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RBI Monetary Policy: Low-interest rate regime will enable more homebuyers to invest in real estate

One of the important factors driving home buying is record-low mortgage rates. With this unchanged policy rate, the lending agencies will continue to maintain the prevailing low home loan interest rate.

RBI Governor Shaktikanta Das presented the monetary policy statement. (Image credit: ANI/Twitter)

RBI Governor Shaktikanta Das presented the monetary policy statement. (Image credit: ANI/Twitter)

The real estate sector welcomed the RBI MPC’s decision to keep the repo rates unchanged at 4% and reverse repo rate at 3.35% while maintaining an ‘accommodative’ policy stance to revive and sustain the growth rate, saying that the move will help homebuyers continue to enjoy decade low-interest rates.

The Reserve Bank of India (RBI) on February 10 held its key lending rates steady at record low levels for the 10th straight meeting to support a durable recovery of the economy from COVID-19. The six-member MPC, which has been on pause since August 2020, voted unanimously to maintain the status quo on the repo rate and by a majority of 5-1 to retain the accommodative policy stance as long as necessary.

The housing market has been showing a healthy bounce back from the COVID-19 crisis and low-interest rates will help in improving affordability and sustaining the growth momentum, real estate experts said.

The fact that the repo rates remain unchanged is good for home loan borrowers as the floating retail loan rates, which are directly linked to external benchmark repo rates, will continue at what are the lowest levels in the last two decades. A continuation of this low-interest rate regime supports the overall environment of affordability for some more time and is very welcome, said Anuj Puri, Chairman – ANAROCK Group.

Real estate developers also welcomed the move.

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“The unchanged REPO rates by RBI is a welcome move. While several industries anticipated an alteration in the rates, the sustained accommodative stance signals the government’s commitment towards housing. We are confident that this decision will enable a larger demographic of consumers to enter the market and invest in real estate,” said Abhishek Kapoor, CEO, Puravankara Limited.

“The RBI MPC has guided the Indian economy through a difficult time, ensuring that the pandemic did not hurt growth prospects even while exercising control over issues such as inflation. In line with the efforts to limit the disruption to economic activity, for the tenth consecutive review, the RBI MPC maintained the status quo on key policy rates, while also maintaining an accommodative stance. This reflects on the consistency which is seen vis-à-vis the Finance Minister’s Budget Speech and today’s Monetary Policy announcement,” said Niranjan Hiranandani, Vice Chairman, NAREDCO and MD, Hiranandani Group.

Experts said that the status quo of the bank comes as a breather.

“In the absence of the specific demand-side interventions from the Budget 2022-23, prospective homebuyers can continue to benefit from lower home loan interest rates which are here to stay for now,” said Ramesh Nair, CEO, India, and Managing Director, Market Development, Asia at Colliers.

The Monetary Policy Committee has voted to keep benchmark lending rates unchanged while taking cognisance of the gradual tapering of the third wave of infections. The accommodative stance is backed by consumer inflation remaining within tolerance level in recent times. For FY2023, the RBI estimates inflation growth to be 4.5%.

“Real estate, especially the residential segment, has benefited from the historically low benchmark lending rates to a large extent. This is likely to keep gaining strength, as demand has remained consistent in recent quarters. The recent budgetary announcements focused on infrastructure which will also welcome the benign rates and accommodative stance. The economic growth is expected to be led by urban capacity building, infrastructure upgrade, multimodal logistics parks, affordable housing, and SEZ policy, and hence the RBI maintaining stable rates is welcome for industry stakeholders,” said Anurag Mathur, CEO – Savills India.

This MPC's decision is welcome for the Indian real estate sector. Indian residential market staged a smart recovery in 2021 as sales grew by 72% year-on-year and reached close to 90% of the pre-COVID 2019 sales levels, explained Samantak Das, Chief Economist, and Head, Research and REIS, India, JLL.

“One of the important factors driving home buying is record-low mortgage rates. With this unchanged policy rate, the lending agencies will continue to maintain the prevailing low home loan interest rate. Our expectation is that during the current calendar year, the residential sector will definitely surpass the pre-pandemic level of sales backed by ‘affordability synergy’. However, we have to keep a close watch on the global policy changes and headwinds, particularly the movement of the US Fed rate,” he said.

The RBI move means home loan interest rates will continue to hover at record low levels, encouraging buyers to buy property. This will solve the twin purposes of helping the government move towards its housing for all goal while also giving a major boost to the real estate industry, adds Dhruv Agarwala, Group CEO, Housing.com, Makaan.com & PropTiger.com

"The sustenance of housing market recovery will have a strong multiplier effect on overall economic growth”, adds Shishir Baijal, Chairman and Managing Director, Knight Frank India.
Vandana Ramnani
first published: Feb 10, 2022 03:39 pm
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