is to keep there money in fixed deposits

Amreesh Murugan,

20th September 2013

Comment

I believe you are some banker who wants the money to be in fixed deposits. I believe this is the right time to invest or buy a property as the discounts and correction in price will make up for the increased interest rates. Moreover we Indian have the habit to exaggerate everything and with just an increase by .25 percent we are making such a hue and cry as the world is going to end. Chill guys and enjoy NEGOTIATION!!!!!!!!!!

Dhiraj,

20th September 2013

I can't understand why repo rates are increased suddenly...as common people like us won't be able to buy a home through emi...:(

Vivek Kulkarni,

23rd September 2013

Though the real estate sector has a valid reason to feel disappointed with the hike in borrowing cost, the Reserve Bank of India has included provisions to increase liquidity in the system. However, few developers have a notion that in regard to the present economic condition, RBI has taken the right move with the monetary policy.

Javed,

28th September 2013

Well, I might agree with you partially, but what I believe is that the rate at with the bank will lend the money is not the function of repo rates only but also the bank's liquidity position and ability to meet the deposit and lending situation. I believe that the Interest rates might not increase immediately.

Also as the SBI has indicated that the deposite rates will go up which will encourage a "common man" to keep their money in bank's fixed deposits( as banks will be paying them higher interest rate for the use of their money for the time period that the money is on deposit) rather then spending them in MARKET. This will improve the liquidity situation for the banks.

Govinda,

20th September 2013

Comment

Yes definately the increased Repo rates is going to hamper the real estate.

1) The home loan interest rate is going to increase.

2) the coast of capital will increase for the developers to develop infrastructural and housing projects.

3) This will also increase the cost of construction.

According to sources, banks like Yes bank and IDBI have already increased their interest rate for loan taker. During a festive season , when the sale is alreay down , further increase in repo rates might keep the buyers away from the market.

Suresh,

20th September 2013

Comment