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Thursday, July 25, 2024

RBI Monetary Policy February; Real Estate Industry Leaders Opinions

Reserve Bank of India governor Shaktikanta Das on Thursday said the central bank has kept the repo rate stable at 6.5 per cent. The benchmark interest rate was last raised last February to 6.5 per cent from 6.25 per cent to contain inflation that was driven by global developments. It was left unchanged in December 2023 meet. RBI governor Shaktikanta Das announced that the repo rate remained unchanged for the sixth time in a row. The retail inflation in the current financial year has declined after touching a peak of 7.44 per cent in July 2023. However, it is still high and was 5.69 per cent in December 2023, though within the Reserve Bank’s comfort zone of 4-6 per cent.

Industry Leaders Opinions

Keval Valambhia, COO, CREDAI MCHI

Ensuring stability in interest rates holds profound implications for both the residential and commercial real estate domains. Keeping the Repo rates low will foster an environment of financial accessibility through consistently low borrowing costs. Stable interest rates serve as a pivotal catalyst for driving heightened interest and investment in properties across both sectors. This, in effect, generates a ripple effect of increased demand, thereby injecting vitality into the real estate industry and also to economy at large. Amidst the intricacies of economic fluctuations and market uncertainties, the imperative of prioritizing affordable housing cannot be overstated.” 

Sachin Marani, Director – Square Feet Group, Secretary – CREDAI MCHI – Thane

“We are pleased that the RBI has decided to maintain the REPO rates unchanged, considering that inflation remains above the 4 per cent target. The market had anticipated that the RBI would maintain the status quo on its policy stance in this monetary policy. The current GDP projection for FY24 is 7.0%, indicating a robust Indian economy. The repo rate has been held at 6.5% for five consecutive meetings, and there is speculation that policy rate cuts may commence from June or August onwards.

The interim budget focused on maintaining fiscal discipline with no major new spending announcements, suggesting less pressure on the RBI to hike rates to control inflation. This decision will be a relief for homebuyers, especially in the affordable segment where the market is getting stabilized after a period of instability. There is a growing demand for real estate amongst millennials especially in emerging markets like Thane, Navi Mumbai, and Panvel where the real estate prices are still rational and reachable.

The millennials are looking more than carpet and structure, they want a lifestyle, facilities, plug-and-play solutions in housing and they want to buy properties from reputable developers. The only thing that is stopping or perhaps delaying their home buying decisions is the anticipation that interest rates will come down in the next few months. As a developer, we are also optimistic that the RBI will consider reducing the REPO rates in the upcoming monetary policy, which will greatly relieve homebuyers and particularly bring more young home buyers into the real estate fold.

Mr. Sachin Patel, Chief Managing Director, Swaminarayan Group

Average home prices in India are set to rise 7% this year and next, driven by purchases of luxury properties. Barely dented by the Reserve Bank of India’s 2-1/2 percentage points of interest rate rises from May 2022 to February 2023, the Indian housing market has powered along with Asia’s No. 3 economy, the fastest growing amongst major peers. Despite the RBI’s efforts to curb inflation with higher rates, a post-pandemic buying frenzy among high-income earners pushed home prices up. But expectations that the central bank will slash interest rates this year should recover affordability. We are channeling our focus towards launching more premium projects, contributing to the challenges faced by the affordable segment.

Vihang Sarnaik, Director, Vihang Group

We’re pleased with the RBI’s decision to maintain the status quo on REPO, especially given the ongoing inflation above the 4 per cent target. It aligns with market expectations, indicating a sense of stability in the current monetary policy. As a leading developer catering the middle-class housing aspirations, this will keep the housing demand intact.

The decision to keep the repo rate intact will help developers like us who catering the middle-class aspiration of owning a home. It will help to continue the current momentum in real estate sales as even a 0.25 BPS increase would have impacted the home-buying sentiments in this segment.

We have anticipated that there won’t be a major change in the repo rates so we have secured a monumental approval for a staggering 3 million square feet commencement certificate from TMC to deliver quality housing in the price bracket of Rs60 to Rs 90 Lakhs to cater to this aspirational middle class.

Looking ahead, we’re optimistic that the RBI will consider reducing the REPO rates in the upcoming monetary policy, providing much-needed relief to the working and salaried class in owning a home.

Nikunj Sanghavi, Managing Director – Veena Developers, Treasurer – CREDAI MCHI

“The decision to uphold the current repo rate is a welcome move in the face of a challenging economic environment world wide, showcasing a judicious approach to balancing diverse sectoral needs, including real estate. Recognizing the intricate dynamics in transmitting repo rate adjustments to lending rates, this decision provides a glimmer of positivity that holds the potential to invigorate buyer sentiments. Nevertheless, as an industry, we maintain vigilance, considering the cumulative impact of recent rate hikes on demand, especially in the affordable and middle-income segments. Emphasizing the broader economic interest and the housing industry’s well-being, we advocate for a future reduction in the repo rate by the RBI.

