Repo rate unchanged: Real estate players expect home sales to grow further

The Monitory Policy Committee (MPC) of the Reserve Bank of India (RBI) kept the Repo rate unchanged for the seventh consecutive time on Friday - bringing cheers to the country’s realtors and industry stakeholders. Keeping the repo rate at 6.5% since February 2023, the RBI MPC’s decision is expected further boost home sales in the country.

According to Deepak Kapoor, Director, Gulshan Group, RBI’s decision is good news for the country’s realty sector. "Even though we would have wanted it to come down by at least 25 basis points, this would have signalled greater confidence in the Indian economy’s growth trajectory and further boosted the sector. Since February 2023, when the RBI first pressed the pause button, the realty sector has witnessed a record jump in sales in the premium and luxury segments. New launches have phenomenally increased, and unsold inventory has drastically decreased. The decision by RBI to keep the rate at 6.50% has cheered the sector,” he says.

Dhruv Agarwala, Group CEO, Housing.com & PropTiger.com says the decision, amid improving growth numbers and moderating inflation augurs, well for the real estate sector in India. “Not only would this reflect in stability in housing loans but also in property prices since the cost of borrowing would remain stable for developers as well. This is going to work tremendously well for the economy in general and the sector in particular.”

According to Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE, it's a positive news for future homeowners, as borrowing costs won't see an increase, making homes more accessible to buyers.

“This move is set to benefit potential homebuyers by ensuring affordability and sustaining momentum in the housing market. With consumer demand driving the real estate sector, especially in luxury housing, the decision to maintain the repo rate status quo supports feasible macroeconomic indicators and encourages new homebuyers to invest in property. As India's economy continues to grow, the real estate sector is poised to play a significant role, making the current repo rate policy a crucial factor in fuelling positive demand and contributing to the country's economic expansion,” says S K Narvar, Group Chairman, Trident Realty.

Industry analysts and experts like Samantak Das, Chief Economist and Head – Research and REIS, India at JLL feels continuity of a stable interest rate which is crucial for both homebuyers and developers. It will help in sustained demand, especially in the mid-tier and high-income segments. “India’s residential markets are currently in the midst of a sustained bull run. Sales in the country rose to over 74,000 units in Q1 2024, up 9% from the quarterly run rate of 2023. If controlled inflation persists, the possibility of future rate cuts becomes more realistic. This would lead to increased affordability levels in 2024, which will be second only to 2021 peak affordability levels reported in JLL’s Home Purchase Affordability Index,” explains Das.

According to him, the momentum is slated to continue with the current pause and potential rate cuts in the second half of FY2025, which is expected to support the growth cycle in the sector. "This scenario would further incentivise buyers on the sidelines and is expected to significantly boost overall market sentiment, pushing residential sales in the top seven markets of India to another historic high of over 3,00,000 units in 2024,” he adds.