SBI's Home Loan Rate Hike: Impact on Housing Market and First-Time Buyers
SBI's recent decision to increase home loan rates could slow down the housing market, particularly affecting first-time buyers who are sensitive to affordability and EMI changes, according to Amit Mamgain of Yugen Infra.
Home Loan RatesHousing MarketFirsttime BuyersSbiEmi ChangesReal Estate NewsAug 21, 2025
He noted that first-time buyers, who are highly sensitive to affordability and EMI changes, are likely to be the most impacted. This could lead to delayed purchase decisions or a shift toward lower budget segments.
While premium housing may hold steady in the near term, demand in mid- and mass housing is expected to face pressure. Edited Excerpts –
Q) In a falling interest rate environment, SBI has raised home loan rates. How will it impact demand in the sector?
A) SBI's choice to raise home loan rates, despite the prevailing trend of falling interest rates, may have a temporary impact on the housing market. Higher borrowing costs increase buyer's costs of sale, especially for higher-leveraged purchasers. This may result in buyer hesitation, delay, or preference for cheaper homes.
In the long term, housing demand will continue to be strong, driven by urbanization and the inherent instinct to aspire to home ownership.
Q) With SBI hiking home loan rates to a range of 7.50%–8.70%, how do you see this impact starting to play out on housing demand, especially among first-time homebuyers?
A) The hike in SBI's home loan rates is likely to have a more significant impact on first-time home buyers as they are highly sensitive to EMI changes and affordability when rates increase. Higher rates restrict affordability, which causes buyers to change budget brackets or postpone purchasing a home altogether.
While for the moment, premium housing that has better-financed buyers may still have conversion, delayed purchasers in mass housing and mid-income housing will likely see a slower conversion. Developers may notice prolonged cycles of decision-making with entry-level buyers.
Q) This rate hike could raise EMIs significantly over a 20-year tenure—does this shift demand more toward affordable housing or delay purchase decisions?
A) A significant rise in EMIs for a long time period will often compel buyers to rethink affordability. For many, this may mean a greater leaning towards affordable housing, where overall ticket sizes and risks are lower. Others may defer purchases awaiting a stabilization of lending rates and costs. The likely outcome will be twofold - higher demand for affordable segments and temporarily lower demand for premium and luxury segments.
Q) If demand starts leaning toward affordable housing due to higher EMIs, what adjustments will real estate developers need to make to supply and pricing?
A) Developers will need to readjust approaches of increasing affordable stock whilst also managing quality. Smaller homes, functional spaces, and creative payment structures may be prioritized to seduce the apprehensive buyer. And pricing structure may also need to be tempered to accommodate lower loan eligibility. Furthermore, partnership with banks is important to identify targeted financing solutions in order to ensure demand remains consistent, even in a high interest rate environment.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Frequently Asked Questions
How will SBI's home loan rate hike affect the housing market?
SBI's home loan rate hike may temporarily slow down housing demand, especially in the mid- and mass housing segments, while premium housing may remain stable.
Who will be most affected by the home loan rate hike?
First-time buyers, who are highly sensitive to EMI changes and affordability, are likely to be the most impacted, leading to delayed purchase decisions or a shift to lower budget segments.
What is the long-term outlook for the housing market despite the rate hike?
In the long term, housing demand is expected to remain strong, driven by urbanization and the aspiration for home ownership.
How might the rate hike affect demand for affordable housing?
The rate hike may lead to higher demand for affordable housing segments, as buyers may opt for lower overall ticket sizes and risks.
What adjustments will real estate developers need to make in response to the rate hike?
Developers will need to increase the supply of affordable housing, manage quality, and implement creative payment structures to attract hesitant buyers. They may also need to adjust pricing to accommodate lower loan eligibility.
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