Rate hike: Industry sees loan rates rising

Interest rates on loans are set to increase with second consecutive rate hike announced by the Reserve Bank of India (RBI) on Wednesday.

"The State Bank of India had already anticipated the rate and raised its deposit rate by 5 to 10 basis points a couple of days ago. With this second rate hike this year, we can expect banks now to raise lending rates leading to costlier loans for consumers. So individuals will have to brace for higher EMIs. Lending rates factor in the repo rate as well as banks’ cost of funds,” Ranjeet Mudholkar, Vice Chairman and CEO, FPSB India said.

Surendra Hiranandani, Chairman & Managing Director, House of Hiranandani thinks that the 25 basis point hike by the apex bank would impact the consumer sentiment.

"The hike will certainly impact credit growth and further delay the revival of the real estate sector. Construction activity had started to pick up slowly post the implementation of policy reforms, but the rise will hurt consumer sentiment," he said.

Meanwhile, Rana Kapoor, Managing Director of YES Bank opined that there will be no further hikes in fiscal 2019. "I foresee the RBI re-focusing on the growth-inflation mix, as the cumulative impact of 50 bps of rate hike is assessed, amidst an uncertain global environment," he said.

Kapoor's opinion is seconded by many other rating agencies. "By keeping monetary policy stance neutral, RBI has kept the window open to move the policy rate in future in either direction subject to data. With this rate hike Ind-Ra believes it is unlikely that there would any more hike in FY19," Sunil Kumar Sinha, Principal Economist, India Ratings and Research (Fitch Group) said.

With the hike in repo rates, the real estate industry fears that there will be hike in home loan rates as well. "While this may lead to a hike in home loan rates as well, the overall real estate sector now rests on a strong footing and buying decisions may not be altered by these marginal changes," Anuj Puri, Chairman - ANAROCK Property Consultants said.