RBI misses opportunity to spur housing demand: CREDAI on RBI interest rate policy

New Delhi: The RBI should have cut key interest rates to boost growth in the real estate sector and the overall economy as any reduction in mortgage rates would have further accelerated housing demand in the current festive quarter, according to industry players.

The Reserve Bank of India (RBI) kept its key interest rate unchanged on Wednesday but took the first step towards a rate cut as it eased its relatively hawkish policy stance to 'neutral'.

Realtors' apex body CREDAI National President Boman Irani said, "As RBI remains cautious regarding potential inflationary pressures, the central bank's decision to keep the repo rate unchanged at 6.5 per cent - albeit with a revised neutral stance - seems somewhat like a missed opportunity, especially with the festive season around the corner".

A rate cut would have provided the ideal boost to accelerate consumer demand across industries, he said, while expecting rate cut in the next quarter.

Realtors' body Naredco President G Hari Babu suggested that the RBI should consider reducing rates in the next MPC meeting. "This will further stimulate economic growth, increase housing demand, and boost investment in the real estate sector." Among developers, Tata Realty and Infrastructure MD and CEO Sanjay Dutt said this stability in interest rates is likely to sustain the positive momentum.

"The consistent repo rate provides a predictable environment for both developers and homebuyers, potentially keeping home loan rates steady and supporting demand in the residential segment," Dutt added.

Niranjan Hiranandani, Chairman of Hiranandani Group, said although a 25 basis point cut could have energized festive sales and buoyed market sentiment, the current approach represents a prudent approach to ensuring economic stability.

Emami Realty MD & CEO Nitesh Kumar remains optimistic about the possibility of a repo rate reduction in the near future. "A decrease in the repo rate would benefit the real estate sector by lowering borrowing costs, making home loans more affordable and stimulating demand and growth in the housing market," he added.

Gaurs Group CMD Manoj Gaur expressed concern over demand and supply in the affordable housing segment and hoped that the RBI would address this issue.

"A rate cut would have given a golden opportunity to reinvigorate the real estate market with reduced interest rates ahead of the festive season, which is a crucial period for real estate sales," said Ramani Sastri, CMD of Bengaluru-based Sterling Developers.

Among leading residential brokerage firms, Anarock Chairman Anuj Puri said the RBI has once again decided to keep the repo rates unchanged, helping the housing market to maintain momentum during the festive season.

"While a repo rate cut would have been preferable, it is clear that the RBI is on a tightrope walk and must keep various macro-economic factors in mind," Puri said.

Housing.com CEO Dhruv Agarwala said the changing of policy stance from ‘withdrawal of accommodation’ to 'neutral' signals the RBI could initiate rate cuts in the upcoming policy meets.

"This comes as good news for prospective buyers, planning to invest in property in the near term." Ashwin Chadha, CEO of India Sotheby's International Realty, said he was hopeful of a rate cut this time around, after moves by the U.S. Federal Reserve and other central banks. "But the RBI’s decision to hold the repo rate steady for the 10th time in a row shows that India is laser-focused on its own economic landscape, rather than following global cues." Other developers and consultants too felt that the stability in interest rates augurs well for the sector but hoped for reduction going forward to further boost demand.

CREDAI-MCHI President Dominic Romell said the RBI move will help maintain current borrowing costs for both homebuyers and developers, providing consistency and predictability in the market.

"A reduction in the repo rate would make home loans more affordable, potentially stimulating further demand and enabling developers to manage rising construction costs more effectively," he added.

NCR-based Ansal Housing Director Kushagr Ansal said stable home loan rates provide much-needed relief to potential buyers amid rising prices.

A stable policy rate ensures a continued favorable lending environment, supporting homebuyers' sentiment, said Shraddha Kedia-Agarwal, Director of Mumbai-based Transcon Developers.

Gurugram-based property consulting firm InfraMantra founder Shiwang Suraj said, "We expected a slight cut in repo rate considering the fact that property sales and launches have been slowing down over the last three quarters of 2024." VS Realtors (I) Pvt Ltd founder Vijay Harsh Jha said a rate cut would have helped in reducing interest on home loans and thereby boosting demand.