Is repo rate stability a boon for diwali home shoppers?

The housing market has welcomed the decision of the Reserve Bank of India (RBI) to maintain the repo rate at 6.50 per cent for the fourth consecutive time. Experts are pleased with the Monetary Policy Committee's (MPC) choice, led by RBI Governor Shaktikanta Das, to keep the key interest rate steady in the most recent RBI policy meeting. This decision is seen as a relief for both new home loan borrowers and existing housing loan recipients because it means that there will be no increase in home loan Equated Monthly Installments (EMIs) for them, say experts.

Festive rate relief

This pause in interest rates by the RBI is seen as a positive development for Diwali housing sales this year. Suren Goyal, Partner, RPS Group, stated, "The unchanged repo rate is a festive gift for homebuyers, providing them with another opportunity to make cost-effective home purchases. The overall consumer market appears to be strong across various sectors, particularly in automobiles and housing, which are often indicators of economic health. The housing sales momentum has been strong, with a 36 per cent year-on-year growth in Q3 2023 across the top 7 cities, thanks to the stable repo rate and consequently steady home loan interest rates."

Gunjan Goel, Director, Goel Ganga Developments, emphasised that the RBI's decision not to increase the repo rate would stimulate housing sales during Diwali, a time considered auspicious for home purchases in India. This move is expected to boost the festive spirit and the real estate sector, leading to increased housing sales in the coming months.

Housing sector strength

Goel mentioned that the housing sector has been performing well, and the RBI's decision to maintain the status quo will further strengthen this trend. Developers are gearing up for new launches and attractive offers, particularly in the premium and luxury project segments, which are experiencing high demand.

LC Mittal, Director, Motia Group, expects the rate pause by the RBI to boost festival sales, noting that housing sales have shown positive trends in recent quarters compared to the corresponding period in previous years. The RBI's MPC decision to keep the repo rate at 6.50 per cent is likely to encourage potential homebuyers.

EMI stability

Regarding the impact on home loan EMIs for both new and existing borrowers, money managers explained that when the repo rate rises, banks typically increase the interest rate on their retail loans. However, after an interest rate hike, they usually extend the loan tenure instead of increasing the monthly EMI. Therefore, with the RBI's rate pause, there will be no increase in home loan EMIs for both new and existing borrowers.