The Reserve Bank of India on Thursday hit 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 paused after six consecutive rate increases aggregating to 250 basis points since May 2022.
RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) will not hesitate to take action in the future. While keeping the interest rate intact, Das said core inflation remains sticky.
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The real estate industry has welcomed the decision to not touch the already high repo rate. Experts see the housing sector to get the benefit of rate-pause.
Boman Irani, president-elect, CREDAI National (apex body of private real estate developers in India), said, “We laud the RBI for maintaining the repo rate, in a move that is bound to go a long way in sustaining the sales momentum that we’ve witnessed in the residential segment.
Given the potential adverse impact of a hike in repo rate and its ripple effect on both housing demand and supply, we, at CREDAI, are extremely pleased and welcome the central bank’s decision. This move would provide a further boost for the affordable and mid income housing segments, in particular.
Coupled with the central government also hiking its outlay for the PMAY program during this year’s Budget, we expect the demand for affordable housing to grow in the upcoming quarters.”
Sanjay Dutt, MD and CEO, Tata Realty & Infrastructure
The decision for the repo rate to remain unchanged is a welcome step, which a positive outcome for home loan borrowers at present. The RBI has taken note of the impact of market dynamics and homebuyer sentiment towards the economy. This will provide stability and encourage banks to lend to consumers, which will result in a higher credit flow to the housing sector. This will further boost the demand for residential real estate and make it an attractive investment for aspiring homebuyers.
Pradeep Aggarwal, founder and chairman, Signature Global (India)
The RBI’s choice to leave policy rates unchanged is a significant relief for prospective homebuyers, as well as for supply-side stakeholders. The past three quarters have seen a gradual rise in home loan interest rates, causing a significant impact on borrowers as rates have surged to over 9%, marking a 40-50% increase from their historical low.
Any additional policy rate hike could push home loan interest rates even closer to the psychological threshold of 10% per annum, creating a substantial impact on buyer sentiments and affordability.
Given the increase in home loan interest rates, we strongly encourage state governments to provide some relief to homebuyers by offering stamp duty rebates or registration fee waivers. Such measures would help mitigate the financial burden on buyers and make homes more affordable for those looking to buy their home.
Shishir Baijal, chairman and managing director, Knight Frank India
Today’s pause in the rate hike cycle is a very positive and welcoming move by the RBI. Any further hike in the repo rate and lending rates along with sustained inflation could potentially reduce the spending capacity of the consumers which in turn can dampen India’s economic growth.
From a real estate market perspective, the sector has weathered multiple home loan interest rate increases from a low of 6.5% to 8.75%, supported by favourable house purchase affordability and the strong desire towards home ownership. Therefore, a pause in any further rise in the lending rates should support the existing growth momentum in the housing sector.
Parvinder Singh, CEO, Trident Realty
The real estate sector is prone to the quick impact of interest rate movements and in the rising interest rate cycles, the unchanged repo rate is likely to keep the home buyers’ sentiment intact further helping to maintain the sustained growth momentum. The real estate sector is witnessing a healthy growth cycle and with the government’s supportive approach, we expect the market sentiments to remain upbeat.
Santosh Agarwal, CFO and executive director, Alpha Corp
This announcement will undoubtedly boost market sentiment after the union budget and boost the housing segment. The real estate sector has experienced significant growth during the past few quarters. Maintaining the accommodating position would allow banks to continue lending mortgages at the present rate, which is very encouraging for homebuyers’ and developers alike.
Ramani Sastri, chairman and MD, Sterling Developers
The RBI’s decision to hold rates is welcome as this will enhance buyers’ confidence especially after repeated hikes had already increased their acquisition cost. The past few months have been testament to the fact that home buyer confidence is at an all-time high and are able to make confident purchase decisions.
The residential market’s winning streak continued in the first quarter of 2023 despite the hike in interest rates 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 upgradation and aspiration of customers to own homes and we see this up-cycle continuing in 2023.
Fuelled by both end-user and investor interest, the real estate market has shown resilience where buyers are carefully filtering out projects and looking for the right product mix in terms of affordability, accessibility and quality of living. Hence, in such a context, we welcome the decision of the RBI to maintain the status quo.
Home loan interest rates are already at an alarmingly higher level of 9.5% and above due to the increase in repo rates in the recent past. Another increase in policy rates means that interest rates on home loans may hit an all-time high and touch almost double-digit, which could have a substantial impact on buyer sentiments and affordability.
However, a cut in the key rates going forward would be widely appreciated as low-interest rates have played a crucial role in the revival of overall real estate demand and improvement in the liquidity situation, which is vital for the sector.
There is also great confidence in real estate as an asset class compared to other asset classes today and in the long term, we expect markets will see sustained growth. With recovery of the economy, we expect that the real estate sector will contribute a substantial share to overall economic development.
Nitin Bavisi, CFO at Ajmera Realty & Infra India
The RBI decision to keep the repo rate unchanged comes as a positive surprise for most sectors. Real estate will rejoice in the move the most.
Given the current setup, we expect inflation to moderate going forward. Inflation being a primary concern of the RBI, the repo rate check shall continue. The economic activity is expected to grow at a rate of 7% of the previous fiscal. Add to that the ease in rates, which will further support growth.
We foresee a resilient upward demand trajectory going forward. The momentum in the market is currently driven by the need to upgrade to a better living and the admiration of real estate as a weatherproof asset class which will continue during the year and the due credit goes to this move from the RBI.
Saransh Trehan, managing director, Trehan Group
It is a huge reliever for home buyers and realtors in the period which has seen a massive jump in home prices, properties, and bank loan schemes. If the move does not guarantee a decrease in skyrocketing prices of homes, it assures that there is no reason for a further upswing in prices. We hope that RBI also considers lowering the repo rate to stabilise market prices and bring a good majority of buyers to the investment circles.
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