Unchanged Rates: Key Takeaways For Housing Sector
Why did RBI keep the repo rate unchanged? How does it help the economy, particularly the housing market? Experts say the RBI's decision happened because of sustained GDP growth forecast and a manageable inflation. Will it help the housing sector? Says Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE: "The pause on the interest rate is expected to push sentiments further for home buyers, and this continued pause in rates is likely to boost the real estate sector significantly."
Anuj Puri, Chairman, ANAROCK Property Consultancy says, considering 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-7 cities in the last one year, at least the unchanged home loan rates will give some relief to the homebuyers.," he adds. Seconds Ramani Sastri, CMD, Sterling Developers. "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."
As reported earlier, the housing market continues to outperform 2022 sales. An unchanged repo rate signals steady interest rates for prospective homebuyers and developers, says Vimal Nadar, Senior Director, Research, Colliers India. "This will aid a stronger 2023 with sales expected to be higher by 20-30 per cent compared to 2022. Steady interest rates will continue to fuel sentiment buoyancy in the market, keeping the housing market on a higher growth trajectory as we begin 2024," says Nadar.
Upasna Bhardwaj, chief economist, Kotak Mahindra Bank points out that the Monetary Policy Committee retained focus on 4 per cent inflation being the medium target, with monetary policy actions to ensure disinflationary trends ahead. "We continue to expect prolonged pause by the MPC, with liquidity tools being more closely if necessary to manage the policy stance," adds Bhardwaj.
Why Status Quo?
Why did the RBI maintain status quo? Experts say the unchanged interest rates reflects a cautious approach aimed at stabilizing inflation within the targeted band of 2 per cent-6 per cent. The RBI governor mentioned a balanced risk outlook, and the projection for Real GDP growth stands at 7 per cent for the current fiscal year, with an anticipated range of 6.4 per cent to 6.9 per cent for the next year. Given these positive and strong economic indicators, the probability of a rate hike in the upcoming MPC review meeting appears negligible, experts add. "We anticipated that the housing sector, particularly the luxury segment, will continue to thrive amid a well-performing economy and growing purchasing power of the citizens of the country," says Ashwin Chadha, CEO, India Sotheby's International Realty.
Sujan Hajra, chief economist and executive director, Anand Rathi Shares and Stock Brokers said the RBI increased its GDP forecast for FY24 by 50 basis points, to 7 per cent, while leaving the inflation forecast unchanged. Although the magnitude of the GDP forecast upgrade exceeded our initial projections, all other declarations and positions remained largely consistent with our expectations, said Hajra. "The governor issued specific warnings regarding premature adjustments to monetary policy rates and liquidity stance, which indicate that the rate pause and liquidity withdrawal stance may persist for a longer duration than initially expected. We maintain our assessment that no rate reductions would occur until the latter part of fiscal year FY25. An upward adjustment to the GDP forecast would have a favourable effect on market sentiment," Hajra added.
Key Takeaways
India's $604 billion forex reserves convey confidence in meeting external financial needs amid global uncertainties, attracting potential foreign capital, the RBI governor said. A commitment to a transparent web aggregation framework for loans aligns with the vision of an inclusive financial ecosystem, enhancing access to credit for economic growth, said experts.
The proposed April repository aims to boost efficiency and transparency in financial systems, with e-mandate payments requiring two-factor authentication for transactions exceeding Rs 1 lakh. This reinforces digital financial security, increasing consumer trust, experts add.
An impactful policy change raises the UPI limit for hospital and educational transactions from Rs 1 lakh to Rs 5 lakh. This targeted measure addresses sector-specific financial needs, contributing to macroeconomic resilience and potentially increasing financial transactions, said experts.
