This is the eighth time in a row that the Reserve Bank of India (RBI) has decided to keep the benchmark interest rate unchanged at 4 per cent
The real estate sector hailed the Reserve Bank of India’s stand to keep the benchmark interest rates unchanged at 4 percent for the eighth time in a row, saying that it would help foster housing demand.
The RBI maintained an accommodative stance as the economy shows signs of recovery. The central bank had last revised its policy repo rate or the short-term lending rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rates to a historic low.
This will go a long way in steering housing sales. “Several banks have lowered their home loan rates by a stable repo rate since September 2021. Overall, it is a good time for homebuyers who can avail of low home loan rates, along with steady prices,” said Ramesh Nair, CEO, India a Managing Director, Market Development, Asia at Colliers.
“As expected, the RBI maintained the monetary policy pause, keeping the repo rate unchanged at 4 percent and the reverse repo rate at 3.35 percent. In short, for homebuyers, the low home loan interest rate regime will continue in the market and help foster housing demand during the festive season,” said Anuj Puri, Chairman, ANAROCK Group.
This is a period when housing sales usually surge on the back of attractive offers by developers and lending banks.
Amit Goyal, CEO, India Sotheby’s International Realty, also welcomed the status quo on policy rates. “This will mean a continuation of low home loan rates, which will keep the demand momentum for homes going. In the past couple of months, we have witnessed further reduction in interest rates of home loans to 6.5 percent per annum by leading financial institutions,” he said.
“The decision to maintain status quo on key policy rates is significant as it comes at the onset of the festive season. We welcome the RBI’s move to keep rates unchanged despite the inflationary pressures, as adequate liquidity, and stable repo rate will play a catalytic role in the robust recovery of the country’s housing sector,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
Over the last few quarters, there has been a fundamental change in buyers’ expectations and attitude towards home ownership, which has resulted in the residential real estate sector perform exceedingly well across all segments.
Many factors, especially demand stimulants like stamp duty cut and lower circle rates along with lowest ever home loan rates, have helped convert latent demand to sales. The RBI’s accommodative stance will allow banks to continue providing home loans at the current levels.
“At this juncture, we are favourably poised with an encouraging ramp-up on vaccination rate across the country, ongoing festive season, and opening up of the country, the time is right to ensure an orbital shift for the industry. Significant and timely measures for a sector like real estate, which has strong linkages with several other industries, would translate into a significant push to overall economic growth of the country,” said Baijal.
ANAROCK Research indicates there may be 10-15 percent growth in housing demand in the ongoing festive period across the top seven cities against the preceding quarter. In Q3 2021, the top seven cities saw total housing sales of nearly 62,800 units – the best quarterly sales since the pandemic.
If ANAROCK’s predictions are accurate, the ongoing festive quarter will see at least a 35-40 percent yearly rise in overall housing sales across the top seven cities as against the same period in 2020. In Q4 2020, these cities saw housing sales of nearly 50,900 units.Developers also welcomed the RBI stand. “For home buyers, this decision will help reinstate confidence and further access to affordable home loans. It also goes without saying that the real estate industry’s perennial hope is fixed on lower interest rates as it improves affordability,” said Ramani Sastri, Chairman and MD, Sterling Developers Pvt Ltd.
