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Kolkata: The status quo maintained by the Reserve Bank of India (RBI) on policy rate at 6.5 per cent is on expected lines, while growth has been revised upwards to 7.2 per cent for the financial year 2024-25 from 7 per cent, experts said on Friday.
Realtors said the decision to keep the repo rate unchanged in the latest monetary policy review is expected to have a stabilising effect on the real estate sector.
The Monetary Policy Committee, consisting of three RBI and an equal number of external members, kept the repo rate unchanged at 6.50 per cent for an eighth straight policy meeting and stuck to its relatively hawkish stance of 'withdrawal of accommodation', Reserve Bank of India Governor Shaktikanta Das said in his statement.
The recent move of the European Central Bank to cut rates by 25 basis points and indications of an impending Fed Rate cut are also leading indicators of how the RBI may look towards its own interest rate regime, though domestic factors will still hold greater sway on the movement and timing of future rate cuts, said Samantak Das, Chief Economist and Head of Research and REIS, India, JLL.
"With controlled inflation paving the way for future rate cuts, 2024 holds the promise of heightened affordability levels within the residential real estate sector, second only to the peak levels of 2021. Anticipating an upsurge in demand, particularly in the mid-tier and high-income segments, the Indian housing market is set to witness skyrocketing growth with residential sales in India's top seven markets predicted to further show a bump of 15-20 per cent over the historic high of 2023," the official said.
Equirus Economist Anitha Rangan said the apex bank in its second monetary policy for the current fiscal 'maintained the policy rate at 6.5 per cent as expected and the growth has been revised upwards to 7.2 per cent while keeping inflation unchanged at 4.5 per cent for the full fiscal'.
"Overall, the key reason for keeping the policy rate unchanged is the uncertainty on the outlook of domestic inflation led by the food basket," the economist said.
RBI said that while core inflation is encouraging, it is the food inflation which is playing the spoilsport, requiring vigilance, Rangan mentioned.
"In addition to that, the crude outlook remains uncertain. The growth revision only reiterates that RBI is willing to wait and watch before changing its stance on policy rates," Rangan said.
CRISIL Chief Economist Dharmakirti Joshi said that RBI has preferred to stay put by not altering the policy rate. "The RBI has to rein in consumer price-based (CPI) inflation to keep at its stated goal of around 4 per cent.' 'Food inflation continues to be cause for worry. The RBI has kept its inflation forecast unchanged at 4.5 per cent. It also remains optimistic about growth, revising the GDP upwards by 20 basis points," Joshi said.
"We now see the RBI cutting rates starting October," he added.
Real estate body CREDAI West Bengal president and Merlin Group chairman Sushil Mohta welcomed the RBI monetary policy announcement as the unchanged repo rate implies that there will be no immediate effect on real estate or home loan EMIs.
"This will keep the residential real estate sector buoyant. Additionally, the RBI has kept its inflation forecast for this fiscal unchanged at 4.5 per cent and remains optimistic about growth. I hope that the repo rate may come down as growth in the US is robust," he said.
Moreover, a constant repo rate will support the commercial real estate sector by ensuring steady borrowing costs, increasing investor confidence, and allowing long-term investment planning, he said.
These factors will help create a favourable climate for development and sustainability in the commercial real estate market, he said.
"The better-than-expected growth has afforded the RBI leeway to keep the repo rate unchanged at 6.5 for the eighth consecutive time, indicating a prudent and measured approach towards ensuring that inflation aligns durably and sustainably to the target. This strategic move ensures a stable and predictable interest rate environment, a transformative factor for both homebuyers and developers," Das said.
Nahar Group Vice Chairperson Manju Yagnik stated that the stability supports the real estate market, making housing more affordable and boosting consumer confidence.
It enables informed investment decisions, promotes sector growth and the financial environment encourages long-term investments in housing, she said.
Dharmendra Raichura, VP & Head of Finance of Ashar Group said although the unchanged rate is industry-agnostic, the real estate sector anticipates lower interest rates later this year, which could provide an impetus for housing demand and sectoral growth across industries.