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Budget 2022

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Presenting Partner

Life Insurance Corporation of India


Budget 2022

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Dell Technologies

Associate Partners

Kotak Mutual Fund
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RBI monetary policy | Unchanged rates good for homebuyers, real estate sector

Unchanged rates mean that home loans won't get expensive and buyers can continue to take advantage of the low rates, which will also sustain housing demand, experts say.

The Reserve Bank of India (RBI), as expected,  on February 5, left interest rates unchanged, while continuing with an "accommodative" stance, a move that will help homebuyers as well as the real estate sector.

Unchanged rates mean that home loans won't get expensive and buyers can continue to take advantage of the prevailing low rates, which will also sustain housing demand, experts said.

"The status quo on the policy rates is a welcome step for the homebuyers as they can take advantage of the prevailing lowest mortgage rates," said Samantak Das, Chief Economist and Head of Research, JLL India.

The benchmark repurchase (repo) rat,e at which banks borrow from the RBI, has been left unchanged at 4 percent, Governor Shaktikanta Das said, announcing the decisions taken by the central bank's monetary policy committee (MPC).

Also read: RBI monetary policy | Retail investors can take direct exposure in G-Secs, says Shaktikanta Das


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He also said the data for sales and new launches of residential units in major metropolitan centres reflected a renewed confidence in the real estate sector.

“Banks and housing finance companies are expected to increase mortgage lending due to stable interest rates and comfortable liquidity environment. The demand for housing, which has shown initial signs of recovery in the latter part of 2020, is expected to sustain if favourable interest rates and price incentives by real estate developers are further supported by economic recovery and improved job scenario,” Samantak Das said.

With consumer inflation still trending at the upper end of the apex bank’s band, and the policy repo rate being substantially reduced by 115 basis points since February 2020, the RBI kept the rates on hold, with an eye on how the inflation and the economic recovery pans out in the coming months ,” said Anuj Puri, Chairman- ANAROCK Property Consultants.

Advance estimates indicate that the Indian economy may contract 7.7% in FY2020-21 due to the pandemic

“In such a scenario, one would usually expect RBI to cut repo rates in order to boost consumption. Certainly, the real estate industry always aspires for reduced interest rates. Housing demand is reviving, and this demand needs to be fostered. However, the RBI's current stance is absolutely justified, given the unique circumstances. We are certain that rates will be adjusted favourably once the pandemic exigencies ease,” he said.

Also read: Growth coming back, says RBI governor: Key highlights from RBI MPC

Developers also said that RBI’s stance was along expected lines.

“Under the given market scenario and circumstance, the RBI’s direction on unchanged repo rate is very much on the anticipated lines, though a rate cut would have been better to combat the negativity of pandemic led economic crisis across the industry," said Niranjan Hiranandani, National President, NAREDCO.

The observation that sales and new launches of residential units in major metropolitan cities reflect a renewed confidence in the sector reinforces the need for further booster dose to strengthen its core revival that enacts a multiplier effect on 270 allied industries, he added.

The decision to leave rates unchanged was understandable, though a further cut in the key rates would have given a boost to demand uptick, he said .

Follow our LIVE coverage of the RBI MPC announcements here

The measures announced by the RBI governor for liquidity enhancement was a good step, said Dhruv Agarwala, Group CEO,, and "The recent Budget announcements and the RBI's decision today will help the sector to cope up with markets’ uncertainties better in the near future," he said.

The first MPC after the Union Budget will help fuel growth by enabling a strong borrowing ecosystem, Anurag Mathur, CEO, Savills India. Though there was no downward revision of benchmark lending rates, the accommodative stance should be helpful for real estate as well as infrastructure, one of the key focus areas in the Budget.

“Inflation being under the tolerance limit of 6 percent, gives the Reserve Bank, the ammunition of further reduction of rates and all-inclusive growth for all sectors, including real estate, in the upcoming fiscal year,” Mathur said.

In line with the Union Budget, the Reserve Bank of India on February 5 projected a GDP growth rate of 10.5 percent for the financial year 2021-22 on the back of a recovery in economic activities.
first published: Feb 5, 2021 01:35 pm
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