RBI’s decision to hold rate to boost housing demand, say real estate experts

The Reserve Bank of India’s decision to keep the repo rate unchanged at 6.5 percent will boost housing demand and give some relief to the homebuyers, real estate experts said on December 8, as the central bank held the key interest steady for fifth straight time.

The move reflected the central bank’s confidence in the country's economic fundamentals and growth prospects and would ensure EMI (equated monthly installment) stability for borrowers.

After hiking interest rates by 250 basis points from since May 2022, the RBI hit pause in February 2023. One basis point is one-hundredth of a percentage point.

G Hari Babu, National President of National Real Estate Development Council (NAREDCO), said with the GDP expected to grow at 7 percent in FY24, the announcement set an optimistic tone for the new year. The unchanged repo rate also signified a conducive environment for sustained growth in the real estate market.

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“It will positively impact both residential and commercial segments. We remain committed to contributing to the robust growth of the real estate sector, particularly in affordable housing, buoyed by the positive indicators set forth in the RBI's monetary policy announcement. However, despite the pause, the current interest rate is at its highest in the last four years,” Babu said.

Also Read: RBI MPC Meeting Highlights | Repo rate pause remains, inflation forecast retained, GDP growth seen at 7%

Momentum for housing market

Anuj Puri, Chairman, ANAROCK Group, a real estate consultancy, said that the move was an extension of the festival bonanza that RBI gave to the homebuyers in its last policy announcement. Stable repo rates would keep the momentum going for the housing market.

“It gives homebuyers yet another opportunity to make cost-optimised home purchases. If we consider the present trends, the housing market is on a bull run and unchanged home loan rates will only add to the overall positive consumer sentiments. Additionally, given that housing prices have escalated across the top seven cities in the last one year, at least the unchanged home loan rates will give some relief to the homebuyers,” Puri told Moneycontrol.

As per ANAROCK Research, average housing prices have increased anywhere between 8 and 18 percent across the top seven cities in the past year, with Hyderabad recording the highest 18 percent jump.

The current average prices in the top seven cities stand at approximately Rs 6,800 per sqft, 11 percent  more than Rs 6,105 per sqft in 2022, the research showed.

“Going forward, we may expect the momentum in housing sales to continue in the wake of the unchanged repo rates coupled with the resultant stable home loan rates and positive economic outlook on India,” Puri said.

Manoj Gaur, CMD Gaurs Group and President NCR chapter of Confederation of Real Estate Developers Associations of India (CREDAI), said that the housing sector, which has been on a positive trajectory, received a further boost with the RBI’s status quo decision.

Also Read: Demand for bigger houses grows despite high interest rates

“The market is receptive to the current 6.5 percent repo rate. New launches by leading developers have received enthusiastic responses as unsold inventory is at an all-time low, and demand for premium and luxury projects has reached unprecedented levels. RBI keeping the repo rate unchanged for the seventh consecutive time signals stability will benefit the sector,” he said.

Mohit Jain, Managing Director, Krisumi Corporation, a real estate consultancy, said that RBI’s decision translates to a “welcome pause” in the upward trajectory of bank-offered home loan rates, thereby ensuring EMI stability for borrowers.

Also Read: No impact on home loan interest rates for now, as RBI leaves repo rate unchanged

“This positive development bodes well for the housing market, as it fuels continued momentum in sales across various property segments, including affordable, mid-range, and luxury housing throughout various regions for the foreseeable future,” Jain said.

Mohit Goel, MD, Omaxe Group, said that RBI’s decision was commendable, as it would stabilise the upward trajectory of the real estate market.

Also read: RBI MPC 2023 | Repo rate, LAF, CRR, and all the key terms de-jargoned

“The consumer demand has been at par for quite some time and stable interest rates would further elevate buyers’ trust in investing in the sector. The entire year of 2023 has been a promising one for real estate as the rates have remained stable since the past few announcements,” Goel said.