RBI hikes repo rate by 25 basis points
RBI Monetary Policy August 2018: The MPC had raised repo rate by 25 basis point to 6.25 per cent in June. This was the first time the benchmark lending rate was raised in over four years.
The 25 bps increase in the repo rate has happened amidst rising inflation, depreciating rupee and other global macroeconomic risks. While this may lead to a hike in home loan rates as well, the overall real estate sector now rests on a strong footing and buying decisions may not be altered by these marginal changes.
According to Anuj Puri, Chairman – ANAROCK Property Consultants , As per ANAROCK research, nearly 60,800 units were sold in Q2 2018 across the top 7 cities of India, which is a 24% rise over the previous quarter. Amidst a 50% quarterly rise in new launches in Q2 2018 too, unsold inventory reduced by 2% from 7.11 lakh units in Q1 2018 to 7.0 lakh units in Q2 2018.These numbers clearly indicate that the markets are now recovering from the shocks of structural changes and policy reforms. In fact, genuine home buyers have welcomed these actions which have imbibed the much needed financial discipline, accountability and transparency in the sector.”
He further added, “With lucrative deals on the table, serious end-user demand is back on the market and marginal hikes in home loan rates are unlikely to deter buyers who have been sitting on the fence for some time now, waiting for the right time to seal the deal.”
Talking on this move, Anshuman Magazine, Chairman, India and South East Asia, CBRE, said, “Most banks are expected to realign their deposit and lending rates following this policy announcement.However, the move is unlikely to impact the real estate sector as most of the home loans are floating in nature and come with 15-20 year tenure. Hence, the rise and fall in interest rates get balanced out during the loan life cycle.”
“The 25 bps increase in the policy rate was on expected lines given the current inflationary trend. However, looking at the challenging residential market scenario, we were hoping that the RBI would have paused the rate hike thereby providing a fillip to the buyer sentiment,” said, Shishir Baijal, Chairman & Managing Director, Knight Frank India.
“It looks like the opportune time for discount hunting in case of residential investments is slipping away. With new launches down to its lowest in the last 3 years, interest rates showing an upward trend; even if sales volume do not increase, prices should start showing an upward trend (except for affordable segment) as the demand supply gap further narrows down. We should be at the last stages of the phase to buy at good bargains,” Joe Verghese, Managing Director, Colliers International India.
Talking from developers perspective, Gaurav Mittal, MD, CHD Developers, said, With the introduction of RERA, there is transparency in the sector and the rise in repo rate is not likely to hurt the sentiment of the buyers. We also hope that the RBI would relax its monetary policies in the near future which can drive demand and sales in the market.”
Adding further, Ssumit Berry, Managing Director, BDI group, said, The increment in the Repo rate may seem to dampen sentiments in the market but for the real estate fraternity, it may have little or no impact. As almost all home loans these days are on floating rates, the increase and decrease in home loan rates do not impact the working of residential real estate sector much and tends to balance each other in the long term.
Rahul Singla, Director, Mapsko Group, further, opined, “As a developer, we are welcoming this step taken by the government. The Reserve Bank of India has increased the key repo rate (the rate at which the central bank infuses liquidity in the banking system) by 25 basis points to 6.50%. It is likely to impact the sentiments of the buyers. We hope that financial institutions may cut down on their lending rates for their customers.”