Real estate consultants and developers welcomed the RBI MPC decision on Friday to keep the repo rate unchaged for the fourth consecutive time, which was much needed albeit the looming inflationary pressure arising from the rising crude prices and rupee depreciation.
“By pausing the policy rate, the central bank continues to maintain its focus on economic growth, which is facing headwinds primarily from the external factors, such as slowdown in global growth, high energy prices and geopolitical tensions; and remains cautious of inflationary pressure as well,” said Shishir Baijal, Chairman & Managing Director, Knight Frank India.
Measures to reduce excess liquidity and improve transmission of earlier policy rate hike measures align with price stability goals of the central bank. The decision will continue to maintain the existing momentum of residential real estate demand in India.
“Since the interest rate upcycle, the repo rate has been hiked by 250 bps, resulting in a 160 bps rise in home loan rates. Since then, although the overall housing demand has remained upbeat, the lower housing segment or the affordable housing demand has witnessed a deceleration due to a substantial rise in the borrowing costs and other challenges. The stance today should be considered as a big relief for the housing sector of the country which has shown tremendous strength in the face of headwinds over the last year,” Baijal added.
Also Read: RBI keeps repo rate unchanged at 6.5% – What it means for homebuyers?
NAREDCO’s National Vice Chairman Niranjan Hiranandani also applauded the balanced mechanism implemented by the RBI Governor while withdrawing accommodation.
“Keeping the repo rate at 6.5% reflects the importance of anchoring inflation on the radar while maintaining economic growth buoyancy. Since inflationary pressure, unaffordability, and lack of new development have contributed to persistently high interest rates on home loans, affordable housing has been adversely affected. As a result, affordable housing, which comprises a substantial portion of the housing pyramid, has seen a decline in demand. The Government of India has announced an additional interest subsidy of Rs 60,000 crore for homes up to Rs 40 lakh to boost small urban housing. Moreover, under the festive tailwind, the demand for home loans is expected to remain buoyant, which indicates strong housing sales growth,” Hiranandani said.
Welcoming the MPC decision to keep the repo rate unchanged, Rajan Bandelkar, National President of NAREDCO, said, “This decision will benefit everyone, ensuring liquidity in the market and adding to the festive cheer. The stability in interest rates is a relief for developers who are navigating a complex economic scenario. Unchanged rates provide a degree of predictability, which is essential for planning and executing long-term projects. This decision aligns well with our industry’s need for continuity and fosters an atmosphere of cautious optimism. However, we expect the central bank to remain mindful of emerging market dynamics and to continue supporting growth-oriented measures. The body of real estate developers acknowledges the careful balancing act being performed by the RBI, considering various economic factors.”
Ashwinder R Singh, CEO-Residential, Bhartiya Urban, said, “In the backdrop of steadfast repo rates, controlled EMIs, and robust developer funding, the Indian housing and real estate sector stands on solid ground. With healthy economic indicators and anticipated strong corporate earnings, our future is bright. As crude prices cool, the Indian economy benefits. We foresee a promising era for the sector, driven by stability and optimism.”
Apart from the residential space, the unchanged repo rate will further encourage more customer engagement in commercial real estate.
“With the festive season set to begin, buyers are already prepared to book their spaces to mark an auspicious beginning. Stable repo rates have strengthened their decision as the interest rates would remain the same without putting a burden on them. RBI has made a smart move to balance inflation as well as encourage investments through this announcement,” said Uddhav Poddar, MD, Bhumika Group.
Some industry experts, however, feel that instead of keeping the repo rate unchanged, the RBI should have lowered it, which will help both homebuyers and the realty sector going ahead.
Sanjeev Arora, Director, 360 Realtors, said, “RBI has kept the repo rate unaltered; however, it could have thought otherwise. The Indian economy is showing resilience and there is a visible growth in the manufacturing and service sectors. Inflation has eased out in September despite turmoil in the global economy. India is poised to become the growth engine of the global economy. In such a conducive environment, the central agency could have thought to increase liquidity in the market by lowering the repo rate. It should have helped in the longer run.”
“We welcome the continuation of the existing policy rates through 2023 and undoubtedly, a further reduction in interest rates in the near future would be preferred to bolster the overall market confidence and make it more enticing for home buyers. With the ongoing festive season, we are already witnessing a surge in inquiries and we are expecting around 20% growth compared to last year’s festive season. This naturally offers a context for consumers to go in for their dream homes as the overall climate is geared towards sustained demand and the fact that home buyer confidence is at an all-time high. The market continues to experience end user-driven demand and we are already witnessing a trend of more serious buyers closing sales,” said Ramani Sastri, Chairman and MD, Sterling Developers.
Developers say low interest rates have been a crucial factor in the revival of overall real estate demand and improvement in the liquidity situation which is vital for the sector.
