Real estate industry’s rate cut hopes bashed as RBI keeps rate unchanged | News
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Although the industry expected the status quo to persist, it is not anticipating any negative impact
As expected by real estate industry experts, hopes for a repo rate cut were turned down as the Reserve Bank of India (RBI) kept the rate unchanged at 6.5 per cent for the 10th consecutive time on Wednesday. Realtors believed that a rate cut would have been helpful, considering the festive fourth quarter of the calendar year 2024 (Q4 CY 2024) and a decline in sales in the preceding quarter.
Niranjan Hiranandani, founder and managing director of Hiranandani Group, said, “Understanding the complex geopolitical and economic landscape, the RBI has maintained the repo rate at 6.5 per cent and adopted a neutral stance. Although a 25 basis point (bps) cut could have energised festive sales and buoyed market sentiment, the current approach represents a prudent stance to ensure economic stability.”
Mohit Jain, managing director of Krisumi Corporation, said, “While the real estate industry was hoping for an interest rate reduction, a status quo is the next best outcome for the industry.”
“While a repo rate cut would have been preferable, it is clear that the RBI is walking a tightrope and must keep various macroeconomic factors in mind,” stated Anuj Puri, chairman of ANAROCK Group, an international property consultant (IPC).
According to ANAROCK, Q3 CY 2024 witnessed average housing prices rise by about 23 per cent year-on-year (Y-o-Y) to approximately Rs 8,390 per square foot in the top seven cities, namely, the Mumbai metropolitan region (MMR), the national capital region (NCR), Pune, Bengaluru, Hyderabad, Chennai, and Kolkata.
Moreover, in Q3 CY 2024, housing sales declined by 11 per cent, while new launches also fell by 19 per cent, annually.
RBI’s unchanged stance boosts stability
Although the industry expected the status quo to persist, it is not anticipating any negative impact. Moreover, the unchanged rate is expected to boost stability within the sector.
Samantak Das, chief economist and head of research and REIS, India, JLL, stated that while a rate cut would have been favourable for the real estate sector, further boosting homebuyer sentiment in conjunction with the upcoming festive season and reducing borrowing costs, the status quo is not expected to negatively impact the market’s current momentum.
Vimal Nadar, head of research at Colliers India, said, “This ongoing stability in the repo rate should provide a significant boost to residential real estate during these festive months, as home loan interest rates are likely to remain steady.”
Manju Yagnik, vice chairperson of Nahar Group and senior vice president of the National Real Estate Development Council (NAREDCO) Maharashtra, said, “By keeping borrowing costs steady, EMIs remain manageable, encouraging potential homebuyers to invest in property, especially in the affordable housing segment. Furthermore, this stability will benefit developers by improving cash flow and reducing borrowing expenses for ongoing projects.”
Additionally, Hiranandani believes that developers are optimistic, projecting a 10-15 per cent growth in festive season sales, supported by favourable monsoons and robust demand for consumption and property investment. “The RBI’s decision supports the objective of maintaining price stability while ensuring balanced economic growth.”
Realtors expect rate cut in coming months
Further, realtors are still expecting a potential rate cut in the coming months, which would eventually boost the sector’s activity.
“While the RBI has kept the benchmark lending rates unchanged at 6.5 per cent, the change in stance from ‘withdrawal of accommodation’ to ‘neutral’ indicates a clear direction for a possible reduction in interest rates in the foreseeable future,” said Nadar.
Pradeep Aggarwal, founder and chairman of Signature Global (India) Limited, said, “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 prioritising inflation management within its target range.
“As and when a rate cut is anticipated, it will benefit both homebuyers and real estate developers, allowing them to capitalise on the market and strengthen overall economic growth,” he added.
Furthermore, the expectation of potential rate cuts in the coming months is boosting optimism in the real estate market, and Jain expects robust demand to continue over the next few years.
First Published: Oct 09 2024 | 12:18 PM IST
