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Fight against inflation – repo rate up 50bps

Mumbai, June 8, 2022: Reserve Bank of India (RBI), on June 8 has hiked the repo rate by 50 basis points to 4.9 per cent.

The RBI has also raised its inflation forecast for FY23 by 100 basis points to 6.7 per cent.

The latest inflation forecasts assume a price of $105 a barrel for India’s crude oil basket.

“The baseline inflation projection of 6.7 per cent for FY23 does not take into account the impact of monetary policy actions taken today,” said Shaktikanta Das, Governor, RBI.

Following are the excerpts of realty players’ reaction to the MPC: 

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

“The RBI’s decision to raise the repo rate by 50 bps to 4.9% was a well-anticipated move, considering the steep rise in global inflation levels as well as the monetary tightening measures being adopted by central banks worldwide. We believe that this decisive action will go a long way in curbing mounting inflation levels in the medium term.”

Anurag Mathur, CEO, Savills India on today’s RBI announcement.

“Brent crude prices breaching USD 120 per barrel and domestic retail inflation at an 8 year high in April have played a pivotal role in recalibration of growth prospects. With geopolitical tensions resulting in globalisation of inflation, the World Bank and RBI have revised India’s GDP growth rate to 7.5% and 7.2% respectively for the ongoing fiscal year. Leading private and public sector banks have already passed on the previous repo rate hike, by increasing home loan interest rates by 30-40 bps across loan categories. The increase in benchmark lending rates by 90 bps in a short span of time, coupled with the anticipation of further rise in coming months will increase the home loan EMIs significantly as compared to the previous fiscal year. Thus, of all residential real estate segments, the impact on EMI dependent affordable segment will be highest. Noteworthily, the increase in cost of borrowing is expected to be tangible for developers on the supply side as well.”

Dr Niranjan Hiranandani, Vice Chairperson NAREDCO and MD Hiranandani Group

“Taming steep inflation hike is a preordained measure by RBI, given the global economic ballgame. Soaring commodity prices especially with food and energy prices, plummeting currencies, supply side shocks are the foremost reasons for rising input cost. A two-thong approach by the RBI governor and the Government of India by means of monetary and fiscal intervention is an absolutely necessitated step to administer economic growth as well as arrest inflationary pressure. A corroborated approach is hailed by India Inc to sustain economic resiliency and boost sentiments.”

It is evident that home loan interest rate hike will impair the home buying rally as pay out in terms of EMI is scheduled to rise. The EMI constraint will be eased as rates are expected to normalize once the global situation is stabilized. The hike in the limit of individual loans by co-operative banks by 100 per cent is a welcome initiative for home buyers who opt for home loans from co-op banks.”

Ramesh Nair, CEO, India and MD, Market Development, Asia, Colliers

“The hovering inflationary concerns amidst the resilient domestic economy supports this RBI’s aggressive move. Despite the challenging global environment, Indian economy is strongly placed and on the path to recovery and GDP growth is pegged at 7.2% for FY 2022-23. On a cumulative basis, this translates into an almost percentage point increase in repo rate in the last 1 month. However, it remains lower than the pre-pandemic level of 5.15%. We expect banks to gradually pass on this rise in the form of higher home loan rates in the coming months. An opportune time for homebuyers to take advantage of the prevailing home loan rates at a time when prices are also expected to rise in most of the markets led by revival in demand”.

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Anuj Puri, Chairman – ANAROCK

“A hike was inevitable, but we are now entering the red zone. Any future hikes will reflect markedly on housing sales. Considering that inflation continues above its target zone of 6%, a hike was inevitable, and it will doubtlessly have some repercussions on housing uptake. The rate hike will push up home loan interest rates, which had already begun creeping upward after the surprise monetary policy announcement last month. Interest rates will remain lower than during the global financial crisis of 2008, when they went as high as 12% and above.  Nevertheless, the current hike will reflect in residential sales volumes in the months to come, more so in the affordable and mid-segments. The silver lining is that the Indian housing market is still largely end-user driven, so there is no investor mindset seeking the lowest possible entry point. Genuine demand comes from an underlying aspiration for homeownership”. 

Rajan Bandelkar, President, NAREDCO:
“The rate hike will impact the robust sales in the residential housing segment, although in the short term. So far, the post Covid recovery and the bullish sentiments were supported by the low interest rate to a great extent. The sector requires liquidity at lower cost to continue the growth momentum. It is expected that interest rates will be eased with the global supply chain returning to normalcy.”

Rohit Gera, Managing Director, Gera Developments

“The increase in rates by the RBI is along expected lines.  The cumulative increase of 90 basis points will increase the mortgage payments for home buyers, however, given the fact that the overall increase in cost of homes over the past 5 years has been negligible, this increase in interest rates can be absorbed by borrowers looking to buy homes.  The increase will affect the cost of borrowings for developers already reeling under severe margin pressure on account of inflation in input costs.”

Pradeep Aggarwal,Chairman Signature Global (India) Ltd 

 “Repo rate hike of 50 BPS by RBI could be termed as reformative move, the stated aim was clear in current macro and micro economic conditions. There was no other option left but to rein in inflation through monetary control measures. This might slightly influence the real estate, but it will not impact the consumer confidence or demand. Simultaneously, increasing 100% limit of individual loans by apex bank for co-operative banks, would surely spread a positive communication among each stakeholder.”

