RBI's "unchanged Repo Rate & Indexation Benefits" brings strong optimism on Realty sector

The RBI's decision to keep repo rates unchanged at 6.5% for ninth consecutive time aligns well with yesterday's announcement on indexation benefits. It sets a positive tone for the housing industry. Maintaining interest rates offers consistency in borrowing costs, which will prompt more aspiring homebuyers to consider taking the plunge - and thus drive demand in the housing market. With interest rates staying steady, EMIs will remain manageable for current and potential homeowners, potentially leading to increased home sales - particularly in the price-sensitive affordable segment.

Yesterday's announcement regarding indexation brings tax advantages for property investors, as it permits adjustments to the purchase price keeping inflation in mind, reducing capital gains tax burdens upon property sale. 

This provision increases the appeal of real estate investments, which will spur demand and capital flow into the housing sector. These combined actions bolster investor trust and position real estate as an avenue for long-term wealth growth.

As housing demand rises due to favourable interest rates and taxation, we can expect overall boosted growth. This will encourage more project construction, job opportunities and broader economic gains. The collective impact of these measures improves affordability levels and boosts demand dynamics in India's housing segment.

Housing sales across the top 7 cities have been phenomenal in the last few quarters, even though prices are rising steadily. As per ANAROCK Research, we saw total housing sales of nearly 2.51 lakh units across the top 7 cities in H1 2024 - the highest half-yearly sales in the last decade.

Meanwhile, average residential prices across the top 7 cities have seen a significant jump in the last one year – ranging between 13-39% in Q2 2024 when compared to Q2 2023. Thus, the breather which RBI’s unchanged repo rate will provide to home loan borrowers is apt and welcome.

About RBI’s Monetary Policy, Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd. said, “The RBI’s decision to keep rates unchanged is on expected lines with an intention to keep inflation under check. While the RBI is focused on reining in inflation within its target limit, the expectation of good monsoon may prompt the apex bank to lower interest rates in the subsequent months thereby further propelling real estate sales momentum and also providing an opportunity to perspective homebuyers to enter in the market. While portraying a robust forecast for economic growth, the RBI’s all-round efforts will positively impact homebuyers sentiments and industry as well”

Founder & CEO of data analytics firm PropEquity, Mr. Samir Jasuja mentioned, “The Reserve Bank’s decision should be seen in the context of inflation-growth dynamics and the ongoing geopolitical crisis. Any rate hike would have halted the real estate sales momentum which in the past few years have been on an upwards trajectory.Going forward, a reduction in the benchmark interest rate will go a long way in providing a further boost to the real estate sector, a major segment of the economy“.

Sanjoo Bhadana, MD of 4S Developers told, “While a rate cut would have been an ideal scenario to propel economic growth across industries including real estate, maintaining status quo will help prevent borrowing cost from rising. The demand for residential real estate has gained momentum in the recent quarters. A 50-75 basis points reduction in benchmark interest rate in the coming months will be further boost the sentiments of prospective homebuyers as well as realtors”.