Thursday, June 20, 2024

RBI Maintains Repo Rate at 6.5% Amidst Upward Revision of GDP Forecast

In its eighth consecutive decision, the Reserve Bank of India (RBI) opted to maintain the benchmark repo rate at 6.5%. Led by RBI Governor Shaktikanta Das, the six-member Monetary Policy Committee (MPC) reached this conclusion with a 4:2 majority. The RBI reiterated its stance of ‘withdrawal of accommodation’ while revising upwards the GDP growth forecast for FY25 to 7.2%, up from the previous estimate of 7%. The inflation forecast for FY25 remains steady at 4.5%.

Governor Das underscored the RBI’s unwavering commitment to ensuring price stability. Despite India’s positive trajectory in managing inflation, challenges persist due to global geopolitical tensions, disruptions in the supply chain, and fluctuations in commodity prices. To address these challenges, the central bank announced plans for further regulations on unsecured loans and emphasized the importance of transparent fee disclosures by regulated entities. Additionally, the RBI transferred a dividend of ₹2.11 lakh crore to the government and maintained a contingent reserve buffer of 6.5%.

Industry Reactions:

Mr. Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd

Pradeep-aggarwal

The RBI held rates steady for the eighth time in a row, likely due to high food inflation despite overall CPI falling within their target range. Strong GDP growth in FY24 may have also influenced this decision. However, economists anticipate rate cuts of 25-50 basis points in the second half of the fiscal year if inflation keeps declining. Lower interest rates could further boost the real estate sector, which is already experiencing strong market demand from end-users. We expect the robust demand trend to stay healthy over the next few years, particularly in cities like Gurugram which are witnessing robust infrastructure development.

Mr Mohit Jain, Managing Director, Krisumi Corporation

Mr. Mohit Jain Managing Director Krisumi Corporation

The demand for homes remains stronger, especially in the luxury and high-end segments. The RBI status quo on the policy front is expected to keep the momentum going. However, with potential rate cuts on the horizon, the entire real estate market could see an additional boost as and when it materializes. The mid and premium housing segments will be the biggest beneficiary of any future rate cut.

Mr. Samir Jasuja, CEO and MD of PropEquity

Smair jasuja

The decision of RBI is on the expected lines. With overall inflation falling within the RBI range, a policy rate cut may not be very far away. Real estate prices have gone up substantially and a future rate cut will give much higher purchasing power to the customer which is the need of the hour. Such a move would be a welcome news for homebuyers across cities including metro cities as well as tier II and III cities.

Mr. Aman Sarin, Director & Chief Executive Officer, Anant Raj Limited

Mr. Aman Sarin Director Chief Executive Officer Anant Raj Limited

We welcome the RBIs move to keep the repo rate unchanged. For the eighth consecutive time the RBI has decided to keep the repo rate unchanged at 6.5%. The RBI’s decision to maintain the status quo on the policy rate is driven by inflation, which remains at a comfortable level of 4%. This will keep the Liquidity and the Cost of Borrowings at static level, thus, helps to keep the cost under control. Real estate Sector will benefit due to static cost of borrowings and price stability and will result in better Profitability in long run from ongoing Projects.

Mr. Amit Goenka, MD and CEO at Nisus Finance

Mr. Amit Goenka

Keeping rates constant, RBI has affirmed its confidence in the economy and its continued growth, which is showing a very healthy number at 8.2 percent as per NSO, while keeping at inflation largely in check at 4.83% well in the middle of its indicative band of 2-6%. Indian real estate players can look forward to being on a robust growth path, continuing the policies of the last ten years of managing fiscal deficit, large infra investments, and a largely stable rupee. 

Dr. Mohit Ramsinghani, Chief Business and Strategy Officer – Suraj Estate

Dr. Mohit Ramsinghani Runwal Group

This stability in interest rate will support the real estate market, making housing more affordable and boosting consumer confidence. Developers and investors can capitalize on the conducive environment, as the residential segment is currently experiencing a bull run.

Sowdamini Bhat, CEO, LoanXpress

Ms. Sowdamini

The Reserve Bank of India (RBI) has decided to maintain the repo rate at 6.5% in its latest Monetary Policy Committee meeting conducted on 7th June 2024, marking the eighth consecutive unchanged decision. Governor Shaktikanta Das emphasized the resilience of the Indian banking system and the strong performance of Non-Banking Financial Companies (NBFCs) in FY24, indicating overall financial sector robustness. The GDP growth forecast for FY25 has been revised upward to 7.2%, with steady quarterly projections. CPI inflation for FY25 is expected to be 4.5%, with attention needed on food price inflation. The MPC aims to gradually withdraw accommodation to align inflation with targets while supporting growth, focusing on policy transmission and inflation expectation anchoring. Additionally, the standing facility and bank rate remain unchanged at 6.75%, and the RBI has transferred Rs 2.11 trillion to the central government as a dividend. The contingent reserve buffer remains at 6.5%, reflecting the central bank’s commitment to financial stability.

Mr. Ashish Narain Agarwal, Founder and CEO at Property Pistol.com

Real Estate Transactions

The RBI has kept policy rates unchanged for the eighth consecutive time, focusing on the broad economic outlook and stable inflation. In the context of the real estate market, 2023 was an optimistic year, and 2024 appears to be continuing this trend with robust demand and supply in both the residential and commercial segments. The pause in repo rate increases is expected to help maintain stability in home loan rates, which should prevent EMIs from rising and provide reassurance to potential homebuyers about stable borrowing costs.

Conclusion

RBI’s decision to maintain the repo rate at 6.5% shows a balanced approach to stabilizing the economy and managing inflation amid global uncertainties. The upward revision of GDP growth forecast for FY25 to 7.2% reflects optimism. Emphasis on price stability and measures to regulate loans demonstrate caution and transparency. Industry responses vary, but overall sentiment is optimistic about India’s economic resilience. RBI’s focus on liquidity management signals readiness to navigate future challenges while fostering economic expansion.

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