Real Estate: Rate hikes won’t have much effect on home loan, housing demand

The recent hikes in key policy rates by the Reserve Bank of India (RBI) to control the high rate of inflation may have resulted in a moderate hike in loan rates, but the affordability of the home loan is still very good, feel experts.

To boost the economic growth, the RBI had kept the policy rates at a very low level for a considerably longer period, despite the pressure of high rate of inflation.

While the lower rates helped the real estate companies clear their inventory piled up since demonetisation – owing to low home loan rates – the artificially low rate, on the other hand, hit the retired persons very hard due to the high level of price rise and low rates of interest on fixed-return instruments – including fixed deposits (FDs).

To reign in the exorbitantly high prices, the RBI – after much deliberations – raised the key policy rates. Since May 2022, the central bank has raised the repo rate from 4 percent to 5.4 percent in three successive rate hikes.

“The repo rate in India has historically been between 6-8 percent. And currently, the repo rate is at 5.4%. So it is still lower than what it has historically been since the past 20 years. The affordability of the home loan rate is still very good. Hence, retail borrowers are still in a comfortable place on an overall basis in terms of the EMIs that they need to pay,” said Amit Agarwal, Co-Founder and CEO of

“There is not going to be any adverse impact in the buy and sell category because of this repo rate hike. There could be a minor turbulence which will be easily absorbed. The Indian real estate market has undergone a downturn over the past 8-10 years,” he added.

“However, now, the real estate market is in a strong situation where we predict that prices will be increasing and the demand will be robust for the next five to seven years,” Agarwal further said.


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