The Reserve Bank of India's rate hike is more likely to be transmitted to customers, though most bankers are not sure when this will happen. With credit demand slowing down, bankers feel that any further increase in lending rates has to be done cautiously. Even if the interest rates go up, bankers and developers alike opined that it would be the last of the hikes.

Some bankers also feel that rate transmission might not happen immediately, as “there is already a lack of credit demand and liquidity surfeit in the system”. That gives home loan customers a breather, since they can be assured of some stability in their repayment rates. With most banks offering special rates for the festival season, Mr H.S. Upendra Kamath, Chairman and Managing Director, Vijaya Bank, said that retail credit growth would not be impacted over the next few months.

Despite 13 hikes so far, the demand for home loans has not really slowed down, as the appetite for home-buying continues to be good.

EMIs have gone up almost 24 per cent over the past year, an analyst pointed out.

Input costs

But what has to be seen over the next few months is how the interest rate hike would hurt real estate developers, most of whom are already facing high debt. Though Bangalore-based developers say that sales have been good during this fiscal, increasing cost of funds is a bit of a concern for them.

“Unless the input costs go up further, we wouldn't look at increasing property prices. Bangalore is a cost-based market,” said Mr Venkat K. Narayana, Chief Financial Officer, Prestige Group.

Different picture

However, this is only true of stabilised markets like Bangalore. In other cities, where rates have already peaked, it could be a different picture altogether.

Some of these markets will see a slowdown in home sales due to the increase in home loan rates, and buyer sentiments in the residential market will remain sombre for now, analysts say.

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