MPC meeting: Realtors cheer RBI’s decision to keep repo rate unchanged

With the Reserve Bank of India (RBI) holding the policy repo rate for another two months at 6.5 per cent, real estate developers are hoping for a bull run in the residential market. The central bank has kept the rate unchanged after having raised it by a cumulative 250 basis points from 4 per cent to 6.5 per cent between May 2022 and February 2023.

“The RBI’s decision to keep the repo rate unchanged at 6.5 per cent will boost the realty sector. This is the second consecutive time that RBI has taken this stance. Since May 2022, the central bank has raised the repo rate by 250 bps. As a result, the present move will encourage residential and commercial development in the country. This move is a nod to growth and could even point towards a reduction in the next meet,” says Nayan Raheja from Raheja Developers.

According to Mohit Goel, Managing Director, Omaxe Ltd., “The RBI’s move reflects an improvement in the country’s economic fundamentals and confidence in India’s economic growth. This decision will positively impact residential and commercial segments. However, even after hitting the pause button, the current interest rate is already at its peak in the last four years. We are sure RBI is aware of it and will consider it in its next review meet.”

Shishir Baijal, Chairman and Managing Director, Knight Frank India, says maintaining policy rates will bolster consumer demand amid moderate inflation, further promoting economic growth. The stance will likely boost homebuyers’ confidence as affordability remains stable. “Since the interest rate up-cycle, the repo rate has been hiked by 250 bps, resulting in 160 bps rise in home loan rates. We remain cautious about the housing market, especially the affordable and the mid segment that is price sensitive and has seen some impact of the previous rate hikes. However, a long pause in the policy rate will be supportive to the housing market,” says Baijal.

According to Manoj Gaur, Chairman & MD, Gaurs Group and Chairman of industry body CREDAI, the pause in the repo rate hike “resonates well with homebuyers and real estate developers. This development imparts the sector with a newfound certainty that the RBI won’t be tightening the rate anytime soon; future reductions could even be on the horizon if the economy keeps its stride”, he says adding that the current rate at 6.5 per cent is still on the higher side and “is a concern, at least for the affordable housing segment”.

Anuj Puri, Chairman, ANAROCK Group, said the RBI’s decision will help maintain the momentum in housing sales, particularly in the mid and luxury segments, which did significantly well in the first half of 2023. As per ANAROCK Research, housing sales of about 229,000 units across the top 7 cities in H1 2023 was the highest half-yearly sales in the last decade.

“However, the risk of inflation continues to lurk and if it rises further, there could be some repercussions on overall sales, especially in the cost-sensitive affordable housing segment which has already been severely impacted by the pandemic over the last couple of years,” adds Puri.