Status quo stance by RBI is welcome to bolster overall market confidence

Mumbai, June 07: The status quo stance by RBI is welcome to bolster overall market confidence, feel the experts.

Ramani Sastri, Chairman and MD, Sterling Developers says, “With the economy looking up and all signs being positive, there is no hesitation among the homebuyers to invest in residential real estate for long-term returns.”

Moreover, stable home loan rates improve consumer confidence and enable more informed investment decisions, since there is a noticeable shift in the intent and aspirations of Indian homebuyers. However, a future repo rate cut would serve as a big boost to homebuyer sentiment and enable better affordability, which is an extremely sensitive factor in the housing market, he said.

According to Shastri, “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. We also hope that the new government would continue to focus on infrastructure development, lowering home loan interest rates, prioritizing tax incentives, easing regulatory constraints and streamlining approval processes for overall growth of the real estate sector.”

The Reserve Bank of India's decision to keep the repo rate unchanged is a boon for the Indian real estate sector. This stability ensures that home loan interest rates remain low, making housing more affordable for potential buyers. With unchanged borrowing costs, both developers and homebuyers benefit from increased market confidence and predictability.

The mid-range and premium property segments together account for more than 55% of the current supply. Together, they recorded approx. 76,555 units sold in Q1 2024 - nearly 60 per cent of the total sales. The buyers of this segment are sensitive to volatile interest rates, and upward hikes would cause many of them to defer home purchases. This policy continuity supports sustained demand in these two segments.

Anuj Puri, Chairman - ANAROCK Group says, “The affordable housing sector is, of course, most cost sensitive. While PMAY Urban has sanctioned 118.64 lakh homes against a demand of 112.24 lakh homes, affordable housing (homes priced under INR 40 lakhs) sales in Q1 2024 recorded 26,545 units - a mere 20 per cent of the total sales. However, as we have seen, unchanged home loan rates alone are insufficient to induce new vibrancy in the affordable segment. It is hoped that the government will soon introduce further incentives to support it.”

The RBI held rates steady for the eighth time in a row, likely due to high food inflation despite overall CPI falling within their target range. Strong GDP growth in FY24 may have also influenced this decision. However, economists anticipate rate cuts of 25-50 basis points in the second half of the fiscal year if inflation keeps declining. Lower interest rates could further boost the real estate sector, which is already experiencing strong market demand from end-users.

Pradeep Aggarwal, Founder & Chairman, Signature Global says, “We expect the robust demand trend to stay healthy over the next few years, particularly in cities like Gurugram which are witnessing robust infrastructure development.”

The demand for homes remains stronger, especially in the luxury and high-end segments. The RBI status quo on the policy front is expected to keep the momentum going. However, with potential rate cuts on the horizon, the entire real estate market could see an additional boost as and when it materializes.

Mohit Jain, Managing Director, Krisumi Corporation says, “The mid and premium housing segments will be the biggest beneficiary of any future rate cut”