The real estate sector has welcomed the Reserve Bank of India's Monetary Policy Committee's (MPC) decision to keep the repo rates unchanged at 6.5% saying that the decision to maintain the status quo augur well for the sector’s growth.
According to Shishir Baijal, chairman and managing director, Knight Frank India, “The central bank’s decision to maintain a pause in policy repo rate is in line with our expectation, and we consider this a comforting signal for the industry.”
Since May 2022, the regulator has hiked the repo rate by 250 basis points to counter inflationary pressures, and for the last six MPCs, the repo rate has remained unchanged. Experts believe this will help strengthen the housing loan portfolio of banks and make construction finance and housing loans cheaper in the next financial year.
They are hopeful that if inflation comes down under RBI’s target limit, the coming financial year may witness rate cuts, keep cost of borrowing reasonable and thereby, give a fillip to affordability and housing demand.
Domnic Rommel, president, CREDAI-MCHI, the apex body of the real estate industry in Mumbai, says “We thank RBI for maintaining the repo rate steady at 6.5%. The last adjustment occurred in February 2023, increasing the rate from 6.25%. This is a good move post a balanced interim budget. The decision to keep the repo rate unchanged echoes the industry and market sentiments. Steady repo rates will lead to stable interest rates on loans for home buyers and developers thereby, keeping the cost of borrowing more reasonable. This continuity fosters confidence in the real estate sector, promoting investment and growth.”
Baijal, however, maintains that in case of the country’s housing market, even as the mid and premium segment continue their growth trajectory, the lower segment has witnessed pressure from elevated interest rates and higher property prices. “We believe that lower home loan interest rates in near future will serve as a big boost to homebuyer sentiment and enable better affordability, which is an extremely sensitive factor in this segment of the housing market”.
It may be recalled that in August 2023, real estate consulting firm ANAROCK had released a report stating that homebuyers’ EMIs had jumped up by 20% in the last two years. Home loan borrowers who were paying an EMI of approximately Rs22,700 in July 2021 are now paying approximately Rs27,300 – an increase of approximately Rs4,600 per month.
Real estate developers said that a cut in policy rates would have been the best scenario for interest-sensitive sectors like the real estate sector, policy continuity is the next best outcome for both borrowers and developers alike.
