Impact on Housing—Unchanged Repo Rate Encouraging for Home Buyers: Experts

With the threat of inflation looming large, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has kept Repo Rate unchanged at 4 per cent. Analysts and sector experts were anticipating this move because it is the inflation and growth data that tends to contribute to the direction in which the MPC will weigh. The MPA discussed for three-days before arriving at its decision. The Reverse Repo Rate also remained unchanged at 3.35 per cent. This is positive news for consumers with home loans and for everyone who is looking to buy a home, experts said. 

What does it mean for the consumer? "The positive side is that an unchanged repo rate will ensure that home loan interest rates will not harden anytime soon," says Anuj Puri, Chairman - ANAROCK Property Consultants. "It is quite clear that increasing interest rates would impact overall demand at a time when the government is keen to boost consumption," he said.

Anshuman Magazine, Chairman & CEO - CBRE India, South East Asia, Middle East & Africa explained, "In the wake of Covid-19, Q2 of FY21 witnessed a strong improvement in consumption and therefore RBI maintaining the status quo for the third time in a row is a positive step in keeping inflation under control."

Magazine praised the accommodative stance of the RBI. "The way our central bank has maintained an accommodative stance will ensure adequate liquidity in the system and will further reinforce stability in our economy. Additionally, policy support being provided by the government will continue to boost residential uptake and support construction activity in the upcoming months," Magazine said.

Shishir Baijal, Chairman & Managing Director, Knight Frank India said the RBI announcement remains in line with its goal of nurturing growth despite the rise in inflation. "Keeping demand stimulated to maintain the current momentum would be critical for continuous acceleration of the economic recovery. Home loan interest rates, which are at the lowest, have played a key role in rekindling the latent demand in housing market by nudging home buyers to make purchase decisions even during the pandemic," Baijal said. 

Ramesh Nair, CEO & Country Head, JLL said the decision to maintain the policy rate was in line with the real estate sector’s expectations as the sector is just recovering and is yet to bounce back to Pre-COVID-19 levels. "Residential real estate witnessed initial signs of recovery with sales increasing by 34% in Q3 2020 over Q2 2020. The RBI’s decision to hold the rate will help homebuyers to avail the benefit of the prevailing lowest mortgage rates. Green shoots of recovery armed with other incentives such as stamp duty reduction in some states and the flexibility of developers in offering best prices/payment schemes will help in further improving home sales,” Nair said.

Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com said: "Even as signs of recovery appear in Asia’s third-largest economy, the RBI has said that it would be open to cutting rates if the economy needs support, which is a very positive signal for the future."

Pradeep Aggarwal, Founder & Chairman – Signature Global Group & Chairman - ASSOCHAM - National Council on Real Estate, Housing & Urban Development said the affordable housing segment is already enjoying the increased demand and the latest unchanged stance of the RBI will not have much impact on the demand per se. 

The key thing is RBI projecting growth to swing back in the positive territory in Q3 and Q4 of FY21, said Krish Raveshia, CEO of Azlo Realty. "Positive GDP growth, low rates, easy liquidity, pickup in demand indicates the worst is behind us,” he added. 

Ankit Kansal, Co-Founder & MD, 360 Realtors termed the move as "conducive for the recovery of the real estate industry" which, Kansal said constituted around 7 per cent of the GDP. "There is also a pressing need to incentivize real estate sales through policy stimuli such as reduced stamp duty, offering better Income Tax discounts in home loans, and reduction in GST rates," he added.

Manju Yagnik, Vice-Chairperson of Nahar Group and Senior Vice President, NAREDCO (Maharashtra) said it will further boost the sentiment in the real estate market encouraging sales pushing the sector on a complete recovery trajectory. "The government’s ongoing policy support on rates and taxes for the housing sector indicates that the worst is behind us," she added.

Repo rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation. The Reverse repo rate is the rate at which the central bank borrows money from commercial banks within the country. It is a monetary policy instrument which can be used to control the money supply in the country.