RBI MPC meeting: Decision to hold rates will boost housing demand, say experts 

The Reserve Bank of India's Monetary Policy Committee (MPC) on June 8 retained the repo rate, the key short-term lending rate, at 6.5 percent

The Reserve Bank of India's Monetary Policy Committee (MPC) on June 8 retained the repo rate, the key short-term lending rate, at 6.5 percent, in line with expectations. Real estate experts said the “wait and watch approach” was “expected” and the pause is likely to encourage potential homebuyers to access housing loans at existing interest rates, thereby boosting housing demand.

Since May 2022, the regulator has hiked the repo rate by 250 basis points to counter inflationary pressure.

“With policy rates unchanged, potential homebuyers can continue to access housing loans at existing interest rates, thus boosting demand for residential properties,” said Samantak Das, Chief Economist and Head of Research & REIS, JLL India.

The Indian residential market witnessed significant growth during the January-March 2023 quarter, with the highest quarterly sales in the last 15 years indicating strong demand, despite elevated mortgage rates and a rise in residential prices. Developers have met the rising demand with the quarter witnessing a decadal high in new launches. “This congruence in demand and supply is expected to lead to a sustainable growth trajectory in the residential segment,” Das added.

“A respite in the home loan interest rate will augur well, fuelling an uptick in housing sales across segments… A hiatus in the interest rate hikes will act as a growth catalyst and boost sales velocity,” said Niranjan Hiranandani, National Vice Chairman of the National Real Estate Development council, and cofounder and MD of the Hiranandani Group.

On the back of the RBI's decision to maintain the repo rate at 6.5 percent, realtors expect both housing supply and demand to sustain its ongoing momentum. However, given that inflation is at an 18-month low, there is scope for the RBI to reduce repo rates in upcoming MPC meetings to stimulate growth across all industries, said Boman Irani, president, CREDAI National, a real estate industry body.

Given the current unchanged rates, the outlook for those looking to buy their first home via a home loan soon remains favourable. Interest rates from most banks will continue in single digits, said Anuj Puri, Chairman, ANAROCK Group, a real estate services company.

According to ANAROCK Research, in the first quarter of 2023, housing sales across the top seven cities breached the one lakh mark to touch 1.14 lakh units.

This demonstrates positive intent towards supporting the housing market and benefiting homebuyers, said Pradeep Aggarwal, founder and chairman, Signature Global (India) Ltd, a Gurgaon-based real estate group.

Real estate loan demand from both the housing and commercial segments has remained strong despite a 150 bps rise in the base lending rate (MCLR) over the past year. “However, we remain cautious about the industry, as complete transmission of the repo rate hikes to lending rates is yet to be observed. We believe that this status quo will facilitate positive decision-making for home buyers,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India, a real estate consultancy.