The Reserve Bank of India maintained the repo rate pause for the third consecutive instance in its MPC meet today. The choice to maintain the status quo is supported by strong economic condition and the revised inflation forecast for FY24 falling within the central bank’s upper tolerance range of 6%.
However, the central bank remains watchful on inflationary expectations and is focused on bringing the inflation level to its 4% target. Measures to reduce excess liquidity, with temporary tightening through incremental Cash Reserve Ratio at 10%, aligns with price stability goals of the central bank.
Whatever the case be, “maintaining policy rates will bolster consumer demand amid moderate inflation, further promoting economic growth. This stance will likely boost homebuyers’ confidence as affordability remains stable. Since the interest rate upcycle, the repo rate has been hiked by 250 bps, resulting in a 160 bps rise in home loan rates. We remain cautious about the housing market, especially the affordable and the mid segment that is price sensitive and has seen some impact of the previous rate hikes. However, a long pause in the policy rate will be supportive to the housing market,” said Shishir Baijal, Chairman & Managing Director, Knight Frank India.
Commenting on the RBI move, Ashish Narain Agarwal, Founder and CEO at PropertyPistol.com, said, “In the realm of real estate, this decision is a welcome one, particularly due to the steadfast momentum witnessed in the housing segment over the past year. The availability of attractively-priced home loans will catalyze growth across luxury, mid-income, and affordable housing segments. As we approach the upcoming festive season, a pivotal period for the industry, the trajectory of growth remains promising. The supportive monetary policy framework provided by the RBI serves as an additional catalyst, poised to further bolster the real estate sector. This synergy between prudent fiscal measures and sectoral dynamism bodes well for the future outlook of the real estate landscape.”
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Aditya Khushwaha, CEO and Director of Axis Ecorp, said that the RBI’s decision to keep the repo rate unchanged will be instrumental in uplifting homebuyer confidence in India’s property market. Interestingly, “NRIs’ keen interest in real estate solidifies our anticipation of sustained growth. Despite lingering worries about inflation, the Indian economy persists in a robust state. Given current market trends we foreshadow a strong festive sales period in real estate, particularly in the second home and holiday home segment,” he added.
“The RBI decision to maintain the status quo for the third time is a welcome move and in line with expectations. This affirms the view that interest rates will only have one direction, which is downwards. This is a big positive for home buyers as they know that their EMIs down the line will only decrease further. A lot of fence-sitters are expected to jump in, and developers are likely to cash in on this pent-up demand,” said Garvit Tiwari, Director & Co-Founder, InfraMantra.
“Now, discerning homebuyers should avail the benefits of cooling inflation, stable home loan rates, conducive real estate market dynamics in the backdrop of buoyancy in GDP growth, domestic demand, and availability of sufficient liquidity,” he added.
Developers believe that the RBI’s decision to keep the repo rate unchanged reflects an improvement in the country’s economic fundamentals and confidence in India’s economic growth. “This decision will positively impact residential and commercial segments. However, even after hitting the pause button, the current interest rate is already at its peak in the last four years. We are sure the RBI is aware of it and will consider it in its next review meet,” said Mohit Goel, MD, Omaxe Ltd.
Amit Modi, Director, County Group, said, “The RBI’s commitment to supporting the real estate sector is evident in its decision to maintain the repo rates at 6.5%. This move shall enhance investment, safeguard against inflation, and ensure a stable housing market. By vigilantly tracking inflation and taking appropriate measures, the RBI has paved the way for continuous growth in the real estate sector, fostering economic prosperity. This shall encourage buyers from every economic group to come and invest in the real estate sector.”
The maintenance of the repo rate stand by leaving it unchanged will keep the growth statistics even-grounded for the real estate sector.
Saransh Trehan, Managing Director, Trehan Group, said, “The housing demand has been rising continuously and the RBI MPC policy continues to add great value to property-friendly sentiments of the buyers planning to soak in money in real estate assets. The inflationary rates will further crater down by this RBI move which is undoubtedly decreasing but continues to pinch the construction and allied sectors and stymie the overall economic climate. The RBI has been impelled to take decisive actions to achieve its inflation target of 4% and by keeping the repo rates unchanged, it will significantly achieve its objectives.”
Vikas Garg, Joint Managing Director, Ganga Realty, said, “The decision will further help in stabilizing the housing demand and maintaining a positive equilibrium in the property markets. By keeping the repo rate unchanged, the RBI has maintained an industry-friendly stand that will support the consolidation of trends which will churn out great results for the real estate sector. It will also help in keeping the macroeconomic conditions steady and perfectly aligns with the RBI commitment to stamp out inflationary concerns and bring it down to 4%.”
Ashwinder R Singh, CEO, Residential, Bhartiya Urban, said the unwavering commitment of the RBI to maintaining the repo rates at 6.5% underscores its resolute support for a stable housing market. “This strategic decision not only enables buyers to invest in real estate with confidence, free from concerns about abrupt interest rate surges but also fosters an investor-friendly climate, promoting growth in both residential and commercial projects. Such a deliberate and confident choice reflects optimism in India’s economic trajectory, poised to generate positive impacts on the real estate sector,” he said.
Subhash Goel, MD, Goel Ganga Developments, said, “Keeping the repo rate unchanged has been on expected lines. As inflationary pressure has eased and the Indian economic outlook looks bullish, the chances of increasing the repo rate are low. In fact, industry pundits believe that by the beginning of the next year, RBI might start reducing repo rates, which will further give a boost to the market. Meanwhile, the unchanged repo rate will make lending institutions avoid any hike in rates, thereby creating a conducive environment for the demand in the industry. The positive ramification will be felt across residential as well as commercial segments with a jump in investment activities.”
Some developers, however, believe that the repo rate at 6.5% is still on the higher side and is affecting the sector’s development in tier 2 & 3 cities.
Radheecka Rakesh Garg, Director, Rajdarbar Realty, said, “After six straight increases, the RBI’s decision to press the pause button straightaway for three consecutive times is a welcome move. From developers to homebuyers and financial institutions, every stakeholder in the real estate sector stands to gain as the decision fosters stability. This move will foster residential and commercial development in the country. However, as far as affordable housing is concerned, the repo rate at 6.5% is still on the higher side and is affecting the sector’s development in tier 2 & 3 cities.”