Reserve Bank of India(RBI) Governor Shaktikanta Das has announced that the central bank will maintain the repo rate at 6.5 percent. The benchmark interest rate was last increased in February 2023, rising from 6.25 percent to 6.5 percent to curb inflation driven by global factors. It remained unchanged in December 2023. Despite a decline in retail inflation this fiscal year, dropping from its peak of 7.44 percent in July 2023 to 5.69 percent in December 2023, it still remains elevated, though within the Reserve Bank’s target range of 4-6 percent.
Furthermore, the RBI has disclosed its plans to conduct a comprehensive review of the existing regulatory guidelines for Electronic Trading Platforms (ETPs) facilitating transactions in RBI-regulated financial instruments like foreign exchange and government securities. This evaluation is prompted by the increasing integration between onshore Indian rupee (INR) markets and offshore centres, the rapid evolution of trading technologies and infrastructure, and the expanding variety of tradable products.
Industry Expert’s opinion;
1) Shrinivas Rao, FRICS, CEO, Vestian, said, “RBI maintained status quo and kept the repo rate unchanged at 6.5% for the sixth time in a row. It is a welcome move to curb inflation and control liquidity in the market. Moreover, this stability in the monetary policy along with robust economic growth may result in sustained demand for real estate assets.”
Mr. Rao further added, “Headline inflation inched up marginally to 5.7% in December 2023 from 5.6% in the previous month. If inflation comes down under RBI’s target limit, the second half of 2024 may witness rate cuts, further boosting the housing demand.”
2) Mr. Mohit Jain, Managing Director, Krisumi Corporation
By holding rates steady, the RBI prioritizes inflation control within its target range. While from the real estate sector perspective, a downward revision in rates would have been the best outcome, but the RBI’s decision to hold rates implies steady EMIs for borrowers. We expect continued momentum in sales across various property segments, including affordable, mid-range, and luxury housing throughout various regions for the foreseeable future. A downward revision, which is expected later this year, would further propel the sector.
3) By Vimal Nadar, Senior Director, Research | Colliers India
“At 6.5%, the benchmark lending rate has remained stable for a year now. The commitment to growth while taming headline inflation remains unabated while the economy is expected to close at a higher 7.3% for the fiscal 2023-24.
The stability not only provides continued relief to homebuyers in the form of predictable EMIs but also aids real estate developers in having greater confidence on near-term financing costs. The steadiness in real estate ecosystem augurs well for healthier balance sheets and should provide further momentum to sales in the residential segment. Moreover, the recent focus of the interim budget on infrastructure and urban housing stands to benefit the real estate sector throughout 2024 and beyond. An anticipation of future repo rate cuts and projected GDP growth rate of 7% for fiscal 2024-25 adds credence to conviction of a strong performance by the real estate sector in the next few quarters.”
4) Mr. Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd
As expected, the RBI kept rates on hold. The prolonged pause, for the sixth time, since February 2023, is aimed at keeping inflation in check without hurting the economic growth momentum. With the reduction 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. The decision allows homebuyers to make informed choices, which is expected to result in enhanced demand across all housing segments in line with the country’s overall economic progress.
5) Mr Amit Goyal, MD, India Sotheby’s International Realty
The RBI’s decision to maintain policy rates at 6.5% was anticipated, given the global uncertainties, which is also highlighted by the governor, including ongoing conflicts and emerging flashpoints worldwide, with disruptions in the Red Sea being the latest example.
However, the encouraging aspect is the remarkable performance of the Indian economy in recent years. Growth is accelerating, surpassing most forecasts, and inflation is on a downward trend. The projected real GDP growth for the next financial year stands at 7%, with risks evenly balanced. Headline inflation has moderated to 5.5%, which is positive news. If the current scenario persists, we may anticipate a rate cut in the next MPC meeting.
Overall, the current situation bodes well for the real estate market, and we anticipate robust demand to continue, particularly in the luxury real estate segment.
6) Mr Prashant Rao, Managing Director, Poulomi Estates, a Hyderabad based real estate developer
Against the backdrop of global uncertainties, the RBI’s decision to maintain policy rates at 6.5% came as no surprise. However, the governor highlighted that India’s potential growth is currently underpinned by structural drivers such as improved physical infrastructure, the development of world-class digital and payment technologies, ease of doing business, increased labor force participation, and better quality of fiscal spending.
Consequently, the projected real GDP growth for the next financial year stands at 7%, with risks evenly balanced, and headline inflation has moderated to 5.5%. These developments bring positive news for both the Indian economy and the real estate sector. With this we anticipate a rate cuts in the next MPC meeting, which will be advantageous for home buyers.
7) Piyush Bothra, Co-founder and CFO, Square Yards
The RBI’s decision to keep the status quo for the sixth consecutive time is in line with expectations and is poised to bolster consumer confidence. This move is a big positive for the affordable and low-income housing segments, which are responsive to interest rate fluctuations. The decision also fosters confidence among homebuyers by providing stability in loan repayments, consequently stimulating overall consumer spending. With the real estate market currently experiencing a bullish trend, the RBI’s persistent repo rate stance is anticipated to amplify the momentum in the housing sector.