RBI hikes interest rates by 0.25%, projects 6.4% economic growth for FY’24

Wednesday, 8 February, 2023: The Reserve Bank of India in its latest bi-monthly monetary policy announced on Wednesday, 8 raised the repo rate by 25 basis points to 6.5 %. Announcing the policy, RBI Governor Shaktikanta Das said, amid volatile global developments, Indian economy remains resilient.

“Core inflation remains sticky. Non-food credit growth was 16.7% from the year ago period as of Jan 27, 2023. We have to remain unwavering on bringing down CPI”, said Das.

Here is how the real estate players reacted to the RBI measure – 

Anurag Mathur, CEO, Savills India 

“While domestic inflation remains within RBI’s tolerance levels in recent months, the Monetary Policy Committee (MPC) of the RBI has advocated a 25-bps increase in benchmark lending rates; the sixth consecutive hike that takes the overall increase to 250 bps in FY23. As a result, the benchmark lending rate stands at 6.5%, with the accommodative stance still withdrawn. While it is understood that retail lending rates would be affected for new home loans, auto loans, institutional borrowing, etc. in reality, lending institutions are likely to increase the tenures for ongoing EMIs.

Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE 

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“RBI’s decision to hike the repo rate by 25 basis points may be one of the last in the ongoing rate hike cycle, as we have witnessed inflation moving toward a comfortable zone. We do not expect any sweeping impact on the real estate sector or housing sales for now, given the demand has remained upbeat and the recent budget announcements will spur the growth momentum”

Dr Niranjan Hiranandani -National Vice Chairman NAREDCO

“The outrageous hike of 250 basis point since May 2021, needs to be warranted before it turns negative for the ascending Indian economic  growth curve. The impact of home loan interest rate hike will be highly deterrent in the affordable housing segment as it will impact the price sensitive homebuyers and fatigue the supply of the developers. The luxury and mid housing segment players will remain cautious with a bit longer sales cycle.”

Harsh V Bansal, Managing Director, Unity Group and Chairman-CII Delhi panel on UD, RE & Infra

The market has been robust and sales were picking up, but the recent hike in repo rate, the sixth in a row, might have negative impact on real-estate. The banks will have no other option but to increase home loan interest rates, which will affect the affordable and mid-segment that are the highest selling segments. We also see the recent step to affect the PM’s vision of housing for all, which was going in the right direction till now. Overall, we have to see the impact of inflation and cost of living that is going to increase after this year’s budget.  The need was to increase disposable income for the common man, and we hope that the Government has taken all economic aspects in mind to come up with recent repo rate hike. on the recent RBI repo rate hike.

Dhruv Agarwala, Group CEO, Housing.com, PropTiger.com & Makaan.com 

This is a policy announcement along expected lines as the RBI continues to balance its twin objectives of encouraging economic growth and keeping inflation in check. While banks in India would pass on the 25 bps hike to homebuyers in the form of increased home loan rates, the borrowing rate for home buyers will continue to remain within a comfortable zone. Home buyer sentiment is strong and we don’t see this hike derailing the strong momentum in the residential real estate market.

Manoj Gaur, President Credai NCR and CMD Gaurs Group

An increase of 25 bps in repo-rate was expected because the American fed rate was increased a few days ago . These rates have now been increased 6 times because of global economic crises cited by RBI. The previous increases did not have much impact but this increase may start affecting the sector. With no major push for the real estate sector in the union budget and lower inflation forecast RBI could have avoided the increase. However we hope because of high market sentiment the effect could be nullified.

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Ankit Kansal, MD & Founder, Axon Developers

The current decision by the RBI to hike the repo rate by 25 basis points is on the expected lines. This can impact inflation, which already is rising high in India. Thus increase in rates makes perfect sense as the objective should be to strike the right balance between growth and inflation. Any possible growth in home loan rates needs to be balanced with incentives and policies to reduce the cost of construction and incentivize sales. Initiatives such as rationalization of GST rates, reduction in stamp duty, lowering of capital gain taxes, and increase the income tax waivers on home loan interests can directly accelerate the overall property market. Even if the governing agencies identify one or two such initiatives and execute them, it will positively impact the overall industry.

