Mumbai Real Estate Sector Applauds RBI's Steady 6.5% Repo Rate, Awaits Boost in Home Sales
The real estate sector in Mumbai has welcomed the Reserve Bank of India's decision to maintain the repo rate at 6.5% for the 10th consecutive time, especially as it aligns with the festive season. This stability is expected to drive increased home sales a
RbiRepo RateReal EstateMumbaiHome SalesReal EstateOct 09, 2024
With the repo rate remaining steady, equated monthly instalments (EMIs) for home loans are expected to stay manageable, encouraging both current and prospective homeowners. This stability is anticipated to drive increased home sales in the upcoming months, offering a positive outlook for the housing market.
While some developers feel that a 25-basis-point cut could have further energised festive sales and buoyed market sentiment, they acknowledge that the current approach represents a prudent strategy to ensure economic stability.
Dr. Niranjan Hiranandani, Chairman of NAREDCO and the Hiranandani Group, expressed optimism about the future of the real estate sector. “Given the fact that real estate cycles persist longer, the current upward momentum looks to continue for the foreseeable future, thanks to favorable economic conditions,” he said. “With India’s projected GDP growth at 7.2%, demand-supply dynamics are expected to remain healthy. The increasing appetite for homeownership, heightened interest in upgrading to luxury homes, and rising investments in real estate assets will further sustain strong demand in the sector.”
Prashant Sharma, President of NAREDCO Maharashtra, emphasized the importance of the decision for the real estate sector. “The maintained policy rate signals a steady interest rate environment in the near term, which can help sustain the ongoing demand for home loans,” he stated. “As the sector gears up for the festive season, this decision could further support housing demand and investment momentum.”
Developers believe that the RBI’s decision to keep repo rates unchanged while shifting its stance to 'neutral' is a positive move for the sector. This shift aligns India’s monetary policy with the global trend, where many central banks have reduced interest rates. Kaushal Agarwal, Director and Co-Founder at The Guardians Real Estate Advisory, highlighted the benefits for home loan borrowers. “This is good news for home loan borrowers, as their EMIs will remain constant for now and may decline in the near future,” he said. “This move is especially encouraging for first-time buyers, allowing them to plan better without the concern of rising interest costs.”
Gauri Tandle, CFO at Ashwin Sheth Group, added that the decision augurs well for mid-range and luxury residential offerings. “It will continue to foster consumer confidence by ensuring stability in home loan interest rates, enabling buyers to invest in properties without the fear of rising interest rates,” she said. “As developers, this aligns well with our long-term interests, as positive consumer sentiment and the right purchasing power quotient help empower the ecosystem players to continue project launches unabated.”
For the real estate sector in the Mumbai Metropolitan Region (MMR), the decision is crucial. Domnic Romell, President of CREDAI-MCHI, noted its importance in maintaining current borrowing costs for both homebuyers and developers. “Since the repo rate directly influences loan interest rates, this decision ensures that home loan EMIs remain steady, offering relief to both first-time buyers and investors in a market where affordability is a constant challenge,” he said.
However, Hitesh Uppal, Head of Finance at Magicbricks, pointed out a potential downside. “While stable rates create a favorable borrowing environment for homebuyers and developers, boosting market confidence and helping control inflation-related cost pressures, they also temper expectations for more affordable financing, which could slow buyer momentum,” he said.
Overall, the RBI’s decision is seen as a positive step that will contribute to the stability and growth of the real estate sector in Mumbai.
Frequently Asked Questions
What is the repo rate and why is it important for the real estate sector?
The repo rate, or repurchase rate, is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks. A lower repo rate typically leads to lower interest rates on loans, making it cheaper for homebuyers to take out mortgages. This can boost home sales and investment in the real estate sector.
How does a steady repo rate benefit the real estate market during the festive season?
A steady repo rate helps maintain stable interest rates, which keeps home loan EMIs manageable. This stability encourages both current and prospective homeowners to make purchases, especially during the festive season when there is a surge in demand for new homes.
What is the projected GDP growth for India, and how does it impact the real estate sector?
India's projected GDP growth is 7.2%. This positive economic outlook supports healthy demand-supply dynamics in the real estate sector, driving increased interest in homeownership and luxury home upgrades, and attracting more investments in real estate assets.
How does the RBI's 'neutral' stance on monetary policy affect the real estate sector?
The RBI's 'neutral' stance on monetary policy signals a stable interest rate environment, which can help sustain ongoing demand for home loans. It also aligns India’s monetary policy with global trends, potentially leading to further interest rate reductions in the future.
What are the potential drawbacks of a steady repo rate for the real estate market?
While a steady repo rate creates a favorable borrowing environment and boosts market confidence, it may also temper expectations for more affordable financing. This could slow buyer momentum, especially for first-time homebuyers who are sensitive to changes in interest rates.
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