The Reserve Bank of India’s Monetary Policy Committee (MPC) maintained a ‘neutral’ position today while leaving the policy rate unchanged at 6.5% for the tenth consecutive time, thus helping the housing market to maintain momentum during the festive season.
“While a repo rate cut would have been preferable, it is clear that the RBI is on a tightrope walk and must keep various macro-economic factors in mind,” said Anuj Puri, Chairman, ANAROCK Group, commenting on today’s RBI MPC announcement.
From the point of view of homebuyers, the relatively affordable home loan interest rate regime will continue at a critical time for the Indian housing market – the festive season – amid rising housing prices and tapered sales. “Q3 2024 saw average housing prices rise by a cumulative 23% in the top 7 cities even as average prices in these markets collectively rose to approx. Rs 8,390 per sq. ft. by Q3 2024-end, from approx. Rs 6,800 per sq. ft. in Q3 2023,” added Puri.
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Dhruv Agarwala, Group CEO, Housing.com & Proptiger.com, said, “The RBI decision to hold the repo rate unchanged at 6.5% for the 10th time in a row is on expected lines as the apex bank tries to maintain a balance between inflation and growth. However, the banking regulator’s changing of policy stance from ‘withdrawal of accommodation’ to ‘neutral’ signals the RBI could initiate rate cuts in the upcoming policy meets. This comes as good news for prospective buyers, planning to invest in property in the near term.”
Property consultants said they were more hopeful of a rate cut this time around, after moves by the US Federal Reserve and other central banks. But the RBI decision to hold the repo rate steady shows that India is laser-focused on its own economic landscape, rather than following global cues.
“One standout from the MPC meeting is the shift to a neutral stance, which suggests they’re open to more flexibility. While inflation is on a downward trend, it’s still not entirely stable, and the MPC is aiming for that 4% sweet spot. A rate cut is certainly on the cards if inflation keeps cooling off, which looks promising in the near term. For real estate, this steady approach is a win. With stable interest rates, homebuyers, especially during the festive season, will feel more confident in making their purchase decisions,” said Ashwin Chadha, CEO, India Sotheby’s International Realty.
Aditya Kushwaha, CEO and Director, Axis Ecorp, said, “Although a rate cut might have bolstered festive season demand, this cautious stance ensures the broader economic landscape remains balanced, with inflation on a downward trajectory. In the real estate sector, particularly luxury real estate, we continue to see robust growth. This trend, driven by strong domestic demand and increased NRI investments, is poised to sustain its momentum through the quarter. The influx of foreign capital, especially in luxury projects, will not only strengthen market sentiment but also contribute significantly to India’s forex reserves. As we navigate these complex times, the stability of interest rates provides further confidence in the continued expansion of high-value real estate.”
“While the RBI decision reflects a cautious approach, we anticipate that a rate cut starting in December will have a positive impact on the real estate sector. Lower interest rates will enhance affordability for homebuyers, boost demand, and encourage investment in housing. This shift is crucial for revitalizing the market and supporting overall economic growth. We remain optimistic that the RBI will take this necessary step to foster a more conducive environment for both consumers and the real estate industry,” said Amrita Gupta, Director of Manglam Group and Founder President of CREDAI Rajasthan Women’s Wing.
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said the real estate sector, particularly the housing market, has experienced strong growth over the past few years. This change in policy stance, along with the prospect of rate cuts, will provide crucial support to the low- and mid-value housing segments, which have seen reduced participation over the last 24 months.
“Homebuying sentiment remains strong, and with a healthy business environment, we anticipate that the trajectory of monetary policy in the coming quarters will further boost the sector’s growth momentum,” he added.
Samir Jasuja, Founder & CEO, PropEquity, said, “The property market has exhibited consistent growth despite stable interest rates. The market looks buoyant and both homes sales and launches will get a festive push to stabilise the total number at 2024 levels after experiencing a record high 2023. A rate cut would only add to this buoyancy.”
The unchanged home loan rates are much-needed demand support in the ongoing festive quarter. “We are expecting faster sales momentum in Q4 2024 when compared to the preceding quarter. This year’s festive quarter may see similar demand to that seen in this period a year ago, if not higher. Over 1.27 lakh units were sold across the top 7 cities back in Q4 2023. Unchanged interest rates will play an important role in achieving and maintaining this momentum,” said Puri.