The Reserve Bank of India on Thursday pressed the pause button and decided to keep the key benchmark policy rate (repo rate) at 6.5% even as inflation is trending above its tolerance level. The rate hike has been put on hold since May 2022 after six consecutive rate hikes totaling 250 basis points.
RBI Governor Shaktikanta Das said that the Monetary Policy Committee (MPC) will not hesitate to act in future. While keeping the interest rate on hold, Das said that core inflation remains stable.
The real estate industry has already welcomed the decision not to touch the higher repo rate. Experts are expecting the housing sector to benefit from the rate-pause.
Boman Irani, elected president of CREDAI National (the apex body of private real estate developers in India), said, “We applaud the RBI for keeping the repo rate in check, in a move that goes a long way in maintaining the sales momentum that we have Seen in residential section.
Considering the potential adverse impact of the repo rate hike and its ripple effect on both housing demand and supply, we at CREDAI are extremely happy and welcome the decision of the central bank. The move will give a further boost to the affordable and middle-income housing segments in particular.
With the central government also increasing its outlay for the PMAY program during this year’s budget, we expect the demand for affordable housing to pick up in the coming quarters.”
Pradeep Agarwal, Founder and President, Signature Global (India)
The RBI’s option to leave policy rates unchanged is a significant relief to potential homebuyers as well as supply-side stakeholders. Home loan interest rates have seen a gradual rise over the past three quarters, which has had a significant impact on borrowers as rates have crossed 9%, marking a rise of 40-50% from their historical lows.
Any additional policy rate hike could push home loan interest rates closer to the psychological threshold of 10% per annum, thereby having a substantial impact on buyer sentiment and affordability.
In view of the increase in home loan interest rates, we strongly encourage the State Governments to provide some relief to home buyers by offering stamp duty waiver or registration fee waiver. Such measures will help reduce the financial burden on buyers and make homes more affordable for homebuyers.”
Shishir Baijal, chairman and managing director, Knight Frank Indiasaid, “Today’s pause in the rate hike cycle is a very positive and welcome move by the RBI. Any hike in the repo rate and lending rates, along with continued inflation, could potentially reduce the spending capacity of consumers.” which in turn can reduce India’s economic growth.
From the real estate market perspective, the sector has witnessed a rise in multiple home loan interest rates from a low of 6.5% to 8.75%, supported by affordable home affordability and strong desire for home ownership. Therefore, holding on to any further increase in lending rates should support the current growth momentum in the housing sector.”
Parvinder Singh, CEO of Trident Realtysaid, “The real estate sector is prone to quick impact of interest rate movements and in rising interest rate cycles, unchanged repo rate is likely to keep home buyers’ sentiment intact and help maintain sustained growth momentum.” The real estate sector is witnessing a healthy growth cycle and with the supportive approach of the government, we expect the market sentiment to remain upbeat.
Santosh Agarwal, CFO and Executive Director, Alpha Corp.said, “This announcement will undoubtedly boost market sentiment post the Union Budget and boost the housing segment. The real estate sector has experienced significant growth during the last few quarters. rate, which is very encouraging for homebuyers and developers alike.”
Ramani Shastri, Chairperson & MD, Sterling Developers
RBI’s decision to keep rates on hold is welcome as it will boost the confidence of buyers, especially after repeated hikes had already raised their acquisition cost. The past few months have witnessed that home buyers’ confidence is at an all-time high and they are able to take buying decisions with confidence.
The residential market continues its winning streak in the first quarter of 2023 despite interest rate hikes over the past year. India’s housing sector is witnessing possibly the biggest boom in the last decade, driven by various factors such as affordability, lifestyle upgrades and customers’ aspiration to own homes and we see this up-cycle continuing into 2023.
Driven by the interests of both end-users and investors, the real estate market has shown resilience where buyers are carefully filtering projects and looking for the right product mix in terms of affordability, accessibility and quality of life. Therefore, we welcome the decision of RBI to maintain status quo.
Home loan interest rates are already at an alarmingly high level of 9.5% and above due to increase in repo rates in the recent past. A further hike in policy rates means that interest rates on home loans could reach an all-time high and touch almost double digits, which could have a substantial impact on buyer sentiments and affordability.
However, further cut in key rates will be widely appreciated as lower interest rates have played a significant role in reviving overall real estate demand and improving liquidity conditions, which is vital for the sector.
There is also a lot of confidence in real estate as an asset class today as compared to other asset classes and in the long term, we expect the market to see continued growth. With the improving economy, we expect the real estate sector to contribute significantly to the overall economic growth.
Nitin Bavisi, CFO of Ajmera Realty & Infra India
The RBI’s decision to keep the repo rate unchanged has come as a positive surprise to most sectors. Real estate will be most pleased with this move.
Given the current scenario, we expect inflation to moderate going forward. Inflation being the primary concern of RBI, the repo rate will continue to be under scrutiny. Economic activity is expected to grow at a rate of 7% over the previous fiscal. Add to this the easing of rates, which will further support growth.
We expect an elastic upward demand trajectory going forward. The momentum in the market is currently driven by the need to upgrade to a better life and appreciation of real estate as a weatherproof asset class which will continue through the year thanks to the RBI move.”
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