RBI keeps repo rate unchanged at 6.5%: What MPC policy means for home buyers

RBI keeps repo rate unchanged at 6.5%: The Reserve Bank of India's (RBI) decision to retain the repo rate at 6.5% for the eighth consecutive time ensures economic stability amid global uncertainty and domestic inflation concerns. Industry Experts believe this stability supports the real estate market, making housing more affordable and boosting consumer confidence.

"This stability supports the real estate market, making housing more affordable and boosting consumer confidence. It enables informed investment decisions, promotes sector growth, and contributes to India's economic prosperity. With GDP growth projected at 7% in FY25 and inflation at 4.5%, the financial environment encourages long-term investments in housing," said Manju Yagnik, vice chairperson of Nahar Group and senior vice president of NAREDCO Maharashtra

The real estate sector anticipates lower interest rates later this year, which could provide an impetus for housing demand and sectoral growth across industries.

"With India's GDP expanding robustly at 8.4% in Q3 of FY 2023/24, a future rate cut could sustain or accelerate this momentum. Developers and investors can capitalize on the conducive environment, as the residential segment is currently experiencing a bull run, with sales rising to over 74,000 units in Q1 2024. We can expect a cut of 0.25-0.50% in H2 of FY 2024-25," said Dharmendra Raichura, Ashar Group, a leading Mumbai-based luxury real estate developer.

RBI Monetary Policy LIVE Updates

Gurmit Singh Arora, the National President of the Indian Plumbing Association, discusses the implications of the RBI's decision to maintain the repo rates. While this decision provides stability and predictability in the housing loan market, it also leads to higher borrowing costs, impacting affordability for potential homeowners. Existing homeowners, however, find temporary relief from increasing EMI pressures amidst challenging economic conditions.

LC Mittal, Director at Motia Group, appreciates the RBI's cautious approach amid expectations of the upcoming union budget. However, this stance prolongs a period of higher borrowing costs, dampening demand for properties in the real estate market. Homebuyers face the dilemma of either delaying mortgage decisions or dealing with more expensive EMIs.

Subhash Goel, MD of Goel Ganga Developments, acknowledges the macroeconomic rationale behind the RBI's policy stance but highlights the challenges it poses for prospective homeowners, particularly in the affordable housing segment. The uncertainty regarding interest rates and property prices persists as homebuyers await fiscal and monetary policy developments.

Aman Gupta, Director at RPS Group, notes the mixed implications of the RBI's approach for homebuyers, depending on the trajectory of interest rates. While high rates may dampen overall housing demand, they also offer opportunities for favorable loan rates and bargaining power with developers.

Gaurav Kansal, Director at KBP Group, emphasizes that maintaining the repo rate can keep borrowing costs affordable, sustaining the housing market's momentum. He highlights the significance of the real estate sector in India's economic growth and suggests that the policy will stimulate demand and support growth.

The recent Lok Sabha elections have further bolstered economic sentiment, enhancing investor confidence through political stability and consistent economic policies.

Also Read | RBI Monetary Policy: Raises FY25 real GDP growth forecast to 7.2% from 7%

RBI keeps repo rate unchanged at 6.5%

RBI Governor Shaktikanta Das recently announced this fiscal year's second bi-monthly monetary policy, stating that the Monetary Policy Committee (MPC) has opted to maintain the repo rate at 6.5 percent.

He noted that the MPC will closely monitor elevated food inflation, especially considering the anticipated normal monsoon.

Also Read: MPC keeps FY25 inflation forecast unchanged at 4.5%

Additionally, the RBI revised its growth forecast for the current fiscal year to 7.2 per cent, up from the previous estimate of 7 per cent.

The government has directed the RBI to aim for CPI inflation of 4 percent with a deviation allowance of 2 percent on either side.

The cycle of rate increases, which saw six consecutive hikes totalling 250 basis points since May 2022, was halted in April last year.