Shrinivas Rao, FRICS, CEO, Vestian

“RBI maintained status quo and kept the repo rate unchanged at 6.5% for the sixth time in a row. It is a welcome move to curb inflation and control liquidity in the market. Moreover, this stability in the monetary policy along with robust economic growth may result in sustained demand for real estate assets.”

Mr. Rao further added, “Headline inflation inched up marginally to 5.7% in December 2023 from 5.6% in the previous month. If inflation comes down under RBI’s target limit, the second half of 2024 may witness rate cuts, further boosting the housing demand.”

Mr. Mohit Jain, Managing Director, Krisumi Corporation

By holding rates steady, the RBI prioritizes inflation control within its target range. While from the real estate sector perspective, a downward revision in rates would have been the best outcome, but the RBI’s decision to hold rates implies steady EMIs for borrowers. We expect continued momentum in sales across various property segments, including affordable, mid-range, and luxury housing throughout various regions for the foreseeable future. A downward revision, which is expected later this year, would further propel the sector.

By Vimal Nadar, Senior Director, Research | Colliers India

“At 6.5%, the benchmark lending rate has remained stable for a year now. The commitment to growth while taming headline inflation remains unabated while the economy is expected to close at a higher 7.3% for the fiscal 2023-24.The stability not only provides continued relief to homebuyers in the form of predictable EMIs but also aids real estate developers in having greater confidence on near-term financing costs. The steadiness in real estate ecosystem augurs well for healthier balance sheets and should provide further momentum to sales in the residential segment. Moreover, the recent focus of the interim budget on infrastructure and urban housing stands to benefit the real estate sector throughout 2024 and beyond. An anticipation of future repo rate cuts and projected GDP growth rate of 7% for fiscal 2024-25 adds credence to conviction of a strong performance by the real estate sector in the next few quarters.”

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

As expected, the RBI kept rates on hold. The prolonged pause, for the sixth time, since February 2023, is aimed at keeping inflation in check without hurting the economic growth momentum. With the reduction in policy rates would have been the best scenario for interest-sensitive sectors like the real estate sector, policy continuity is the next best outcome for both borrowers and developers alike. The decision allows homebuyers to make informed choices, which is expected to result in enhanced demand across all housing segments in line with the country’s overall economic progress.

Mr. Amit Goyal, MD, India Sotheby’s International Realty

The RBI’s decision to maintain policy rates at 6.5% was anticipated, given the global uncertainties, which is also highlighted by the governor, including ongoing conflicts and emerging flashpoints worldwide, with disruptions in the Red Sea being the latest example.

However, the encouraging aspect is the remarkable performance of the Indian economy in recent years. Growth is accelerating, surpassing most forecasts, and inflation is on a downward trend. The projected real GDP growth for the next financial year stands at 7%, with risks evenly balanced. Headline inflation has moderated to 5.5%, which is positive news. If the current scenario persists, we may anticipate a rate cut in the next MPC meeting.

Overall, the current situation bodes well for the real estate market, and we anticipate robust demand to continue, particularly in the luxury real estate segment.

Mr. Prashant Rao, Managing Director, Poulomi Estates, a Hyderabad based real estate developer

Against the backdrop of global uncertainties, the RBI’s decision to maintain policy rates at 6.5% came as no surprise. However, the governor highlighted that India’s potential growth is currently underpinned by structural drivers such as improved physical infrastructure, the development of world-class digital and payment technologies, ease of doing business, increased labor force participation, and better quality of fiscal spending.

Consequently, the projected real GDP growth for the next financial year stands at 7%, with risks evenly balanced, and headline inflation has moderated to 5.5%. These developments bring positive news for both the Indian economy and the real estate sector. With this we anticipate a rate cuts in the next MPC meeting, which will be advantageous for home buyers. 

Mr. Piyush Bothra, Co-founder and CFO, Square Yards

The RBI’s decision to keep the status quo for the sixth consecutive time is in line with expectations and is poised to bolster consumer confidence. This move is a big positive for the affordable and low-income housing segments, which are responsive to interest rate fluctuations. The decision also fosters confidence among homebuyers by providing stability in loan repayments, consequently stimulating overall consumer spending. With the real estate market currently experiencing a bullish trend, the RBI’s persistent repo rate stance is anticipated to amplify the momentum in the housing sector.

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