As the outstanding home loan balance of banks nearly doubled to INR 16.85 lakh crore in the last five years, according to Reserve Bank data, interest rates do not appear to significantly impact those who borrow money to purchase their dream residential homes.

Even though the Reserve Bank raised the key interest rate three times by a huge 140 basis points (bps), which made the home loan rate go up, the amount of outstanding bank house loans grew by double digits in the first five months of this fiscal year. The repo rate went up by 50 basis points in September.

According to RBI data, at the end of fiscal 2016-17, the outstanding home loans of banks amounted to INR 8,60,086 crore; by the end of fiscal 2021-22, this figure has climbed to INR 16,84,421 crore.

Experts say that interest rates are important, but that doesn't stop people from buying a home because the decision is based on the buyer's current income and long-term plans. Additionally, home buyers are becoming more and more conscious that interest rates fluctuate during the course of a loan, which is normally for 15 years.

A family does a lot of research before buying a house, which is different from buying other things. The interest rate on a home loan changes over time. Unlike a loan for a car or other consumer goods, a home loan is usually for 12 to 15 years. Because of this, a rise in interest rates has less of an effect on cash flow. During the 12 to 15-year loan period, interest rates usually go through two or three cycles. So people who take out loans know that interest rates may go down over a long period of time.

Given that the RBI increased the repo rate by 190 bps during the current fiscal year, the transmission to the interest rate on house loans is in the range of 140 to 150 bps, bringing the mortgage rate to roughly 8.85 percent. The housing market is still strong, though, and by the end of 2022, it may reach a decade high. This might be explained by the strong festive demand, stable prices, and relatively low house loan interest rates compared to the peak of 10 to 11% observed eight-ten years ago.

Sources claim that pent-up demand helped India's primary housing market recover last year, with sales increasing to 2,36,516 units. Up until September of this year, the high momentum was still present. Realtors are optimistic that despite the increase in interest rates, sales momentum will continue.