Those intending to buy houses will not be stressed now.
The RBI’s decision to keep the repo rate steady has been welcomed by experts in the real estate sector. They consider it as relevant to the present scenario.
Boman Irani, President-eElect, CREDAI National, says “We laud the RBI for maintaining the repo rate. It’s 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, welcome the central bank’s decision. This move would provide a further boost to the affordable and mid-income housing segments, in particular. Coupled with the Central government also hiking its outlay for the PMAY programme during this year’s Budget, we expect the demand for affordable housing to grow in the upcoming quarters.
According to Anshuman Magazine, Chairman & CEO – India CBRE, the RBI’s decision to keep the repo rate stable is a surprise move, done with the view to the withdrawal of accommodation while keeping a close eye on inflation. The move is highly encouraging for the infrastructure, housing, and other real estate segments as this decision, for now, allays fears of a further increase in financial burden on developers and borrowers. With the borrowing cost expected to remain largely stable, the overall growth momentum will get a fresh impetus. The RBI has taken an extremely balanced view of containing inflation and managing external volatilities over the past year.
Piyush Gupta, MD, Capital Markets & Investment Services at Colliers India, says that after six consecutive hikes, RBI MPC’s decision to pause on further increase in rates is a welcome move. With inflationary pressures now taming down, this will bring back focus on growth, credit off-take, consumer spending, real estate, infrastructure and specifically housing sector demand.
According to Vimal Nadar, Head, Research, Colliers India, the RBI decision is an encouraging sign. The unchanged repo rate is likely to give some breather to homebuyers as the RBI has raised the repo rate by a cumulative 250 basis points since May 2022, thereby pushing up interest rates for homebuyers to 9.5% and above. Given the expected nominal growth in income levels paired with sturdy prices in a cautious economic environment, RBI’s pause on repo rate is a much-needed step to boost real estate sentiment.
Amit Goyal, CEO, India Sotheby’s International Realty, says despite inflationary pressure and other geopolitical issues, RBI decision to maintain the status quo on policy rates is good news for home buyers. Rising home loan interest rates has become a growing concern for both homebuyers and supply-side stakeholders. To some extent the higher home loan interest rates have dampened the demand for affordable and mid-segment housing as buyers in these segments are more price-sensitive. While the luxury and high-end segments have not been significantly impacted yet, further increases could have affected the overall industry.
Shishir Baijal, Chairman & Managing Director, Knight Frank India, says it’s a welcome move by the RBI. The consumer inflation has sustained above the RBI’s upper threshold of 6% and is more likely to remain sticky in the next few months following the recent crude oil production cut by the OPEC countries and Russia. Consumer inflation arising from such events is beyond the central bank’s control. 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. Therefore, the RBI’s decision to pause its rate hike cycle is supportive of economic growth. India’s economy is expected to grow at 6.5% in FY24; which is an optimistic outlook for the economy amidst ongoing global financial market volatility and economic slowdown anxieties.
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.
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