RBI Keeps Rates Unchanged; Homebuyers' EMI has gone up by 20% in two years: Anarock Research

RBI Keeps Rates Unchanged; Homebuyers' EMI has gone up by 20% in two years: Anarock Research

RBI has kept policy rates unchanged in its latest policy decision. The move by RBI has been welcomed by real estate sector. A report published by Anarock Research has suggested that homebuyers' EMI has jumped by nearly 20 percent in the last two years, mainly due to rising interest costs. This is pinching the consumers who have taken bigger loans to fund their home purchase. Higher interest rates also impact real estate sector as affordable housing segment suffers decline in demand. Many people have delayed their home buying as interest rates are currently at multiple year highs.

A report by Anarock Research follows.....

As widely anticipated, the RBI has decided to keep the repo rates unchanged at 6.5%. India continues to outperform other countries in terms of consumption and with the festive season coming up, the RBI will not risk denting it.

This is nothing but good news for aspiring homebuyers on the market for a purchase in the near future. The unchanged repo rate will help maintain the momentum in housing sales - particularly in the mid and luxury segments, which did significantly well in H1 2023.

As per ANAROCK Research, we saw total housing sales of approx. 2.29 lakh units across the top 7 cities in H1 2023, the highest half yearly sales in the last decade.

However, the risk of inflation continues to lurk and if it rises further, there could be some repercussions on overall sales, especially in the cost-sensitive affordable housing segment which has already been severely impacted by the pandemic over the last couple of years.

Amidst the rising cost of these properties and the cumulative 250 bps rate hikes by the RBI in the last one year and more, affordable housing buyers have taken the severest blow. As per ANAROCK Research, homebuyers’ EMIs jumped up by 20% in the last two years. Home loan borrowers who were paying an EMI of approx. INR 22,700 in July 2021 are now paying approx. INR 27,300 - an increase of approx. INR 4,600 per month.

This 20% increase in the EMI has resulted in a jump of approx. INR 11 lakh in the overall interest component - from approx. INR 24.5 lakh interest payable in 2021 to approx. INR 35.5 lakh today. The total interest payable over a 20-year tenure is now more than the principal amount.