The Reserve Bank of India (RBI) maintained the policy rate at 4% and voted unanimously to keep the status quo with an accommodating stance. The marginal standing facility and bank rate remained at 4.25 per cent, while the reverse repo rate remained at 3.5 per cent. The majority of experts predicted that the RBI will preserve the status quo in the face of a rise in COVID-19 cases in the country. The RBI's decision to keep key policy rates unchanged means that low-interest rates on home loans will continue, but real estate developers believe that more reductions could have boosted housing demand, which has shown signs of recovery in recent months.
Prateek Mittal, ED Sushma Group, said, "The Reserve Bank of India (RBI) maintained the status quo on key policy rates at its recent monetary policy review meeting, which was in line with expectations. Given that the repo rate, which is the rate at which the central bank lends money to India's scheduled commercial banks, is already at a record low of 4%, there was little space for more cuts."
Following a budget with few real estate announcements, the sector was hoping against hope for a further reduction in repo rates. "Even though no profound measures were initiated for real estate and homebuyers in the previous Budget, the current RBI announcements were very much on the expected lines," said Nagaraju Routhu, CEO, Hero Realty. He added "It would have led to a ray of hope, if the sector received any benefit today, as the experts predicted. Despite the predictions, the apex bank kept the repo rate unchanged at 4%, but we are still expecting some kind of support from the Union government and RBI in their upcoming policy meetings to help the reeling industry enter a favorable scenario, which promises stable and long-term growth."
After being impacted by COVID last year, sales recovered in October-December 2020 due to pent-up and festive demand, as well as a low home loan interest rate of about 7%. Saying that while a further reduction in rates would have boosted the current demand uptake that we have seen recently, Achal Raina, COO Raheja Developers, says, "the RBI's decision to hold the Repo Rate unchanged along with its accommodative stance is understandable at this time. The steps announced by the RBI Governor including the promise that RBI will ensure ample liquidity in the system so that productive sectors get adequate credit to boost liquidity in the economy are positive moves. The RBI announcement of a new Liquidity infusion of Rs 50,000 crore for fresh lending to national financial institutions -- Rs 25,000 crore to NABARD, Rs 10,000 crore to NHB, and Rs 15,000 crore to SIDBI is a welcoming decision. The real estate sector has been hard hit by the pandemic, and the recent Budget announcements, as well as the RBI's decision today, will help the sector cope better with market uncertainty in the near future with the infusion of additional liquidity should bring stability to the sector."
The reduction would have aided demand for real estate, which has been significantly affected by the pandemic and subsequent lockdowns. However, Pradeep Aggarwal, Founder & Chairman, Signature Global Group, Chairman, ASSOCHAM, National Council on Real Estate, Housing and Urban Development, felt that "The affordable housing market is already experiencing increased demand, and the RBI's new unchanged stance will have no impact on demand. Indeed, the RBI's growth projections will instill a sense of hope in the sector, which will translate into positive numbers for the real estate sector. If the economy recovers, which is likely after the RBI announced in the MPC review that it will maintain market liquidity and the job market remains active, then the buyer of affordable housing will expedite the process of property ownership. Right now, we understand the MPC's decision and hope that growth projections change, resulting in a flourishing real estate market."