RBI repo rate hold likely to boost homebuyers’ sentiment to invest

The real estate sector has welcomed the Reserve Bank of India’s decision to keep the repo rates unchanged at 6.5%, saying that the move provides much-needed relief to homebuyers and helps them to continue enjoying low-interest rates.

RBI Governor Shaktikanta Das(PTI file photo)
RBI Governor Shaktikanta Das(PTI file photo)

The move is expected to maintain the ongoing momentum in housing registrations in the final month of the year and going forward one may expect momentum in housing sales to continue in the wake of the unchanged repo rates coupled with the resultant stable home loan rates and positive economic outlook on India, said real estate experts.

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From a borrowing cost perspective, this move ensures that homebuyers’ equated monthly installments (EMIs) don’t increase whereas for developers, it doesn’t increase their financial burden owing to the consistent rate of cost of capital.

The monetary policy committee on December 8 decided to keep the policy repo rate unchanged at 6.5 per cent,” said Reserve Bank of India governor Shaktikanta Das on Friday.

RBI Governor Shaktikanta Das says, “…The Monetary Policy Committee decided unanimously to keep the policy repo rate unchanged at 6.5%. Consequently, the Standing Deposit Facility rate remains at 6.25% and the Marginal Standing Facility rate and the Bank Rate at 6.75%.”

Also read: ‘Monetary policy actively disinflationary’: RBI keeps repo rate unchanged at 6.5%

“With the fundamentals of the Indian economy remaining strong and the recently announced GDP rates indicating positive outlook, the RBI once again decided to keep the repo rates unchanged. This is an extension of the festive bonanza that RBI gave to the homebuyers in its last policy announcement. It gives homebuyers yet another opportunity to make cost-optimized home purchases,” said Anuj Puri, Chairman – ANAROCK Group.

If we consider the present trends, the housing market is on a bull run and unchanged home loan rates will only add to the overall positive consumer sentiments. Additionally, given that housing prices have escalated across the top seven cities in the last one year, at least the unchanged home loan rates will give some relief to the homebuyers, he said.

“RBI’s decision to hold the repo rate at 6.5% bodes well for Indian real estate and its ancillary industries, as it is expected to maintain the ongoing momentum in housing registrations in the final month of the year. With GDP growing at 7.6% in the July to September quarter – faster than the expected rate – Inflation relatively in check, the macro-economic indicators seem healthy enough and should act as an ideal platform for sustained infrastructural and economic growth. We can expect more homebuyers and fence-sitters coming to the fore and fulfilling their property purchases towards the end of this quarter and going into 2024,” said Anshul Jain, Managing Director, India & Southeast Asia and Head of APAC Tenant Representation, Cushman & Wakefield.

Also read: IT SEZs now allowed to lease space in major real estate reform

Some developers were of the opinion that a rate cut would have been more beneficial.

“As anticipated, the RBI continues to keep the repo rate at 6.5%. However, the Indian real estate industry and the economy at large would have greatly benefitted from a rate cut, given that current macro-economic parameters are favourable and the rate has been maintained at 6.5% for the last 3 quarters. This move will keep home loan rates and the cost of buying a house on the higher side for consumers and we hope that it does not disrupt homebuyers’ sentiments,” said president of real estate developers’ body CREDAI’s president Boman Irani.

Also read: Office rental values increase by 7 percent year-on-year in top seven cities despite tepid leasing in H1 FY24

JLL estimated that healthy macroeconomic fundamentals and some normality in the global economy next year is likely to support a repo rate reduction. “This is expected to translate into a decline in home loan interest rates which will improve affordability levels and provide a fillip to the market with sales expected to surpass the 300,000 units mark in 2024,” said Samantak Das, Chief Economist and Head of Research & REIS, JLL India.

“As the housing market continues to outperform 2022 sales, unchanged repo rate signals steady interest rates for prospective homebuyers and developers. This will aid a stronger 2023 with sales expected to be higher by 20-30% compared to 2022. Steady interest rates will continue to fuel sentiment buoyancy in the market, keeping the housing market on a higher growth trajectory as we begin 2024,” said Vimal Nadar, Head of Research at Colliers India.

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