Developers pin hope albeit RBI's status quo

RBI today surprised the market by leaving the repo and CRR rates unchanged at 7.75 percent and 4 percent respectively. Majority had expected RBI Governor Raghuram Rajan to hike rates at least by 25 basis points owing to the persistent high inflationary pressure.

Economists believe that a status quo on key policy rates will serve as a breather for households and leveraged developers alike. He adds, “Looking beyond the inflation fuelled economic vagaries, the central bank has chosen to salvage the weak economic situation. From the perspective of the real estate industry, high inflation coupled with muted income growth has already made a dent on consumer affordability” says Dr. Samantak Das, Chief Economist and Director-Research, Knight Frank India.

“We welcome RBI’s decision not to hike the Repo and CRR rates and to keep it unchanged as this will stabilise the home loan market and sustain growth in the sector. RBI should take steps to increase fund supply for the sector which will help increase housing stock and stabilise property prices,” CREDAI National President Mr. Lalit Kumar Jain said.

While some developers hailed RBI's decision, saying that the bold move by the apex bank would infuse positive sentiments in the property market while others feel a rate hike was eminent. Commenting on the unchanged policy Mr. Sachin Sandhir, MD, RICS South Asia says, “For the real estate market, inflation remains a concern. And these concerns will continue to hinder investment sentiment even in the early part of the year 2014.”