As widely expected, the Reserve Bank of India decided to keep the repo rate unchanged at 6.5% in its monetary policy review on Thursday. Consequently, the standing deposit facility (SDF) rate remains at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%.

Industry experts and property consultants believe that the third consecutive pause on policy rates will certainly drive the growth of real estate, particularly housing.

“This is nothing but good news for aspiring homebuyers on the market for a purchase in the near future. The unchanged repo rate will help maintain the momentum in housing sales – particularly in the mid and luxury segments, which did significantly well in H1 2023,” said Anuj Puri, Chairman, ANAROCK Group.

As per ANAROCK Research, housing sales of approx. 2.29 lakh units were reported across the top 7 cities in H1 2023, the highest half yearly sales in the last decade.

Also Read: RBI Monetary Policy: What should home loan borrowers do now?

Experts are of the view that India continues to outperform other countries in terms of consumption and with the festive season coming up, the RBI will not risk denting it.

Dhruv Agarwala, Group CEO, Housing.com, Proptiger.com, and Makaan.com, said, “The unanimous decision of the six-member rate-setting panel of the RBI comes as no surprise. With the nation currently dealing with sky-high vegetable prices and a tumultuous monsoon, which in turn raise worries about a potential surge in inflation, the move by the central bank was appropriate. As a result, there will be no changes in home loan EMIs, which is a positive signal for prospective homebuyers. This move might also serve to boost sentiment in the lead-up to the festive season, which is an important time for the real estate industry.”

Vimal Nadar, Head of Research, Colliers India, said, “RBI’s decision to keep the repo rate steady at 6.5% since February this year will continue to bring in respite for EMI dependent homebuyers. Stability in financing costs will also stand to benefit the balance sheet of real estate developers. Real estate construction activity remains buoyant and is reflected in healthy steel consumption and cement production. Stable interest rates, favourable pricing & availability of relevant supply will augur well with first time homebuyers especially in the affordable & mid segments in the upcoming festive season.”

The primary objective of the RBI move is to curb inflation and bring it within the comfortable range of 4%.

“This strategic move is anticipated to provide substantial impetus to India’s broader growth trajectory. There is an emerging expectation that the RBI might eventually consider a reduction in key interest rates. Once this happens it will be a much-needed breather on EMIs for home loans. It’s noteworthy that the demand for residential real estate has been robust since 2021 on the strength of the economy, jobs and growth,” said Ashwin Chadha, CEO, India Sotheby’s International Realty.

All said and done, however, the risk of inflation continues to lurk and if it rises further, there could be some repercussions on overall sales, especially in the cost-sensitive affordable housing segment which has already been severely impacted by the pandemic over the last couple of years.

“Amidst the rising cost of these properties and the cumulative 250 bps rate hikes by the RBI in the last one year and more, affordable housing buyers have taken the severest blow. As per ANAROCK Research, homebuyers’ EMIs jumped up by 20% in the last two years. Home loan borrowers who were paying an EMI of approx. Rs 22,700 in July 2021 are now paying approx. Rs 27,300 – an increase of approx. Rs 4,600 per month,” said Puri.

This 20% increase in the EMI has resulted in a jump of approx. Rs 11 lakh in the overall interest component – from approx. Rs 24.5 lakh interest payable in 2021 to Rs 35.5 lakh today. The total interest payable over a 20-year tenure is now more than the principal amount.