RBI's 'pause' to provide temporary relief to realty sector; support festive season demand

"The decision by the RBI to keep key rates stable was taken in the backdrop of inflation being largely in control. The move imparts flexibility to the RBI to move in either direction in the coming months. Any hike in repo rate would have impacted consumption sentiments and also the real estate sector. Also, the change in stance of the RBI from neutral to calibrated tightening is an indication of the intent of the RBI to keep inflation levels in check," said Anshuman Magazine, Chairman, India and South East Asia.

Knight Frank India CMD Shishir Baijal said: "While we are in a rising interest rate cycle now, the pause will provide a temporary relief to the home buyer sentiment and support the festive season demand."

Favourable only for the short-term

Anuj Puri, Chairman - ANAROCK Property Consultants is of the view that RBI’s decision "is surprising and contrary to the industry's expectations, which skewed more towards an increase on the back of increasing inflation and depreciation of the rupee".

Real estate developers heaved a sigh of relief. "RBI's decision to keep the repo rate unchanged is a relief to the developers, home buyers and real estate stakeholders at large. However, the economy is too precariously poised for real estate to pull itself by its bootstraps. We hope in particular for decisive steps to end the credit freeze," said Jaxay Shah, President, CREDAI National.

Will banks reverse the hike in interest rates? Can a rate hike be expected in the near future and will banks now reverse the hike in interest rates, questioned others.

Niranjan Hiranandani, President, National Real Estate Development Council (NAREDCO), which works under the aegis of Ministry of Housing and Urban Affairs, Government of India, said: "The banking sector, like it has done just before the past two reviews, hiked interest rates. The RBI didn’t. This has real estate wondering whether it is just a bit of bother – or are we looking at an incomplete picture, and can expect to see something new in the coming days. Home loan rates remain untouched – in theory, as per the RBI's stance."

"A section of banks have a day before the RBI announcement, hiked interest rates. So, will we see them reversing the latest hike – or,will we see something akin to the RBI announcing a hike in rates? The jury’s out on this, we will wait and watch," he said.

Amit Wadhwani, Managing Director, Sai Estate Consultant Chembur Private Limited, anticipates that there may be a hike in repo rate by RBI in the near future.

"Concern about the rising repo rate by 25 basis points for a second straight time to 6.5 per cent have had an adverse impact on the Indian currency, but the decision to repo rates to kept unchanged has brought in major relief among consumers and real estate players. Also, the commencement of the festive season is another factor that will boost sentiment. There may be a hike in repo rate by RBI in the near future as US Fed is likely to hike their interest rates in December. Hence, home loan interest rates may get affected," he said.

Lending rates of NBFCs expected to rise Others cautioned that lending rates of NBFCs are also expected to rise on the back of IL&FS crisis and that may impact real estate financing.

"While The markets had anticipated an increase of at least 25 bps in the repo rates, by keeping the repo rate unchanged, RBI may have brought a positive sentiment in the market in general. This move will help in keeping the inflation in check. The lending rates of NBFCs are expected to rise, as the bigger concern for the real estate financing space is the liquidity crunch at the NBFCs post the IL&FS crisis. We will have to wait a while to see how these NBFCs respond to the current situation," said Suresh Castellino, Executive National Director, Capital Markets & Investment Services at Colliers International India.

vandana.ramnani@nw18.com