Unchanged repo rate to help housing sector in festive season: Industry experts

The momentum in residential sales has sustained even as an inflationary environment forced the RBI to increase the repo rate by 250 bps between May 2022 to February 2023.
For representational purposes.
For representational purposes.

NEW DELHI: The RBI’s decision to keep the repo rate unchanged 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 decided to keep the benchmark interest rate unchanged at 6.5%. With this, the central bank has maintained the status quo for the fourth straight occasion.

“The unchanged repo rate is a festive bonanza for homebuyers and gives them yet another opportunity to make cost-optimized home purchases. If we consider the present trends, the overall consumer market looks bullish across sectors, particularly the automobile and housing markets, which in many ways reflect the health of the economy. We are entering the festive quarter with a very strong momentum in housing sales, and unchanged interest rates will act as a major catalyst for growth in the residential market,” said Anuj Puri, Chairman - ANAROCK Group.

As per ANAROCK Research, housing sales across the top 7 cities created a new peak in Q3 2023 (despite the usually slow monsoon quarter) and stood at 1,20,280 units as against over 88,230 units sold in Q3 2022, thus recording 36% yearly growth. 

The momentum in residential sales has sustained even as an inflationary environment forced the RBI to increase the repo rate by 250 bps between May 2022 to February 2023.

This has affected homebuyers, especially in the affordable segment, as the interest on home loans has now surged to about 9% from less than 7% in April 2022.

The industry was concerned that another interest rate hike, coupled with high real estate prices, may discourage buyers from making a big ticket purchase.

“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, the central bank continues to maintain its focus on economic growth, which is facing headwinds primarily from external factors, such as a 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.

Baijal added, “Measures to reduce excess liquidity and improve the transmission of earlier policy rate hike measures align with price stability goals of the central bank. The decision will continue to maintain the existing momentum of residential real estate demand in India. Since the interest rate upcycle, the repo rate has been hiked by 250bps, resulting in a 160bps rise in home loan rates. Since then, although the overall housing demand has remained upbeat, the lower housing segment or the affordable housing demand has witnessed a deceleration due to a substantial rise in borrowing costs and other challenges. The stance today should be considered as a big relief for the housing sector of the country which has shown tremendous strength in the face of headwinds over the last year.”

Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE, said that the upcoming festive season is expected to further drive economic activity across segments -- from real estate and FMCG to automobiles, etc.

“We also anticipate a substantial number of homebuyers to finalise their decisions during the festive season, taking advantage of the repo-rate pause and any developer incentives,” added Magazine. 

Ramani Sastri, Chairman and MD, Sterling Developers, said that they are witnessing a surge in inquiries and expecting around 20% growth compared to last year’s festive season.

He added, “This naturally offers a context for consumers to go in for their dream homes as the overall climate is geared towards sustained demand and the fact that home buyer confidence is at an all-time high.”

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