RBI’s Move to Keep Repo Rate Unchanged to Keep Housing Demand, Homebuyers’ Sentiment Steady

Aug 8, 2024: The Reserve Bank of India (RBI), on expected lines, kept its key interest rates unchanged at 6.5%. This, say real estate experts, augurs well for both homebuyers and developers, as this would ensure home loans remain steady and borrowing costs don’t move up. Real estate players said this decision of keeping the repo rate unchanged will have a stabilizing effect on the real estate sector: 

Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd.
 “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” 

Dr. Niranjan Hiranandani, Chairman, NAREDCO and Hiranandani Group, “The RBI’s decision to maintain the repo rate unchanged is a stabilizing force in the current volatile global economic scenario. With the U.S. recession threats hovering, the Bangladesh crisis impacting regional capital flows, and broader global economic uncertainties, steady home loan interest rates offer a semblance of predictability. However, stakeholders must closely monitor these geopolitical undercurrents and macroeconomic indicators to adapt their strategies effectively.”

“From a real estate standpoint, lowering the repo rate could have helped revive affordable housing, which has been negatively affected by higher interest rates. However, NRI investors, in particular, find this predictability crucial amidst fluctuating foreign exchange rates and global undercurrents. As the market remains steady, it provides fertile ground for both long-term and short-term real estate investments, but vigilance towards inflation trends, fiscal policies, and global economic developments remains imperative.”

Aman Sharma, Managing Director of Aarize Group, stated, “The Reserve Bank of India’s decision to maintain the repo rate at 6.5% is a positive move for the real estate sector. This monetary policy stance supports ongoing and future investments by keeping borrowing costs stable. We anticipate that this growth trajectory will persist, fostering further development in the real estate market. As a result, we are poised to leverage this growth to address the rising demand for both residential and commercial spaces, ensuring we are well-positioned to meet future market needs.

Vimal Nadar, Senior Director & Head, Research at Colliers India: Amidst swift changes in global economic undercurrents with a moderate view on global economic outlook, RBI has remained cautious and maintained benchmark lending rates at 6.5% for the ninth consecutive time. Inflation, despite being within 6% levels, remains above the benchmark of 4% and thus, continuation of withdrawal of accommodation. In the first MPC meet after the Budget, the RBI has projected a GDP growth rate of 7.2% for FY 2025 led by robust high frequency economic indicators across key sectors. Interestingly, stability in interest rates coupled with the recent announcement to rationalize stamp duty charges along with concessions for women homebuyers bodes well for real estate sector especially residential segment. Strong visibility in financing charges should help homebuyers and developers alike in the upcoming festive season. 

Moreover, partial withdrawal of the applicability of the revised LTCG tax arising out of sale of land & buildings retrospectively provides elbowroom to effect housing sales with minimal tax outgo. This is likely to buoy investors’ & homeowners’ sentiment and thus the real estate sector at large throughout 2024.  

Shrinivas Rao, FRICS, CEO, Vestian said, “RBI maintained status quo for the ninth consecutive time and kept the repo rate at 6.5%. Sticky inflation, elevated food prices, and global macroeconomic uncertainty likely influenced this decision. A steady monetary policy for the past one and half years has ensured stability in the real estate sector, boosting demand for all asset classes. This upward momentum is expected to continue as the repo rate is anticipated to remain stable for a couple of more months due to rising inflation amid increasing geopolitical frictions in the Middle East.”