Status quo for time being was as expected, should boost home loan market, say biz captains.
MUMBAI, Apr 6 (The CONNECT) – Aptly and as expected, the RBI has kept the repo rates unchanged at 6.5%, said Anuj Puri, Chairman – ANAROCK Group:
The Indian economy is going strong and inflation is reined in, though it has yet to come within the threshold of RBI’s target, Puri said.
The decision to maintain status quo will keep the ongoing residential real estate sales momentum on course and unimpeded. Aspiring homebuyers eyeing a purchase will proceed with confidence, Puri said
Housing sales across the top 7 cities have been phenomenal in the last few quarters, even though prices are rising steadily. As per ANAROCK Research, we saw total housing sales of over 1.3 lakh units across the top 7 cities in Q1 2024 – the highest quarterly sales in the last decade.
Average residential prices across these cities have seen a significant jump in the last one year – ranging between 10-32% in Q1 2024 when compared to Q1 2023. Thus, the breather which RBI’s unchanged repo rate will provide to home loan borrowers is apt and welcome, he added.
RBI’s decision will propel economic activity and boost economic growth, said Sanjeev Agrawal, President, PHD Chamber of Commerce and Industry (PHDCCI).
The continuously accelerating economic growth and softening inflation trajectory, coupled with the status quo in repo rate will lead to much higher GDP growth in FY2025, Agrawal said.
“We expect a repo rate cut as and when headline inflation softens around 4.5%,” said Agrawal.
As the third quarter of FY23-24 GDP surprised with a significantly high growth of 8.4%, the current financial year is also expected to give such surprises on the back of robust economic activity and enhanced resilience of the economy, he opined.
P. Nandakumar, MD & CEO at Manappuram Finance said, the RBI’s interest rate panel sent out a clear message that any cut in rates or change in stance is not on its table till headline inflation returns to the median target of 4%. However, commentary on economic growth with GDP expansion pegged at 7% for the current fiscal is reassuring since that means credit expansion will continue its momentum and that bodes well for lenders like us, he said.
Sandeep Yadav, Head – Fixed Income, DSP MF, said the monetary policy was quite uneventful, as expected. While the inflation and growth projections did change, the difference was not meaningful.
In such a scenario, he said, the Indian bonds markets will be tracking global markets for a while. Thus, the US treasury yields and oil should remain near term drivers.
For the longer term, he expects the favourable demand supply dynamics to bring yields lower.
Siddarth Bhamre, Head of Institutional Research, Asit C Mehta Investment Intermediates, said domestic factors influencing inflation are projecting that inflation may remain on downward trajectory. However, concerns related to volatility in food prices, geo-political tensions and disruption in supply channels remain the challenges to deal with. As far as GDP growth is concerned, projections remain at 7.0% for 2024-25, he said.
Global factors are weighing high on governor’s mind. In advanced economies inflation remains sticky because of tight labour markets. Significantly higher Debt to GDP ratio may pose financial threat in adverse situations, he said
“We believe with inflation firmly under control, RBI is keeping eye on FED and global risk parameters. Also, till the time GDP growth rate remain above 6%, RBI may not blink first to reduce interest rates,” Bhamre explained.
Deepak Ramaraju, Senior Fund Manager, Shriram AMC it is important to note that the timing of the rate cut is linked to the inflation rate reaching 4%. This creates some uncertainty about when the rate cut will happen. Currently, he said, “we are in a deflationary zone, but there are upward pressures from food prices (due to the El Nino factor) and crude oil shocks that can add to the uncertainty”. The market is concerned about a potential delay in the rate cut, which could cause it to remain range-bound in the near term, Ramaraju added.
Prashant Sharma, President of the National Real Estate Development Council (NAREDCO) Maharashtra, attributed a recent surge in home sales to this positive financial environment, bolstered by optimistic consumer sentiment and supportive government policies. “We foresee an escalation in demand, particularly within the affordable and mid-segment housing markets. This trend is expected to persist, with hopes of a future reduction in the repo rate,” Sharma noted.
Pritam Chivukula, Vice President of CREDAI-MCHI and Co-Founder & Director of Tridhaatu Realty, praised the RBI for its delicate balance between fostering growth and controlling inflation. “The housing sector’s triumph in recent quarters is commendable, supported by government initiatives aimed at revitalizing the real estate market. The RBI’s recent policy decision is a significant indicator of continued growth, expected to boost consumer confidence and drive investments in property,” he remarked.
Mr. Samyak Jain, Director of Siddha Group, commended the RBI for its role in managing inflation and ensuring economic liquidity. “The real estate market’s strong performance, fuelled by growing homeownership demand and increasing income levels, positions us for a surge in demand. We are confident this growth will persist throughout the year,” Jain remarked.
For homebuyers, the unchanged policy rates mean stable loan interest rates, making it an ideal time for potential homeowners to secure loans at attractive rates, he said.
Himanshu Jain, VP of Sales, Marketing, and CRM at Satellite Developers Private Limited (SDPL), noted the positive impact of the RBI’s decision on inflation and liquidity. He highlighted the boost in sales during the festive and post-festive seasons, expecting the trend to motivate more buyers towards homeownership.
Shrinivas Rao, FRICS, CEO, Vestian, aid RBI’s decision to keep the repo rate unchanged at 6.5% for the 7th time in a row is in line with the current situation as inflation remains out of the target range of RBI, due to soaring food prices in the past couple of months.
“Stable repo rates for more than a year has brought certainty into the real estate market. However, rate cuts are expected in the second half of 2024 if the inflation falls under the upper limit of 4%, set by RBI,” he said.
Vimal Nadar, Senior Director & Head, Research at Colliers India, said against the backdrop of inflation cooling down in recent months and a projected GDP growth rate of 7% for FY2025, the decision to uphold benchmark lending rates reinforces investor confidence.
For the real estate sector, the decision offers a sense of continuity and predictability, Nadar said. It also provides a solid foundation for future investment and development initiatives.
Developers and investors can capitalize on the conducive environment to explore new opportunities and drive innovation in the market. Moreover, unchanged lending rates continue to present EMI dependent buyers a rational opportunity to fulfil their home-ownership aspirations. With anticipation of rate cuts in the ongoing fiscal year, the momentum in residential segment is likely to persist, he added.
Ashwin Chadha, CEO, India Sotheby’s International Realty, said, the encouraging news is that inflation has decreased over the past couple of months, while growth prospects have improved.
Economic growth has remained robust, evidenced by the above-expected GDP growth during Q3 FY’24. Recently, the World Bank also revised India’s FY25 growth projection upwards to 6.6%, with FY24 GDP estimated at 7.5%.
This strong growth trajectory is expected to sustain adequate demand, particularly in the luxury segment of the real estate market, Chadha said.
Stable rates are poised to support the housing market, and he anticipated a potential reduction in interest rates in the upcoming MPC meetings.
Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution Pvt Ltd, said For the past couple of years, the RBI’s policy has closely mirrored that of the Federal Reserve, and this trend persists. However, in the current Monetary Policy Committee (MPC) meeting, the governor highlighted how inflation is gradually decreasing and emphasized the robust growth in India’s economic landscape.
These domestic conditions of diminishing inflation and promising growth prospects set the stage for a potential rate cut.
“We anticipate that in the upcoming MPC meetings, the RBI will likely announce a rate cut ranging from 25 to 50 basis points, provided the current conditions continue to improve,” he said
Interestingly, the impact of rate increases has had minimal effect on the demand for home loans, which continues to rise.
“At Andromeda, we have observed approximately a 25% growth in the total disbursement of loans, including home loans, loans against property, and personal loans, during FY24,’’ Kapoor said.
