NEW DELHI: The RBI’s decision to keep repo rate unchanged at 6.5% is likely to keep housing demand strong in the upcoming festive season. The monetary policy committee of the Reserve Bank of India (RBI) in its October review meeting maintained status quo for the fourth straight occasions. “Continuation of pause in the repo rate was much needed albeit looming inflationary pressure arising from – rising crude prices and rupee depreciation.
By pausing the policy rate, RBI continues to maintain its focus on growth, which is facing headwinds primarily from the external factors like slowdown in global growth, high energy prices and geopolitical tensions; and remains cautious of inflationary pressure as well,” said Shishir Baijal, Chairman & Managing Director, Knight Frank India.
The momentum in residential sales so far has sustained even as an inflationary environment forced RBI to raise repo rate upwards by 250 bps between May 2022 and February 2023. Despite the 250 basis point increase in repo rate, the transmission to bank lending rates is not complete, as per the monetary policy panel. The average lending rates on fresh and outstanding rupee loans rose by 196 bps and 112 bps, respectively, during May 2022-August 2023.
This has been affecting homebuyers, especially of affordable segment, as the interest on home loans has surged to about 9% from less than 7% in April 2022. The industry was concerned that another rate hike, coupled with high real estate prices, may discourage buyers from making a big ticket purchase.
Surendra Hiranandani, Chairman and managing director, House of Hiranandani, said the monetary policy committee’s decision to maintain the current repo rate is prudent and encouraging for the housing market.
“The Indian real estate market has witnessed a notable growth of 9.5% since early 2023. The REPO rate decision, coupled with the upcoming festive season, will only bolster this growth further.
Festive season embarks a surge in the demand and sales of properties connected to long-standing traditions and characterised by their auspicious origins. Additionally, the steadfast repo rate plays a crucial role in relieving pressure within the sector and spurring growth in infrastructure and construction,” said Hiranandani.