“We hail the RBI decision to maintain status quo as it helps in holding the interest rates and sustaining the growth momentum in the real estate sector. The perception of lifestyle has changed which is driving the demand for premium properties and we believe the positive sentiment will continue in the luxury segment. However, a reduction in the key rates going forward would be widely celebrated as low interest rates have been a crucial factor in the revival of overall real estate demand and improvement in the liquidity situation which is vital for the sector. Overall, we believe that this momentum is projected to persist not only throughout the remainder of this year but also well into 2024,” said Lincoln Bennet Rodrigues, Chairman & Founder, The Bennet and Bernard Company, known for luxury themed homes in Goa.
Here’s what many other developers said about the RBI MPC decision:
Amit Sarin, Managing Director, Anant Raj Limited: “Holding of interest rate at the same level in the monetary policy is a welcome move which will help in sustained recovery in economic growth which the country is witnessing. Needless to say, the real estate sector stands to benefit from the decision. The demand for residential dwellings is expected to remain robust in the coming quarters. The borrowing cost for the corporate too would remain at a reasonable level, which will be beneficial for the economy as corporate will have the leeway to continue to undertake capital expenditure and investment.”
Mohit Jain, Managing Director, Krisumi Corporation: “The RBI decision to maintain the status quo on the interest rate augurs well for the housing sector and the real estate sector as a whole. Amid the festive season, the demand for housing — particularly for mid and luxury housing – is expected to remain robust over the next few months. The ever-increasing inclination towards buying cozy and comfortable living spaces will further get stronger in the near future.”
Saransh Trehan, Managing Director, Trehan Group: “The RBI decision to maintain the repo rate at 6.5% for the fourth consecutive time is a positive indicator of the ongoing economic stability. This stance is not only advantageous for lenders and buyers but also a reassuring sign for global investors. Home loan borrowers can now breathe a sigh of relief, as the unchanged repo rate offers a sense of financial security and stability in these uncertain times.”
Vikas Garg, Joint Managing Director, Ganga Realty: “The continuation of ‘withdrawal of accomodation’ stance by RBI was pencilled in today’s meeting. The apex financial body identified inflation as an overriding impediment for national economy and sustainable growth, which was rightly expected by most leaders prophesying correctly that RBI is most likely to maintain its repo rate disposition. From the looks of it, the RBI seems in no mood to change its position on repo rate anytime soon in future. Moreover, the move will be largely supported but will invite pockets of criticism from people expecting RBI’s intervention in the form of repo rate reduction to cushion steep high home prices and loan rates.”
Santosh Agarwal, CFO and Executive Director, Alphacorp: “The RBI decision to maintain the repo rate as constant is a welcome reprieve. This announcement is expected to boost market sentiment and give impetus to the homebuyers towards investing in the realty market. This decision is also poised to bolster the real estate sector during this festive quarter. Maintaining the accommodating position would allow banks to keep offering mortgages at the current rate, which is beneficial for both homebuyers and developers.”
Dr. Nitesh Kumar, MD & CEO, Emami Realty: “Despite global economic uncertainty, uneven monsoons and rising global crude oil prices, RBI maintained its repo rate for the fourth consecutive time which is a welcome development after six consecutive increases. Real estate stakeholders, including developers, homebuyers, and financial institutions, stand to gain and sentiment toward homebuying will be boosted in the upcoming festival season. Nevertheless, the current rep has already reached a four-year high. Therefore, our earnest appeal to RBI will be to reduce the repo rate in its next meeting because at 6.5%, the rate is still on the higher side for the housing sector.”
Shashank Mewada, Chief Financial Officer at Homesfy Realty Ltd: “Once again, the RBI has demonstrated prudence by maintaining the existing repo rate at 6.5%. This consistent decision of RBI reaffirms its commitment to financial equilibrium and sustainable growth amid economic challenges and global uncertainties while keeping investors and businesses in mind. At the same time, it is making investments across various sectors an attractive proposition, including real estate, where homeownership dreams are within reach. However, careful financial planning and expert guidance are essential to make informed choices in this favourable climate. RBI’s unwavering stance in maintaining the repo rate exemplifies a measured approach to steering India’s economy. So, while we embrace this decision enthusiastically, we must also recognize the importance of being cautious.”
Yashank Wason, Managing Director, Royal Green Realty: “RBI has kept the repo rates unchanged for the fourth time in a row since Feb 2023, which is a good sign for the real estate sector as it implies that the cost of borrowing for banks is stable. A stable repo rate could contribute to a more predictable economic environment, potentially influencing the market dynamics. In the festive season, this is going to be bonus for homebuyers as it keeps borrowing costs consistent, potentially encouraging real estate investment. The sentiment-driven real estate will benefit as steady interest rates may boost confidence, leading to increased activity in the market. Commercial real estate, which is closely linked to economic activities, may also see effects in terms of demand for office spaces and commercial properties.”