 "Hopes dashed but prudent approach: Realtors on unchanged repo rate")
Even as the realtors’ hopes for a repo rate cut ahead of the festive season were dashed after the Reserve Bank of India (RBI) kept it unchanged at 6.5 per cent for the 10th consecutive time on Wednesday, real estate industry experts say that the decision represents a “prudent approach” expected to boost stability in the sector.
The realtors believed that a rate cut would have been helpful considering the festive fourth quarter of the calendar year 2024 (Q4CY24) and a decline in sales in the preceding quarter.
“Understanding the complex geopolitical and economic landscape, the RBI has maintained the repo rate at 6.5% and adopted a neutral stance. Although a 25 basis point (bps) cut could have energised festive sales and buoyed market sentiment, the current decision represents a prudent approach to ensuring economic stability,” Dr. Niranjan Hiranandani, founder and managing director of Hiranandani Group, said.
Mohit Jain, managing director of Krisumi Corporation, said, “While the real estate industry was hoping for an interest rate reduction, a status quo is the next best outcome for the industry.”
“While a repo rate cut would have been preferable, it is clear that the RBI is on a tightrope walk and must keep various macro-economic factors in mind,” said Anuj Puri, chairman of ANAROCK Group, an international property consultant (IPC).
As per ANAROCK, Q3CY24 witnessed average housing prices rise by about 23 per cent year-on-year (Y-o-Y) to approximately ~8,390 per square foot in the top seven cities, including Mumbai metropolitan region (MMR), national capital region (NCR), Pune, Bengaluru, Hyderabad, Chennai, and Kolkata.
Moreover, in Q3CY24, the housing sales declined by 11 per cent, while new launches also fell by 19 per cent annually.
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RBI's unchanged stance to boost stability
However, the industry was expecting the status quo to persist, it is also not expecting to witness any negative impacts for the same. Moreover, the unchanged rate is anticipated to boost the stability within the field.
Dr. Samantak Das, chief economist and head of research and REIS, India, JLL, said that while a rate cut would have been favorable for the real estate sector, further boosting home buyer sentiment in conjunction with the upcoming festive season and reducing borrowing costs, the status quo is not expected to negatively impact the market's current momentum.
Vimal Nadar, head of research, Colliers India, said, “This ongoing stability in repo rate should provide a significant thrust to residential real estate during these festive months as home loan interest rates are likely to remain steady.”
Manju Yagnik, vice-chairperson of Nahar Group and senior vice-president of National Real Estate Development Council (NAREDCO) Maharashtra, said, “By keeping borrowing costs steady, EMIs remain manageable, encouraging potential homebuyers to invest in property, especially in the affordable housing segment. Furthermore, this stability will benefit developers by improving cash flow and reducing borrowing expenses for ongoing projects.”
Additionally, Hiranandani believes that the developers are optimistic, projecting a 10-15 per cent growth in festive season sales, supported by favourable monsoons and robust demand for consumption and property investment. “The RBI's decision supports the objective of maintaining price stability while ensuring balanced economic growth.”
Realtors expect rate cut in coming months
The realtors are expecting a potential rate cut in the coming months, which will eventually boost the sector’s activity.
“While RBI has kept the benchmark lending rates unchanged at 6.5 per cent, a change in stance from ‘withdrawal of accommodation’ to ‘neutral’ indicates its clear direction for a possible reduction in interest rates in the foreseeable future,” said Nadar.
Pradeep Aggarwal, founder and chairman of Signature Global (India) Limited, said, “While the recent rate cut by the US Federal Reserve has sparked similar hopes in India, the domestic situation remains distinct, with the central bank prioritising inflation management within its target range.
“A rate cut is anticipated soon, which, when implemented, will benefit both homebuyers and real estate developers to capitalise on the market and strengthen overall economic growth,” he added.
Furthermore, the expectation of potential rate cuts in the coming months is also boosting optimism in the real estate market, and we expect the robustness in demand to continue over the next few years,” said Jain.