Kolkata: Reserve Bank of India ’s decision to increase the repo rate by 25 basis points to 5.5% will make home loans more expensive and have an adverse impact on the already stressed real estate sector in Kolkata, city-based developers said on Wednesday.
Real estate consultants said home loan borrowers will face either an increase in their equated monthly instalment (EMI) or an extension of their loan repayment tenure, or a combination of both, depending on their lender’s reset mechanism.
Already reeling under the impact of the Iran war that has led to a 10%-15% input cost hike and pushed up home prices by 8%-10%, dampening customer sentiment and affecting demand, Credai West Bengal president Sushil Mohta said a rise in home loan rates would have an adverse impact on the sector, particularly in the short and medium term. “When one takes a home loan for 25-30 years, there will be three times when rates will go up and three times when rates will go down. For a Rs 50 lakh home loan with an initial 25-year tenure, a 25-basis-point (0.25%) repo rate hike will see the home loan interest rate increase from around 8.5% to 8.7%. If one chooses to keep one’s remaining tenure at 25 years, the EMI could increase by Rs 850 per month. The additional interest to be paid on a new loan will be Rs 2.5 lakh over the life of the loan.
We hope the rate environment remains stable going forward, so that the real estate sector can maintain its growth momentum,” Mohta added. That could mean additional interest of Rs 10.1 lakh being paid due to the compounding effect of extending the timeline. You Can Also Check: Gold Rate in Kolkata | Silver Rate in Kolkata | Bank Holidays in Kolkata | Public Holidays in Kolkata | Kolkata AQI | Weather in Kolkata | Petrol Price in Kolkata | Diesel Price in Kolkata | CNG Price in Kolkata | LPG Price in Kolkata Stay updated with the latest Kolkata news.
“Higher equated monthly instalments could lead some prospective homebuyers to defer their purchase decisions, especially in the affordable and mid-income segments, where buyers are more sensitive to interest-rate movements,” he said. I believe Kolkata’s residential market has the resilience to absorb this small increase in borrowing costs,” said Pansari. Ultimately, it will even out,” he said.
The repo rate revision will also increase the cost of construction finance for developers. For them, the rise in borrowing costs may put pressure on project margins, construction budgets and cash flows, and could eventually result in higher property prices. “While demand for housing remains fundamentally strong, sustained increases in interest rates may affect sales velocity and overall market sentiment. Siddharth Pansari, the former president of Credai Kolkata, felt the war has had a more lasting impact on the sector than the repo rate hike. “The repo rate hike may make home loans marginally more expensive, but I don’t see it having a major impact on genuine homebuyers. In Kolkata, people are buying homes with a long-term view, and their decisions are increasingly driven by the right location, better quality and the lifestyle a home offers. There may be some caution in the short term, but the underlying demand for good homes remains strong. If a customer prefers not to increase the monthly out-of-pocket budget, the tenure of a relatively new loan could increase by two years. Download the TOI App.