RBI Monetary Policy 2024: Reserve Bank of India Governor Shaktikanta Das on Thursday announced the bi-monthly MPC decisions amid expectations of continued pause on the key interest rate as inflation remains near the upper tolerance level of 6 per cent.
While announcing the decisions, Governor Das said that the RBI has decided to maintain the status quo on the key lending rate or repo rate and keep it unchanged at 6.5 per cent.
Impact On Housing Sector
Anuj Puri, chairman, Anarock Group, said, “With the fundamentals of the Indian economy remaining strong despite all global headwinds and inflation well under control, the RBI once again decided to keep the repo rates unchanged at 6.5%, thus extending the festive bonanza that it gave to the homebuyers in its last two policy announcements. Thus, homebuyers retain their advantage of relatively affordable home loan interest rates.”
Housing Market Trends & Home Loan
Puri added that if current trends are considered, the housing market has been unstoppable, and unchanged home loan rates will help maintain the overall positive consumer sentiments.
“Given that housing prices have risen across the top 7 cities in the last one year, this breather by the RBI is a distinct advantage to homebuyers.”
As per Anarock Research, 2023 saw average housing prices rise by anywhere between 10-24% in the top 7 cities, with Hyderabad recording the highest 24% jump. The average prices in these markets stood at approx. Rs7,080 per sq. ft., while in 2022 it was approx. Rs 6,150 per sq. ft. – a collective increase of 15%.
“Going forward, we can expect the momentum in housing sales to continue, significantly aided by the unchanged repo rates which will keep home loan interest rates attractive and also signal ongoing robustness of India’s positive economic outlook,” Puri added.
Manoj Gaur, president CREDAI NCR and CMD Gaurs Group, said, “The real estate sector continues to exhibit a steady demand, the commercial segment is doing exceptionally well, and the country’s economy is growing from strength to strength. The residential segment will maintain the trajectory it took last year. I am sure that the sector will continue to show buoyancy as in the past quarters across the country.”
Manju Yagnik, vice chairperson, Nahar Group and SVP, NAREDCO- Maharashtra, said considering that the macroeconomic conditions are favourable and the rate has been held at 6.5% for the past few quarters, the Indian real estate market and the overall economy would have benefited immensely from a rate reduction.
“This action will keep consumer housing costs and mortgage rates higher, and we hope it won’t negatively affect the feelings of prospective homeowners,” Yagnik added.
Ramani Sastri, chairman and MD, Sterling Developers, said, “The long-term benefits of owning a home have led to sustainable growth in the segment and we see this up-cycle continuing in 2024. Hence, the pause in policy rate augurs well for the residential real estate sector.”
Sastri also highlighted that consumers are keen to buy homes as stability and security are on top of their minds now and the recent past has been a testament to the fact that home buyer confidence is at an all-time high.
“We will continue to see a multi-fold growth in real estate investments since the real estate market is less volatile than other investment markets and delivers higher returns. As long as the macro fundamentals are stable, demand for real estate will continue to grow. Going forward, there can be a further uptick in demand with a reduction in rates, making it even more enticing for prospective homebuyers and bolstering overall market confidence,” Sastri said.
Pawan Sharma, MD, Trisol RED, said, “The fact that the repo rate has not increased in the past year has proven beneficial for the real estate sector in every aspect. This is undoubtedly excellent relief news for both home buyers and investors. Indeed, this will further benefit the market.”
Nayan Raheja from Raheja Developers, said, “The realty sector welcomes the RBI’s decision to hold the repo rate. This move will foster stability and bolster confidence among stakeholders, including home buyers and investors. However, the repo rate at 6.5% remains at a 4-year high, and a rollback would have boosted the affordable housing segment.”
Pradeep Aggarwal, founder & chairman, Signature Global (India), added, “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.”
Repo Rate Trend
For a year, the Reserve Bank has kept the short-term lending rate or repo rate stable at 6.5 per cent.
The benchmark interest rate was last raised in February 2023 to 6.5 per cent from 6.25 per cent to contain inflation driven mainly by global developments.
The MPC is entrusted with the responsibility of deciding the policy repo rate to achieve the inflation target, keeping in mind the objective of growth.
In an off-cycle meeting in May 2022, the MPC raised the policy rate by 40 basis points and it was followed by rate hikes of varying sizes, in each of the five subsequent meetings till February 2023. The repo rate was raised by 250 basis points cumulatively between May 2022 and February 2023.
The MPC consists of three external members and three officials of the RBI.
The external members of the panel are Shashanka Bhide, Ashima Goyal, and Jayanth R Varma. Besides Governor Das, the other RBI officials in MPC are Rajiv Ranjan (Executive Director) and Michael Debabrata Patra (Deputy Governor).
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