Ashwani Kumar, Pyramid Infratech

Though the hike is a bit disheartening as no major push was given to the real estate sector in the Union budget, the market trends are expected to keep the popularity of projects going upwards. The continuous hikes in repo rates have resulted in an increase in home loan interest rates. However, buyers’ incline has been towards both residential and commercial projects, stabilizing the real estate sector. RBI is striving to balance global inflation with repo rates, and the hikes are expected to be halted anytime soon in future.

Narayan Bhadana, MD, 4S Developers

The RBI has announced another 25 basis point increase in repo rates, in an effort to reduce inflation. The increase in repo rates from 6.25% to 6.50% is fairly minimal and may be easily curtailed because it is still quite low in comparison to other parts of the world experiencing a similar situation. The hike was widely anticipated, and the RBI handled it admirably by only making a little adjustment. This may have a short-term impact on homebuyers, but it will have a long-term favourable benefit. The real estate sector has been performing well as a result of a high demand for Grade A developments, and this trend is projected to continue.

Rajesh K. Saraf, Managing Director, Axiom Landbase Pvt Ltd

The RBI’s small raise in repo rates of 25 basis points was widely anticipated, and the organisations handled it properly, avoiding any significant variation in total value. Middle-income groups or homebuyers in the inexpensive category may face a little stumbling block, but the overall expansion of the industry will be unaffected. According to recent trends, the real estate sector has been performing fairly well, and this government decision will help it grow even more. Though the interest rate of 6.50% will slightly burden homebuyers, the economy would be strengthened by the measure. We hope that this increase does not create a significant gap between builders and buyers.

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Prateek Mittal, Executive Director, Sushma Group

The RBI has announced a repo rate hike of 25 bps which currently stands at 6.5%. This is the first repo rate increase in 2023, which projects that RBI will maintain an assiduous policy stance to square off the inflationary woes. The moderate hike in repo rate demonstrates that RBI might go for lower repo rate hikes in 2023 as the economy is much better regulated and managed than the situation was in 2022. As far as the real estate sector is concerned, the hike will not dampen housing or commercial space demand as real estate becomes one of the most reliable and sought-after investment portfolios for traditional and new-age investors.

LC Mittal, Director, Motia Group

To tamp down inflation rates which RBI Governor said would still be above the 4% target in 2023-24, the RBI has announced a policy rate hike by 25 bps to 6.5%. The increasing geopolitical uncertainties and market volatility necessitate the need for institutional intervention. The sustainable demand for real estate continues to rise by epic proportions, especially luxury realty won’t bear a significant impact on end-users due to high disposable income strengths and portfolio diversification ambitions.

Amit Modi, Director, County Group, President CREDAI *(WUP)

We understand that despite RBI’s sincere efforts, inflation is still a cause of concern, but at the same time millions of first-time homebuyers across the country are looking at stability in interest rates, to plan their further course of action while sitting on the edge to decide on their future of home buying process. 

The bank’s recent hike of 25 basis points will surely help in controlling the inflationary concerns, but we are also looking forward to stable interest regime for a long-term period to help millions of first times buyers across the country. In our view the present hike should not cause much concern, as the quantum is still relatively less.

Sanjay Sharma, Director, SKA Group

While raising the repo rate by 25 bps, the RBI Governor had said that the global economy is not as grim as it was a few months ago. Coupled with the tapering inflation and the projected GDP growth for the current financial year, the sector should easily absorb the impact. However, this is the sixth straight hike taking the total quantum to 6.5%, the highest in four years. Therefore, it is crucial to understand that buyers and developers both look for stability in interest rates. We do hope that the RBI takes a positive note of our demand.

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Yash Miglani, MD, Migsun Group

The RBI’s stance to stamp out inflation continues to be the foundation of its repo rate policy, as we witness the first repo rate hike in the new year a week after the Budget presentation. The RBI hikes the repo rate to 6.5% by 25 basis points. The marginal repo rate hike was expected by industry players. The real estate end-users might face a short-term effect on home loan mortgage rates, but it would not cause much of a consequence on the overall scheme of things and demand for housing.

Ashwinder R Singh, CEO Residential Bhartiya Urban

Even though a rise in interest rates will be hard for many people with home loans, it could help people save more, which will help them build wealth and reach their financial and housing goals. Interest rate increases are often a sign of a strong and growing economy, which always leads to more job opportunities, higher wages, better financial security, and more home sales for many households. Here, India is doing well compared to the rest of the world

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