Realtors React to RBI's Unchanged Repo Rate: Hopes Dashed but Stability Welcomed
Realtors and industry experts express mixed feelings following the Reserve Bank of India's (RBI) decision to keep the repo rate unchanged at 6.5%. While the hope for a rate cut to boost festive sales was dashed, the industry largely sees the decision as a
Real EstateRbiRepo RateHousing MarketEconomic StabilityReal Estate MaharashtraOct 09, 2024
The industry was anticipating a rate cut to energize the market and boost sales during the festive fourth quarter of the calendar year 2024 (Q4CY24). However, the RBI's decision, influenced by complex geopolitical and economic factors, was aimed at maintaining a neutral stance and ensuring economic stability.
Dr. Niranjan Hiranandani, founder and managing director of Hiranandani Group, commented, “Although a 25 basis point (bps) cut would have energized festive sales and buoyed market sentiment, the current decision represents a prudent approach to ensuring economic stability.” He added that the developers are optimistic and project a 10-15% growth in festive season sales, supported by favorable monsoons and robust demand.
Mohit Jain, managing director of Krisumi Corporation, stated, “While the real estate industry was hoping for an interest rate reduction, a status quo is the next best outcome for the industry.” This sentiment was echoed by Anuj Puri, chairman of ANAROCK Group, who noted, “While a repo rate cut would have been preferable, the RBI is on a tightrope walk and must keep various macro-economic factors in mind.”
According to ANAROCK, the third quarter of the calendar year 2024 (Q3CY24) saw average housing prices rise by about 23% year-on-year (Y-o-Y) to approximately ₹8,390 per square foot in the top seven cities, including Mumbai Metropolitan Region (MMR), National Capital Region (NCR), Pune, Bengaluru, Hyderabad, Chennai, and Kolkata. However, housing sales declined by 11%, and new launches fell by 19% annually.
Despite the unchanged rate, the industry is not anticipating any negative impacts. Dr. Samantak Das, chief economist and head of research and REIS, India, JLL, explained, “While a rate cut would have been favorable for the real estate sector, the status quo is not expected to negatively impact the market's current momentum.” Vimal Nadar, head of research at Colliers India, added, “This ongoing stability in the repo rate should provide a significant thrust to residential real estate during these festive months as home loan interest rates are likely to remain steady.”
Manju Yagnik, vice-chairperson of Nahar Group and senior vice-president of the National Real Estate Development Council (NAREDCO) Maharashtra, said, “By keeping borrowing costs steady, EMIs remain manageable, encouraging potential homebuyers to invest in property, especially in the affordable housing segment. This stability will benefit developers by improving cash flow and reducing borrowing expenses for ongoing projects.”
The realtors are also looking forward to potential rate cuts in the coming months. Pradeep Aggarwal, founder and chairman of Signature Global (India) Limited, noted, “While the recent rate cut by the US Federal Reserve has sparked similar hopes in India, the domestic situation remains distinct, with the central bank prioritizing inflation management within its target range.” He added, “A rate cut is anticipated soon, which will benefit both homebuyers and real estate developers to capitalize on the market and strengthen overall economic growth.”
In summary, while the real estate industry's hopes for a rate cut were dashed, the RBI's decision to maintain the repo rate is seen as a prudent move to ensure economic stability. The industry remains optimistic about the future, anticipating potential rate cuts and robust demand in the coming months.
Frequently Asked Questions
What is the repo rate and why is it important for the real estate industry?
The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks. A lower repo rate reduces borrowing costs, which can boost the real estate market by making home loans more affordable and increasing buyer sentiment.
Why did the RBI keep the repo rate unchanged?
The RBI kept the repo rate unchanged to maintain economic stability, considering various macro-economic factors and the complex geopolitical landscape.
What impact did the unchanged repo rate have on the real estate market?
While the unchanged repo rate may have slightly disappointed hopes for a boost in festive sales, it is not expected to have a negative impact on the market. The stability in borrowing costs is seen as beneficial for both homebuyers and developers.
What are the industry's expectations for the future?
The real estate industry is optimistic about potential rate cuts in the coming months, which could further boost sales and improve market conditions.
How did housing prices and sales perform in Q3CY24?
In Q3CY24, average housing prices rose by about 23% year-on-year to approximately ₹8,390 per square foot in the top seven cities, while housing sales declined by 11% and new launches fell by 19% annually.
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