In the last few months, RBI has revised its lending rates to banks on 5 instances in an attempt to try to keep up with the Inflationary upsoar and also to recover on all the subsidies & discounts given during the covid pandemic.
In fact, this is the fifth consecutive time RBI has increased interest rates to lower inflation.
When the RBI increases interest rates, commercial banks usually follow the same suit and raise their home loan rates as well.
The current Repo rate is at 5.90
| Date | Rate | Change |
| 5-Aug-22 | 5.4 | 0.50 |
| 8-Jun-22 | 4.9 | 0.50 |
| May-22 | 4.4 | 0.40 |
The reason for this is that commercial banks borrow money from the RBI by paying an interest rate called the repo rate. The increase or decrease in Lending rates is directly in proportion to the Repo rate fixed by the RBI.
In contrast, bulk buyers need not worry when they buy a property in bulk amounts.
But the increased interest rates are not eternal. It can come back when inflation set rights with the RBI tolerance threshold.
As per Rajiv Williams’s views
This was hovering somewhere between 6.5 to 7.2 % which is now back to 8.00 to 8.5% which is sure to impact the overall pricing of the real estate investment that the buyer chooses to make.
Given the fear of a global recession this could go further, one could only hope for the govt to come up with some sort of an economic package or relief to encourage buyers and make sure the flow of capital continues.
I’ve read quite a few articles that India in its current stride is recession proof, If that is to be believed then we should continue to see some benefits offered by the govt or some sops rolled out for the investors & home buyers to make sure their desire to own a home need not be postponed.
When spending reduces, production halts, and when production halts, there are budget cuts & job cuts which result in an extremely slow progress cycle at every level thereon.
The builders would need to come up with flexible payment schemes to encourage the home buyers in order for them to best leverage their monies in other investment classes as well which may give good returns in the short term while also choosing to invest in real estate as well.
When the buying behavior is impacted n volumes reduce locally, FDI comes in large volumes and funds pick up huge properties that are underwritten and picked up at good rates that enable the industry to stay afloat due to the stronger dollar vs the weaker rupee. The cycle thus continues to recover.