Amarjit Bakshi, CMD, Central Park
“The circumspect approach of the RBI to hike the repo rate by 50 basis points is a laudable decision to ward off the inflationary challenges and provide relief to the household segment. It’s a temporary speed breaker in the current growth momentum, which would stabilise the current inflationary trend and build strong foundation in the near future for RBI to again adopt growth-oriented stance.  The current rate hike will certainly make home loans costlier, but it will not have a tangible impact on the buyers in the long run. The real estate sector is on the stronger side of the tide, and no significant impact will be swatted by the industry.”

Dharmesh Shah, CEO, Hero Homes

“The RBI has taken a middle ground by hiking the repo rate by 50 basis points without resorting to any extreme ends. It is nevertheless, a commendable move to axe the inflation rates that are striking down the economic renaissance of the country in the post-pandemic period. There will also be a certain increase in home loan rates that will backtrack home buyers’ aspirations to invest in property markets and impact residential sales for a short period of time.”

Nayan Raheja, Raheja Developers 

From a macro perspective, the RBI’s repo rate hike by 50 bps is a praise-worthy move to simmer down the inflation rates, looming large on the Indian economy. Through the lens of the micro-industry level, it might pose a few incipient challenges. The silver lining is that the real estate sector, which is feeling the pressure of high input costs, of late, will definitely get some relief from the policy decision. Hopefully, the country will canner out of the tight-inflation situation and the economy will be back on track.”

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Sanjay Sharma, Director, SKA Group said
“As the saying goes, ‘inflation is a hidden tax’ and the RBI’s measure to raise the rate by 50 BPS seeks to correct this situation. Unfortunately, the move comes at the time when there was a renewed buyer interest in every segment of the real estate – residential, commercial, retail, hybrid, SCOs, etc. This move will definitely have an impact on buyers’ sentiments but at the same time let’s wish that the step brings the expected relief and benefits the sector that is also reeling from high input costs on account of various factors including inflation.”

Deepak Kapoor, Director Gulshan Group 

“A balanced approach has been streamlined by the RBI as it shows its noble intentions to bring down the inflation rates. From a micro-industrial lens, it might increase the consumer loan interest rates. But on the other hand, the increase of repo rate by 50 bps will also bring down the rising input costs that developers are facing on a protracted basis”.

Vikas Garg, Deputy Managing Director, MRG World 

The increase in repo rate by 50 basis points will not make any difference to the market, at least in the segment we operate in. The demand and the sentiments of the home buyers are in our favour and, at present, it is beyond these considerations. An increase in the rate of interest won’t make any difference, particularly in the “highly affordable segment” we operate in.”

Manoj Gaur, CMD, Gaurs Group & President, CREDAI NCR
“It has been a fine balancing act by RBI. While it has not given to the hawkish stance that a few observers had expected at the same time it has signalled its will to tame inflation. We understand that the hike in repo rate by 50 BPS will impact interest rates of consumer loans and make home loan dearer right at the time when real estate sector was coming out of the throes of pandemic and affect sales in the short term. However, by reining in the inflation it will ultimately benefit the real estate sector that is bogged down by high input costs.”

Amit Modi, President, CREDAI Western UP
“The increase in the repo rate by 50 bps will hamper the sentiments of the buyers, especially first time home buyers who are heavily reliant on home loans. It will be a barrier to the growth trajectory of the revived sales post-Covid. Millions of homebuyers will be sidelined and alienated from the property markets after the hike. It will slow down the pace of sales that has taken a rise in the recent past.”

Uddhav Poddar, MD, Bhumika Group

“With retail inflation that is at an 8-year high in April and rise in wholesale prices, fastest in the last three-decades RBI did not have much room. However, RBI MPC’s decision to hike repo rate by 50 basis points will definitely affect real estate demand. We however hope that the decision by RBI helps Inflation return to normalcy and benefits the economy in the long run.”

Prateek Mittal, Executive Director, Sushma Group 

“A repo rate hike of 50 BPS by RBI is on expected lines. This time the target before RBI was clear cut, that is to rein in inflation through monetary control measures. The move will definitely help the country as well as benefit the real estate sector that is already battling high input costs on account of various external factors and the consequent increase in fuel cost. Though this increase will also impact the buying power of consumers, but we feel the impact will be taken in a stride.”

L.C.Mittal, Director, Motia Group
“Let’s hope that the current repo rate hike by RBI brings in the intended results and ends up taming the inflation which is threatening to derail the country’s progress. Even though this hike will eventually lead the banks to increase the home loan rates and to an extent impact the real estate sale in the short term but in the long run it will augur well for the sector”.

Kushagr Ansal, Director, Ansal Housing 

The repo rate hike decision is a calibrated effort to cow down the inflationary rates that have reached an all-time high. It will also lead to a decline in input costs that had resulted in an increase in the sales prices of residential projects. So it will be a positive signal for the home buyers to return to the markets as the properties will be sold at reasonable prices, and they will not have borne the pressure of the global crisis situation or supply chain disruptions. The RBI decision will persuade buyers to return to the property markets and also reduce the input costs, to developers’ relief.”

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Amit Goenka, MD and CEO, Nisus Finance 

RBI action has acted along expected lines in response to global inflationary pressures. The stock markets have already priced in the resultant change in valuations. The real estate market will face some pressures as repo rate linked home loans are likely to increase the EMIs. However, given the resilience shown by the sector, it’s unlikely to have a major impact on sales.

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