RBI Kept Repo Rate Unchanged: What Does This Mean For Home Loan Borrowers?

Governor Shaktikanta Das of the Reserve Bank of India (RBI) released the second bi-monthly monetary policy for the fiscal year 2024-25 on Friday. For the eighth time in a row, the six-member Monetary Policy Committee (MPC), chaired by Governor Das, opted to keep the benchmark repo rate at 6.5%. The RBI has stabilised external benchmark lending rates by keeping the repo rate stable. This is good news for borrowers since it means their EMIs won't rise. Low borrowing costs will keep home loans affordable, which will motivate investors and homebuyers.

Mr. Krishan Mishra, CEO, FPSB India commented, "We welcome the RBI's decision to keep the repo rate unchanged. This stability is a positive signal for the financial planning sector and consumers alike. An unchanged repo rate provides a consistent environment for both certified financial planners and their clients to make informed decisions about investments, savings, loans, etc. For financial planners, stable rates mean more accurate projections and advice, which results in fostering trust and confidence among clients. This unchanged repo rate is also beneficial for home buyers. It ensures that home loan EMIs remain stable, making it easier for individuals to plan their finances without the worry of increasing borrowing costs. This stability is particularly encouraging for potential home buyers to proceed with their purchase decisions, supporting sustained growth in the housing market."

Gurmit Singh Arora, National President, Indian Plumbing Association said, "While the continuation of the status quo regarding the repo rates by the RBI benefits home buyers in some aspects, it also bears some drawbacks. That being the case, although the maintained status has given an illusion of stability and market predictability in the housing loan market, the long-drawn high-interest rate regime is driving the expenses up in terms of affordability. The potential homeowners are now left in a very unenviable position of having to either spend a percentage of their monthly salary which might be more than what they previously had to borrow or having to adjust their expectations of homeownership with the hope that the interest rate will become slightly more reasonable in the future. But for the consumers who already had home loans, the monetary policymaker's conservative policy decision allows a temporary relief against mounting EMI pressures, even as the economy is passing through tough phases."

Mr. Pankaj Dhingra, Managing Partner & Co- Founder - "We commend the RBI's decision to maintain the repo rate at its current level. This stability sends a relieved message to the consumers. The unchanged repo rate is advantageous for consumers, as it keeps home loan EMIs as it is. This allows individuals to plan their finances with greater certainty, free from concerns about rising borrowing costs. Such stability will particularly encourage prospective home buyers, prompting them to move forward with their purchase decisions and supporting continued growth in the housing market."

LC Mittal, Director, Motia Group said, "The RBI's strategy to wait and watch before initiating further rate cuts is well-appreciated, especially in the light of the eagerly awaited union budget that is expected to shed light on fiscal policy. To home buyers, this cautious stance means a higher borrowing cost period that continues to undermine the constrained demand for property in the real estate market. As much as the industry expected the RBI to cut the rates to boost housing consumption, the latter's priority lies in curbing inflation and maintaining financial stability. Consumers that buy homes now experience the dilemma of either delaying their decision on their mortgages or handling more expensive EMIs."

Subhash Goel, MD at Goel Ganga Developments commented, "This decision shows that the RBI is alert to inflation threats - the key reason why it has kept the repo rate constant - despite portraying an upbeat economic growth picture. While this policy stance makes much macroeconomic sense, it also presents efficacious challenges for prospective homeowners. As the cost of borrowing offset remained high, the affluence of attaining homeownership continues to remain a mirage to several, especially within the affordable housing space. As far as the monetary policy is concerned the biggest wait goes to the fiscal policy, similarly the home buyers wait for the ideal interest rates and the cheaper prices of the houses in the coming months."

Aman Gupta, Director, RPS Group stated that, "The decision analyzing the structure of the RBI currently keeping repo rate at 6. 5 percent for the eighth consecutive time is consistent with the desire of the central bank to permanently guide the inflationary expectations. As for home buyers, such an approach may also have mixed implications: the risks and opportunities will depend on the possibilities of continuing the decline of interest rates for a long time. In turn, even if the current set of bargaining factors such as high interest rates significantly slows the overall housing demand, it does offer an opportunity for those within the financial capacity of attaining a more favorable loan interest rate before any further increase. While some home buyers might be waiting for the prices of new properties to come down, others might be looking forward to take advantage of the slow market, to bargain for better prices with the developers involved."

Gaurav Kansal, Director, KBP Group believes that, "This means keeping the repo rate as it is will keep the borrowing costs affordable for people intending to purchase homes by maintaining the housing market's pace. The government has signed new luxury housing projects to meet the consumers' demand for high-end property; it will stabilize macroeconomic factors and engage new customers. It has been seen that with the boom in the Indian economy the contribution made by the real estate sector is huge hence the current repo rate policy will help in stimulating demand and strengthening the growth."

Commenting on the outlook of the real estate sector following the unchanged repo rate news, Ramani Sastri, Chairman and MD, Sterling Developers said "The Indian real estate sector continues to scale new heights and the growth outlook is also projected to be strong. In this context, the status quo stance by RBI is welcome to bolster overall market confidence. With the economy looking up and all signs being positive, there is no hesitation among the homebuyers to invest in residential real estate for long-term returns. Moreover, stable home loan rates improve consumer confidence and enable more informed investment decisions, since there is a noticeable shift in the intent and aspirations of Indian homebuyers.

However, a future repo rate cut would serve as a big boost to homebuyer sentiment and enable better affordability, which is an extremely sensitive factor in the housing market. We will continue to see a multi-fold growth in real estate investments since the real estate market is less volatile than other investment markets and delivers higher returns. We also hope that the new government would continue to focus on infrastructure development, lowering home loan interest rates, prioritizing tax incentives, easing regulatory constraints and streamlining approval processes for overall growth of the real estate sector."

Sridhar Samudrala, Founder, Hecta commented that, "The results of the 2024 elections which ensured the BJP's continued governance is likely to maintain stability and investor confidence in India's real estate market. With focus on infrastructure development and housing initiatives, we can expect increased investments and project launches across the country. This will have a positive impact on both residential and commercial real estate sectors, leading to increased growth and improving market dynamics. Additionally, policies favoring affordable housing and smart city projects will likely enhance the sector's growth prospects, creating a more robust environment for developers, investors and homebuyers alike."