Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta
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To control inflationary pressures, RBI increases repo rate. And it is quite evident from the short term and long term graphs; whenever repo rate is increased, it impacts growth of the industry. And in recent times, one can correlate the slowdown in real estate transactions with increase in repo rate.
Latest short term repo rate changes by Reserve Bank of India
History of repo rate changes by Reserve Bank of India
Whenever, repo rate is lowered it encourages individuals and companies to invest because of lower cost of borrowing.
For example, the debt on balance sheet of 11 real estate listed firms on BSE stands at Rupees 42000 Crores. Even a drop in repo rate by 1% reduces the debt servicing by Rupees 420 crores per year. That’s massive for real estate developers given that other input costs are rising.
Similarly, for a home loan seeker who has taken 50 Lacs rupees of home loan, drop in repo rate results in substantial savings on EMIs.
Loan amount – 50 lacs
Bank interest rate – 11%
Tenure – 20 years
EMI – 51609
Loan amount – 50 lacs
Bank interest rate – 10%
Tenure – 20 years
EMI – 48251
Which means, monthly savings of rupees 3358.
Therefore, just like any industry, real estate sector including the developers and customers are keeping an eye on RBI’s monetary policy and are batting for lowering of interest rates.
Follow @sach_gupta
Latest short term repo rate changes by Reserve Bank of India
History of repo rate changes by Reserve Bank of India
Whenever, repo rate is lowered it encourages individuals and companies to invest because of lower cost of borrowing.
For example, the debt on balance sheet of 11 real estate listed firms on BSE stands at Rupees 42000 Crores. Even a drop in repo rate by 1% reduces the debt servicing by Rupees 420 crores per year. That’s massive for real estate developers given that other input costs are rising.
Similarly, for a home loan seeker who has taken 50 Lacs rupees of home loan, drop in repo rate results in substantial savings on EMIs.
Loan amount – 50 lacs
Bank interest rate – 11%
Tenure – 20 years
EMI – 51609
Loan amount – 50 lacs
Bank interest rate – 10%
Tenure – 20 years
EMI – 48251
Which means, monthly savings of rupees 3358.
Therefore, just like any industry, real estate sector including the developers and customers are keeping an eye on RBI’s monetary policy and are batting for lowering of interest rates.
Have any Questions? Tweet to @sach_gupta
