RBI Monetary Policy Committee (MPC) Announcement: Real Estate Sector Reaction

The RBI, in its Monetary Policy Committee (MPC) announcement, kept the repo rate unchanged at 4%, and the reverse repo rate at 3.35%, for the 10th consecutive time, making a progressive accommodative step for the present economic situation.

Commenting on the stance, Anuj Puri, Chairman, ANAROCK Group, "The fact that the repo rates remain unchanged is good for home loan borrowers as the floating retail loan rates, which are directly linked to external benchmark repo rates, will continue at what are the lowest levels in the last two decades. A continuation of this low-interest rate regime supports the overall environment of affordability for some more time and is very welcome. While the window of opportunity for homebuyers to avail low-interest rates has been extended for some more time, it is unlikely to prevail for much longer - sooner or later, repo rates will rise. Overall, this courageous and progressive stance by the RBI factors in real-time ground realities and flies in the face of industry expectations that the repo rates would be increased."

In addition to that, Dhaval Ajmera, Director, Ajmera Realty and Infra India Ltd. stated, "RBI's announcement to continue with its accommodative stance is a welcome move to revive and sustain growth and limit any disruption to economic activity. It is a clear signal that regulators have chosen growth over any other factor like inflation or even aggressive stance taken by global central bankers and policymakers. The Indian economy has weathered Covid Pandemic well and it will continue to be the fastest-growing economy in the coming future. After a heavy-duty CAPEX budget by the government, MPC has provided room to remain accommodative, improving inflation outlook with continuous policy support warranted for a durable and broad-based recovery."

Ajmera added, "The real GDP growth projected at 7.8% for 2022-2023 and inflation targets are seen to be milder than expected. We welcome these measures as it will continue the lower rate regime for the industry in general and also focus on the rate-sensitive real estate sector. With this move, consumers and home buyers will continue to enjoy decade low-interest rates prevailing from past few months and continue to drive robust demand for the sector."

Importantly, Siddharth Maurya, Market Expert (Real estate and fund management) stated on the RBI announcement, "As inflation is under control, RBI could have thought to lower the rates by 25 to 50 basis points. In the last 2 years, RBI has been maintaining an accommodative stance and slashed rates, which has been instrumental in setting the stage for higher economic growth. RBI should take a cue from the past actions and continue with further measures to support spending and spurred growth."

Commenting on the MPC decision, Ram Raheja, Director at S Raheja Realty on the RBI Monetary Policy, "The economy is recovering, and this move ensures sustainable growth would continue to be the focus. Alongside this, the pandemic and lockdown continue to be a hopeful prospect for the real estate sector given it is a safe-haven and tangible asset at the time of crisis. A low home loan interest rate regime has been greatly instrumental in further stimulating India's real estate sector eventually increasing investment and home-buying in the last two years. The coming quarter continues to remain optimistic for most of the sector ultimately reflecting in the S&P BSE realty index."