RBI increases repo rate by 35 basis points

The Reserve Bank of India has raised interest rates for the fifth time since May 2022. The benchmark lending rate has been increased by 35 basis points to 6.25 percent as of 7 December 2022 in an attempt to tame inflation. This decision is likely to push home loan rates back to pre-covid levels. In totality, the benchmark lending rate has gone by 225 basis points in the last seven months.

Earlier revisions to the benchmark lending rate by the RBI were welcomed with caution. However, this time around builders are more confident about the upward demand in the market. Experts believe demand for residential real estate has expanded multi-fold across segments and geographies corroborating the improved bank credit figures in the retail home loan segment. They expect the gradual easing of inflation to partially mitigate input cost pressures and provide legroom for developers to offer competitive-value homes and keep home purchase affordability within range.

This latest hike in benchmark rates comes after a 40-bps increase in May and a 50-bps hike each in June, August, and September. Some experts believe the trajectory of rising interest rates may give the rental market a well-timed stimulus if potential homebuyers find that purchasing a house is beyond their budget.

Next (Aparna Constructions launches four residential projects in Hyderabad)

RBI increases repo rate by 35 basis points

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