Real estate analysts think the RBI’s decision to keep the repo rate at 6.5% will help the housing industry sustain sales momentum throughout the holidays.
The housing sector will benefit from the Reserve Bank of India’s 10th straight repo rate freeze at 6.5%.
With stable interest rates, present and future homeowners can afford their monthly installments, which may boost house sales, especially over the holidays.
Mixed views on RBI’s Decision on Repo Rate:
A few analysts believe that a rate drop would have presented a good chance to revive the real estate market with lower interest rates ahead of the festival season, a critical time for real estate transactions.
Anuj Puri Chairman of Anarock’s views on Repo Rate being Constant:
“The steady home loan rates provide much-needed demand support in the continuous festive quarter. Achieving and preserving the sales momentum would depend much on unchanged interest rates, advised Anuj Puri, Chairman of ANAROCK Group.
Mr. Anuj Puri said, “The RBI has once more opted to retain the repo rates at 6.5%, enabling the housing market to sustain pace throughout the festival season, with the foundations of the Indian economy staying robust despite global headwinds, geopolitical concerns, and inflation well within control.”
He added, “Although a drop in the repo rate would have been ideal, Anuj Puri, Chairman of ANAROCK Group, pointed out that the RBI is walking a tightrope and has to consider several macro-economic issues.”
The relatively reasonable home loan interest rate regime will remain at a crucial time for the Indian housing industry, which is the festival season.
This is even though property prices are increasing and sales are decreasing.
From the perspective of homebuyers, the repo rate being constant is a positive development.
The average housing costs in the top seven cities increased by a cumulative 23% during the third quarter of 2024.
This occurred even though the average prices in these markets collectively increased to nearly ₹8,390 per square foot at the end of the third quarter of 2024, which is an increase from around ₹6,800 per square foot in the third quarter of 2023.
The third quarter of 2024 saw a fall in housing sales, even though prices were on the rise. An annual decrease of 11% was seen in home sales during the third quarter of 2024, as reported by ANAROCK statistics. Additionally, there was a 19% decrease in the number of new launches during this time period.
Sales momentum in Q4 2024 is expected to be faster than in the previous quarter. The demand during this year’s festive season quarter may be on par with, or even stronger than, last year’s during the same time. According to him, in the fourth quarter of 2023, sales in the top seven cities exceeded 1.27 lakh units.
Views by JLL on the Repo Rate being Unchanged:
Samantak Das, Chief Economist and head of research and REIS, India JLL, says that while a repo rate cut would have been good for the real estate market because it would have made people more likely to buy homes during the holiday season and made borrowing money cheaper, things as they are now are not likely to slow down the market. That they changed their stance to neutral is an early sign that they will change how they handle interest rates in the future.
CREDAI President Boman Irani on the RBI Decision:
RBI is still worried about possible inflationary forces, so the choice to keep the repo rate at 6.5% (though with a new neutral stance) seems like a missed chance, especially since the holiday season is coming up soon. GDP growth was only 6.7% in the last quarter, which was below RBI’s goal of 7%. “A rate cut at this point would have given the perfect boost to speed up consumer demand across all industries, which would have had a positive effect on economic growth going into Q3 FY 2025,” said Boman Irani, president of Credai.
“During the holiday season, there is usually a lot of interest and activity in the housing sector. Because of the unique multiplier effect that exists in this sector, a rate cut would have made real estate have an even bigger effect on India’s GDP growth and other macro-economic indicators.” It is still hoped by CREDAI that the central bank will lower interest rates in the next three months. This would boost economic growth and demand in all areas, he said.
Developers appreciate the RBI’s decision on Repo Rates:
According to a top developer, The RBI has again maintained the repo rate steady, implying that there would be no immediate impact on house loan EMIs.
While the real estate sector has experienced robust growth in recent years due to ongoing demand, a rate cut would have provided an excellent opportunity to reinvigorate the real estate market with lower interest rates ahead of the festive season, which is a critical period for real estate sales. Going forward, they anticipate reduced interest rates, which will boost not only real estate and housing demand but also other industries and economic growth.
Views expressed by Vimal Nadar, Head of Research Colliers:
According to Vimal Nadar, Head of Research at Colliers India, while the RBI has kept the benchmark lending rate unchanged at 6.5%, a shift in stance from “withdrawal of accommodation” to “neutral” indicates a clear direction for interest rate reductions in the near term.
This continued stability in repo rates should offer a considerable boost to residential real estate throughout the holiday season since home loan interest rates are expected to stay stable,” he said.
Homebuyers typically complete their home purchases in the fourth quarter, which is an auspicious season, with developers giving substantial discounts.
“In addition, property developers building commercial office buildings may find it advantageous due to stable borrowing costs and the Supreme Court’s recent extension of the Input Tax Credit (ITC),” Nadar continued.
In conclusion, the RBI’s decision to maintain the repo rate at its current level reflects the central bank’s ongoing efforts to balance economic growth with inflation management. While the pause in rate hikes provides some relief for borrowers, it’s essential to monitor global economic developments and domestic factors that could impact future monetary policy decisions.