MPC meeting: Realtors cheer RBI’s decision to keep repo rate unchanged

As the Reserve Bank of India (RBI) maintains the policy repo rate at 6.5 percent for an additional two months, expectations of a bullish trend in the residential real estate market are on the rise among developers. This decision follows the central bank\’s earlier increases, which collectively raised the rate by 250 basis points from 4 percent to 6.5 percent between May 2022 and February 2023.

\”The RBI\’s choice to keep the repo rate steady at 6.5 percent will provide a boost to the realty sector. This marks the second consecutive instance of the RBI adopting this stance. Since May 2022, the central bank has incrementally raised the repo rate by 250 basis points. Consequently, this current move is likely to stimulate residential and commercial development across the nation. This step is indicative of growth and might even hint at a reduction in the next meeting,\” explains Nayan Raheja from Raheja Developers.

Mohit Goel, Managing Director of Omaxe Ltd., comments, \”The RBI\’s decision reflects an enhancement in the country\’s economic fundamentals and its confidence in India\’s economic progress. This determination will have a positive impact on both residential and commercial segments. Nonetheless, despite the pause, the current interest rate is already at its peak in the last four years. We are confident the RBI is cognizant of this and will consider it in the next review.\”

Shishir Baijal, Chairman and Managing Director of Knight Frank India, asserts that maintaining policy rates will invigorate consumer demand amidst manageable inflation, thereby fostering economic growth. This stance is likely to bolster the confidence of homebuyers, as affordability remains stable. \”With the repo rate having risen by 250 basis points during the interest rate upswing, causing a 160 basis points hike in home loan rates, we maintain a cautious outlook for the housing market—especially the affordable and mid segments, which are price-sensitive and have already felt the impact of prior rate hikes. Nevertheless, an extended pause in the policy rate should provide support to the housing market,\” Baijal emphasizes.

Manoj Gaur, Chairman & MD of Gaurs Group and Chairman of CREDAI (industry body), sees the halt in repo rate hikes as favorable for homebuyers and real estate developers. He believes this development instills a newfound certainty that the RBI won\’t be tightening rates in the near future. Gaur adds that if the economy maintains its momentum, future reductions might even be on the horizon. He does, however, express concern about the current rate of 6.5 percent, which he considers relatively high and a particular worry for the affordable housing sector.

Anuj Puri, Chairman of the ANAROCK Group, notes that the RBI\’s decision will sustain the momentum in housing sales, particularly in the mid and luxury segments, which performed remarkably well in the first half of 2023. ANAROCK Research indicates that H1 2023 witnessed the highest half-yearly housing sales of approximately 229,000 units across the top 7 cities in the last decade.

\”Nevertheless, the specter of inflation remains, and if it escalates further, it could impact overall sales, especially in the cost-sensitive affordable housing segment, which has already borne the brunt of the pandemic\’s effects over the past couple of years,\” Puri concludes.

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