RBI Monetary Policy: Unchanged Repo Rate to Keep Home Loan EMIs Unchanged 

October 9, 2024: With Reserve Bank of India (RBI) keeping repo rates unchanged at 6.5% the Home loan EMIs will stay at the current levels thereby not creating any disruption in the current home sales momentum. The apex bank kept the rates unchanged for the 10th consecutive time. 

But the RBI, has changed the policy stance to ‘Neutral’ from ‘withdrawal of accommodation’. This, experts say, has created the path for interest rate cuts in future. For the FY25, the GDP growth estimates and the CPI Inflation forecast were also kept unchanged. 

The real estate developers and experts, while welcoming the move, added that a rate cut at this ongoing festive season would have boosted the somewhat stagnant home sales growth in housing market.

Realty & More spoke to a cross section of industry veterans to get their reaction on the RBI MPC announcement – 

Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd
The RBI’s decision to hold rates steady aligns with expectations, to keep inflation under check. 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 prioritizing inflation management within its target range.  Yet policy stability bodes well in the ongoing festive season which promises to be a significant phase in terms of real estate demand as the industry is hopeful of the continued rise in residential sales. As and when a rate cut is anticipated soon, which, when implemented, will benefit both homebuyers and real estate developers to capitalize on the market and strengthen overall economic growth.

Deepak Kapoor, Director, Gulshan Group says, “The RBI’s decision to maintain the repo rate demonstrates confidence in India’s economic resilience, even as global challenges persist. This move will encourage homebuyers to invest in real estate as a long-term asset. It also provides an opportunity for financial institutions to offer competitive rates during the festive season when the sentiments remain high and augur well for real estate development.

Uddhav Poddar, CMD, Bhumika Group says, “The economy has significantly strengthened over the past few years, with the real estate sector contributing to this recovery. RBI’s decision to keep the repo rate constant will strengthen confidence in both commercial and residential real estate investors and buyers, significantly contributing to India’s GDP and future growth prospects. Further, as RBI has kept its stance neutral, the sector looks forward to a cut in repo rates in the future. Thus, amid this steadiness, we anticipate more fruitful opportunities for buyers and developers.”

Prateek Tiwari, MD, Prateek Group says “The real estate sector has been booming over the past few years, and the RBI’s decision to keep the repo rate unchanged at 6.50% will positively affect the sector. In addition, by acquiring a neutral stance, the announcement indicates future rate cuts. Amidst the rise in housing demand, less volatility in the loan rates would instil greater confidence in the buyers and developers, welcoming long-term growth. This stability in the interest rates will notably encourage first-time homebuyers and boost the growth in the entire sector. However, the affordable housing sector is one area of concern, and we hope that RBI will cater to these concerns in the following announcements.”

SKA Group Director Sanjay Sharma says that by keeping the repo rate stable at 6.50% during the festive season, the RBI has once again met buyers’ expectations. This will not only stabilize interest rates for potential buyers but also boost purchases during the festive period. This is a welcome step by the RBI, and we hope that the rapid growth of the real estate sector will continue. This decision will prove beneficial for both buyers and developers.

Salil Kumar, Director, Marketing and Business Management, CRC Group, “RBI’s decision to keep the repo rate unchanged at 6.50% is a welcome step that will maintain the momentum observed in the real estate sector. Moreover, a repo rate cut is expected in the near future, as RBI has kept its stance neutral. A positive demand is anticipated in the commercial sector since financial instability has been resolved and interest rates remain stable. This will likely increase the flow of potential buyers towards this sector, as investing here will not put much strain on their pockets. We hope the authorities will maintain a favorable approach, benefiting the real estate sector in future announcements as well.

Manoj Gaur, President CREDAI NCR and CMD Gaurs Group says “The announcement to maintain the status quo on the repo rate by RBI will enthuse the market, both buyers as well as real estate developers. At a time when the sector is witnessing a new vigour, expanding its footprints in new regions and breaking grounds in terms of offerings, this decision not only signifies stability in India’s economy. It could also be a precursor to rate cuts in future. However, the affordable housing sector is one area of concern, and we are hopeful that RBI will heed to its concerns.” 

Vimal Nadar, Head of Research, Colliers India

While RBI has kept the benchmark lending rates unchanged at 6.5%, 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. 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. 

Typically, Q4, marked by higher inclination of homebuyers to wrap-up property purchases during the auspicious period combined with instantaneous liquidity benefit aided by developers offering attractive discounts, has historically provided the final push to housing sales across the major markets in the country.  Additionally, steady borrowing costs and recent extension of Input Tax Credit (ITC) by the Supreme Court can potentially benefit property developers engaged in construction of commercial office buildings.

Anuj Puri, Chairman – ANAROCK Group 

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.

From the point of view of homebuyers, the relatively affordable home loan interest rate regime will continue at a critical time for the Indian housing market – the festive season – amid rising housing prices and tapered sales. Q3 2024 saw average housing prices rise by a cumulative 23% in the top 7 cities even as average prices in these markets collectively rose to approx. INR 8,390 per sq. ft. by Q3 2024-end, from approx. INR 6,800 per sq. ft. in Q3 2023.  

Housing sales also declined to an extent in Q3 2024, even as prices rose. As per ANAROCK data, Q3 2024 saw residential sales go down by 11% annually against Q3 2023. New launches also fell by 19% in this period.

The unchanged home loan rates are much-needed demand support in the ongoing festive quarter. Unchanged interest rates will play an important role in achieving and maintaining this momentum.