After the monetary policy meeting that started on October 5, the Reserve Bank of India (RBI) committee has taken a major decision on interest rates. After the three-day meeting, RBI Governor Sanjay Malhotra said that a decision has been taken to increase interest rates by 25 basis points. Now the interest rate has increased from 5.25 to 5.50 percent.
He said that the decision to increase interest rates has the support of four out of six members of the MPC. Apart from increasing interest rates, RBI has also retreated from its stance of monetary easing. The central bank has changed its stance to ‘balanced tightening’.
Interest rates increased after 3 and a half years
The central bank has increased the repo rate for the first time after February 2023. RBI has taken this step to keep the country’s economy and inflation under control amid global uncertainties and rising crude oil prices.
The central bank said that the Standing Deposit Facility (SDF) rate has been increased to 5.25 percent, while the Marginal Standing Facility (MSF) rate and the Bank Rate have been adjusted to 5.75 percent.
This increase in repo rate will make it expensive for banks to take loans, which will have a direct impact on the general public, because due to increase in interest rates on home loan, car loan and personal loan, monthly installments (EMI) can become expensive.
GDP growth will accelerate but inflation will also increase
According to RBI, domestic economic activities remain strong even amidst global uncertainties. The good news on the GDP growth front is that the country’s growth may be 7.1 percent in FY 2027. However, common people may get a shock on the inflation front. Governor Sanjay Malhotra said that inflation may increase in the country.
Real GDP growth for the financial year 2027 is estimated at 7.1%, which was earlier estimated at 6.7%. Whereas CPI inflation remains a matter of concern. CPI inflation for the entire financial year is estimated to be 5.2%.
Announcing the monetary policy, Governor Malhotra said that there is a possibility of inflation rising again at the global level, due to which many major central banks of the world are taking steps towards further tightening the monetary policy.
This increase has been made at a time when concerns about inflation are increasing across the world including India. Due to ongoing tensions in West Asia, crude oil prices remain above $100 per barrel, which has increased pressure on global and domestic inflation.
Inflation figures are also increasing RBI’s concern. CPI inflation increased to 4.82 percent in August, which was 4.45 percent in July. Apart from this, there is also a risk on Rabi crop production due to El Nino effect and less rainfall.
There is no possibility of further reduction in interest rates
The RBI Governor said that in view of external challenges and risks of rising inflation, there is no possibility of cutting interest rates in the near future. He said the committee that sets interest rates will either keep rates stable or decide to increase them, depending on how macroeconomic conditions change.
What do experts say about the impact on home loans?
According to Amit Modi, director of County Group, stable interest rates during the festive season are important for the confidence of home buyers. Home loan EMI will increase by 25 basis points increase in repo rate. This may especially affect first-time home buyers and people who are more price sensitive.
Kushagra Ansal, Director, Ansal Housing said, ‘The increase in repo rate has a direct impact on the cost of home loan. Some people may postpone the decision of buying a house for some time. But if the increase is limited then its impact on the entire real estate market will not be much. In markets where demand for homes is strong, buyers may continue to buy despite modest increases.
Yash Miglani, director, Migson Group, said, ‘Interest rates are an important factor influencing demand in real estate, but it is not the only factor. Today buyers are also giving importance to better location, good connectivity, modern amenities and trusted developers. Therefore, a limited increase in the repo rate may slow down the pace of the market, but a major decline in demand is not necessary.
‘Developers should keep house prices balanced’
According to Harvinder Singh Sikka, Chairman of Sikka Group, ‘With the increase in interest rates, it will be necessary for developers to keep the prices balanced. With this, easy payment plans and convenient options can be provided to the buyers. With this, some impact of increased EMI can be reduced. It will be relatively easy for developers with strong financial position to handle such a situation.
Amogh Bansal, MD, MUREC said, ‘Buyers’ preferences in real estate are constantly changing. Now the demand for well-planned projects, bigger and better designed houses, quality and amenities related to better lifestyle is increasing.
Meanwhile, Rajat Goyal, Managing Director, MRG Group said, ‘It is important to maintain a balance between controlling inflation and maintaining economic activities. Stability and clarity in loan costs for real estate is important as buying a home is a long-term decision and buyer preferences are constantly changing. This will help developers focus on developing better and well-planned projects as per the needs of today’s homebuyers.
Source: ndtv.in
