RBI Soft On Repo Rate Is Good Omen
The overall consumer market looks bullish across sectors, particularly the automobile and housing markets, says Anuj Puri, Chairman of Anarock.
MUMBAI, Oct 6 (Ther CONNECT) – Real estate and finance markets have unanimously hailed the RBI’s decision not to hike the repo rates thus giving push to the home and auto loan markets.
Though it was on expected limes, Anuj Puri, Chairman – ANAROCK Group, said 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,” Puri pointed out. “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,” he said.
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. Thanks to the stable repo rate and the resultantly stable home loan interest rates, we can expect the momentum to continue.
Dr. Poonam Tandon, Chief Investment Officer at IndiaFirst Life, said the global outlook remains challenging with the global financial landscape rapidly changing and potential risks may emanate. The RBI is closely monitoring the situation and will act proactively to maintain financial stability.
On the domestic side, Dr Tandon said, economic activity remains resilient with risk evenly balanced. FY24 GDP growth was maintained at 6.5%. The RBI reiterated its FY24 inflation target at 5.4% while remaining watchful of the inflation outlook due to a fall in kharif sowing, lower reservoir levels, and volatile global food and energy prices. Inflation surged in July and August driven by higher tomato and vegetable prices while it is expected to ease in September.
The RBI committee mentioned that the Indian banking system continues to be resilient and banks having surplus funds should consider looking at lending to the interbank call market. It stated that I-CRR will be discontinued in a phased manner. Also, RBI will remain nimble and may consider open market operations with regards to G-secs to manage liquidity.
Overall, RBI identifies high inflation as a major risk to macroeconomic stability and sustainable growth and remains committed to achieving the target while effectively managing liquidity, she said.
Shrinivas Rao, FRICS, CEO -Vestian, said despite headline inflation being out of the central bank’s comfort zone in July and August 2023, it maintained status quo and kept repo rate unchanged at 6.5%. This move showcases RBI’s confidence in the market and anticipation of moderating headline inflation in the future, he said.
“We anticipate both real estate demand and supply to sustain its ongoing momentum on the back of stable market conditions, “he said cautioning that the uneven distribution of monsoon and its adverse effect on Kharif Crop planting may pose a challenge to curb inflation. This may lead to a prolonged tighter monetary policy, which in turn will impact real estate activities, he opined.
On anticipated lines, RBI has continued to maintain the status quo on benchmark lending rates for the fourth consecutive time. A steady repo rate of 6.5% since February, has been providing relief for EMI-dependent homebuyers, especially in these times of elevated inflation levels, said Vimal Nadar, Senior Director & Head of Research at Colliers India.
With developers likely to bring in festive offerings in the next few months, a stable financing environment will drive housing sales across categories. Overall festive tailwinds, the accommodative stance of RBI and ongoing freebies offered by various financial institutions & developers will keep the momentum in the residential segment strong for an upbeat 2023.
Fence sitters and first-time homebuyers are likely to remain highly active across residential hotspots of major Indian cities, Nadar said.
Amit Sarin, Managing Director, Anant Raj Limited, felt that holding of interest rate at the same level in monetary policy is a welcome move and this move will help in a sustained recovery in economic growth which country is witnessing.
Needless to say, the real estate sector stand to benefit from the decision. The demand for residential dwellings is expected to remain robust in the coming quarters, Sarin said. The borrowing cost for the corporate too would remain at a reasonable level, which will be beneficial for the economy as corporate will have the leeway to continue to undertake capital expenditure and investment, he added.
Mohit Jain, Managing Director, Krisumi Corporation, too said RBI’s decision to maintain the status quo on the interest rate augurs well for the housing sector and the real estate sector as a whole. Amid the festive season, the demand for housing particularly mid and luxury housing – is expected to remain robust over the next few months. The ever-increasing inclination towards buying cozy and comfortable living spaces will further get stronger in the near future, Jain said.
Pritam Chivukula – Vice President, CREDAI-MCHI and Co-Founder & Director, Tridhaatu Realty, said the government has been supportive to the real estate sector with constructive industry policies. This pause in the repo rate has come at an apt time given the ongoing festive season which will improve market sentiments and drive housing demand even further.
Construction activity has been buoyant on the back of timely government intervention and positive policy measures keeping the economy strong against global headwinds, he said.
Vivek Mohanani – MD & CEO, Ekta World, the RBI has effectively managed to keep inflation rates within acceptable boundaries. RBI’s choice to uphold the current stance for the fourth consecutive occasion was a predictable decision aimed at prioritizing stability. Further increase in policy rates, he said, could potentially have a substantial impact on the outlook of prospective homebuyers and their purchasing capacity. Consequently, this could have also restrained the demand which has been on the rise in the past few months.
He would prefer to see the interest rates coming down in the future which could bolster overall market confidence and establish a more attractive environment for potential homebuyers.
Rohan Khatau, Director, CCI Projects, said it was “a good move by the RBI will help in curbing inflationary trends in the economy. This comes at a time when market sentiments are at an all time high and home sales robust. This pause in the repo rate will put more money in the hands of home buyers. The importance of home ownership and given the current festive season we can expect home buyers to come forth and make that home purchase.”
The RBI decision comes at a time when property prices are on the rise, which is adding a significant financial strain on consumers, according to Samyak Jain – Director, Siddha Group
While this decision may not have an immediate effect on potential homebuyers, it does provide some stability to the real estate industry, he said. As a result, it could potentially encourage several prospective homebuyers during the upcoming festive season who were eagerly waiting to buy their dream homes.
Srikanth C – Managing Director, Intercontinental Infrastructure, said the long-term benefits of homeownership have resulted in consistent growth within the residential segment and this has led to a sustained demand in the real estate sector. “We anticipate that the current policy rates will persist throughout 2023, and certainly, a potential decrease in interest rates in the near future would be desirable to boost overall market confidence and enhance the attractiveness for prospective homebuyers,” he said.
Prashant Khandelwal, CEO – Agami, felt it was a good decision to maintain status quo at 6.50 per cent.
Given the ongoing festive season, this decision will encourage prospective home buyers to come forward and buy their desired home. As in the past, we look forward to continued support from the government with policies that will sustain growth of the sector, going forward.
Himanshu Jain, VP – Sales, Marketing, and CRM, Satellite Developers Pvt. Ltd. (SDPL), remarked given the current market conditions and the inflationary pressures, the RBI’s decision was anticipated to guide the economy towards stability and maintain a secure financial environment. Rising property prices had already added to the difficulties for potential homebuyers. Nevertheless, the RBI’s decision not to implement another repo rate increase has offered significant relief to individuals interested in buying homes. Moreover, those looking to make their first home purchase often view it as a substantial investment, and the RBI’s action is expected to have a favorable impact on their decision-making process.”
Dr.Sachin Chopda – Managing Director, Pushpam Group, said Over the past few years, there has been a notable surge in real estate investments, primarily due to its ability to offer investors better returns on their capital and its growing appeal as an asset class when compared to alternative investment opportunities.
This decision is likely to inspire potential homebuyers to still close in on their property investments in the upcoming festive season, he said.
Aakash Patel, Director, Atul Projects India Pvt Ltd., ssid the RBI decision will help in maintaining liquidity and control inflation in the economy. “This decision will convince home buyers that it is the right time to go ahead and buy their long awaited dream home; given upcoming festivals like Dussehra and Diwali which will ignite home sales even further,” he said.
