The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on announced its decision to retain the repo rate at 6.5 per cent. This has brought cheer to the real estate developers, who breathed a sigh of relief. The MPC had raised the repo rate in February to 6.5 per cent from 6.25 per cent in line with the steep inflation prevailing in the economy. Since then, the committee has kept the rate unchanged as retail inflation eased, resulting in a pause in interest rate hikes by lenders.
Appreciating the move, Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd., said, “This demonstrates a positive intent towards supporting the housing market and benefiting homebuyers. Home loan borrowers have embraced the previous interest rate hikes, and as long as the home loan interest rates hover around 9 per cent per annum, it is unlikely to have a significant impact on housing demand”.
According to Anuj Puri, Chairman of ANAROCK Group, the pause will provide some respite to prospective homebuyers looking to avail home loans in the near future. “The unchanged repo rate can help maintain the momentum in housing sales, which has so far been firing on all cylinders in 2023. Per ANAROCK Research, we saw housing sales in first quarter of 2023 scale new heights, breaching the 100,000 mark at 114,000 units across the top 7 cities. Given the current unchanged rates, the outlook for those looking to buy their first home via a home loan soon remains favourable. Interest rates from most banks will continue in single digits. With top banks, they currently hover between 8.7 per cent and 9.65 per cent.”
Vimal Nadar, Head of Research at Colliers India, says, as home loan rates are already elevated at 9 per cent and above “This is a significant breather for lenders, developers and homebuyers. First-time homebuyers will be better placed to make their home buying decision in a stable lending rate regime. Fence sitters in the affordable and mid segment will have greater visibility of their EMIs (equated monthly instalments) and thus effect buying.”
According to Atul Banshal, Director-Finance at Omaxe Ltd., while the RBI has kept the rate unchanged, it would have helped if the repo rate was cut. “Following a series of successive policy rate hikes, the real estate sector had anticipated some relief from the central bank in the form of a modest rate cut. Such a move would have bolstered demand and, subsequently, the overall economy. Consequently, we maintain our expectation that the RBI will opt for a policy rate reduction in the next review meeting, providing a much-needed impetus to various sectors, including real estate, and fostering economic growth,” he said.
According to Puri of ANAROCK, a future rate hike, if any, may push the rates into double digits. The persisting financial instabilities in advanced economies may have repercussions for India, pushing the RBI to take such a step to face these headwinds.
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