As broadly expected, the Reserve Bank of India (RBI) maintained status quo on key policy rates in its MPC review meeting on Friday, reaffirming its withdrawal policy stance. The move bodes well for the housing market in India and will reinforce confidence among potential homebuyers.

Hailing the RBI decision to maintain the repo rate at 6.5% for the fifth time in a row, developers said the RBI decision to hold interest rates steady, coupled with favorable inflation expectations, mirrors a strategic stance fostering economic stability.

“This move comes as the real estate sector in India has already been experiencing solid demand, and now, with enhanced buyer confidence and an inviting investment environment, we can expect an even stronger wave of growth and prosperity in the housing market in 2024,” said Ankush Kaul, Chief Business Officer at Ambience Group.

Avneesh Sood, Director, Eros Group, said, “With a projected GDP growth of 7% in 2023-24 and a positive shift in rural demand, the unchanged repo rate ensures stability and affordability in the property market. As a real estate developer, we view this decision favorably, anticipating sustained momentum and increased homebuyer confidence. Despite global economic uncertainties, India’s real estate sector remains resilient, supported by robust capacity utilization and urban demand.”

Also Read: RBI holds key policy rates: How it will impact exiting and new home loan borrowers

Builders believe the RBI move to hold the key rates will attract a positive momentum in the housing market.

Rajjath Goel, Managing Director, MRG Group, said, “Amidst the escalating housing prices, the unchanged home loan rates will provide some relief to homebuyers. So, we expect both buyers and developers to gain from the stable interest rates as buyers would feel more comfortable spending their money in the sector. And the new launches, expansion of projects in emerging hotpots, will all be backed by this decision of the RBI.”

Uddhav Poddar, Managing Director, Bhumika Group, said, “India’s economy is scaling unprecedented heights; there is a massive uptick in GST collection, the Sensex is at an all-time high, inflation is under control, and the housing sector has had a record-breaking year. While the real estate sector would prefer a lowering of rates, against the above backdrop, the RBI decision to maintain the status quo is a balanced move.”

Dr. Dharmesh Shah, CEO, Hero Realty Pvt Ltd, said, “This decision is expected to have a positive impact on the real estate market, particularly in the housing sector, leading to a steady increase in property transactions. The growth trend in mid-income and premium housing transactions is likely to continue, while affordable and low-income housing, influenced by interest rates, may see a more cautious pace of activity.”

For buyers, an unaltered repo rate is a treat since it provides them with another opportunity to purchase properties at the best prices. “The MPC last raised this rate by 25 bps to 6.50% at its meeting in February 2023. Current statistics indicate that the housing market is doing fairly well for consumers, which is consistent with the robust state of the economy. We have strong momentum in home sales heading into the busiest quarter of the holiday season; the RBI decision to keep the interest rates constant will be crucial in driving the residential market’s expansion,” said Subhash Goel, MD, Goel Ganga Developments.

Industry players say maintaining stable interest rates is crucial in the housing sector, given its vulnerability to fluctuations in interest rates.

Ankit Gupta, Director, Reach Group, said, “The Reserve Bank of India’s decision to keep the repo rate unchanged acts as a pivotal catalyst in addressing this concern. A positive economic outlook, coupled with stable interest rates, fosters a conducive environment that supports the continued viability of home purchases.”

“The apex bank’s announcement to maintain the current policy rates indicates the central bank’s firm stance in maintaining vigilance against inflationary pressures. The decision to keep the interest rates stable is seen as a favorable factor that supports the ongoing demand. This stability not only reinforces confidence among potential homebuyers but also contributes to sustaining the positive momentum in the real estate market,” said Prashant Rao, Managing Director, Poulomi Estates, a Hyderabad-based real estate developer.

Mohit Jain, Managing Director, Krisumi Corporation, said, “The RBI’s wise decision to maintain interest rates aims to tame inflation within its targeted range. This translates to a welcome pause in the upward trajectory of bank-offered home loan rates, thereby ensuring EMI stability for borrowers. This positive development bodes well for the housing market, as it fuels continued momentum in sales across various property segments, including affordable, mid-range, and luxury housing, throughout various regions for the foreseeable future.”

Some developers, however, feel that even the current interest rates are high and need to be lowered to give a further push to housing sales.

Nayan Raheja of Raheja Developers, for instance, said, “The RBI decision to maintain the status quo on the repo rate is a welcome move. Despite the real estate sector’s desire for a slight rollback, this decision signals stability. It will boost confidence among developers and homebuyers, offering clearer long-term financial commitments and EMIs. With a positive consumer sentiment, the sector is poised to sustain its record-breaking performance. However, the current rate of 6.5% is at an all-time high. We hope the next MPC meeting will consider the sector’s request and pave the way for a return to a low-rate regime.”

Echoing similar views, Saransh Trehan, Managing Director, Trehan Group, said, “The decision of the RBI is a reflection of its unequivocal commitment to decrease headline inflation to 4% and is an affirmation of its pointed stand to curb inflation rates as espoused by the RBI MPC members. The majority of us had an inkling that the RBI would vote in favor of the continuation of the current repo rate status, so the decision was expected and there was no shock value attached. Not to say, we would have appreciated it if the RBI would have considered lowering repo rates to lease life into the market dormancy in some areas. Having said that, the property markets have undergone a steady revitalization. So, a disinflationary stand will also help in creating smooth operating conditions.”

Beneficial for Homebuyers

Whatever be the case, RBI’s prudent move in keeping the repo rate unchanged brings a sigh of relief to homebuyers.

Jetaish Gupta, Co-founder & Director, Adore Group, said, “This stability in interest rates ensures a conducive environment for those aspiring to own a home. This decision will not only bolster the real estate market but also foster economic growth. It reflects a thoughtful approach by RBI, aligning with the industry’s needs and providing a positive impetus for the housing sector, contributing to overall economic development. The steady rates will be particularly beneficial for home loan borrowers, offering financial predictability and easing the burden of monthly repayments.”

Sadly, however, despite making timely payments, many borrowers have seen an increase in their tenors during this time rather than a decrease. So, what is the solution?

LC Mittal, Director, Motia Group, said that home loan EMIs will stay the same for the time being. Leading banks and mortgage providers, including HDFC Bank, Bank of Baroda and State Bank of India, currently provide house loan rates ranging from 8.4 to 9.05 per cent. This translates to longer tenors or higher EMIs for current house loan borrowers—or, most of the time, both. Despite making timely payments, many borrowers have seen an increase in their tenors during this time rather than a decrease.

“Rather than raising EMIs, you can think about partially repaying the loan using your investments and savings. Your best bet in this situation, considering the high-interest rate scenario, would be to refinance at a lower rate while keeping a larger EMI. This will assist you in lowering your borrowing expenses. If you intend to apply for a house loan, don’t rely your decision on changes in the policy rate. A home loan borrower will experience multiple adjustments in the interest rate cycle during the loan because home loans are often long-term loans,” Mittal added.