Industry reacts as RBI raises repo rate again

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    The Monetary Policy Committee (MPC) of the Reserve Bank of India on Wednesday (8) hiked the key policy rate, the Repo rate, by 25 basis points to 6.50 per cent in a bid to rein in retail inflation.

    The RBI has raised repo rates for the fifth time in a row. For the previous few months, the RBI has announced the smallest feasible increases in repo rates to combat the inflation the country is experiencing due to global trends.

    Though this increase would cause home loan interest rates to rise, the real estate market is predicted to remain strong because the sector is thought to give superior returns on investment compared to other businesses.

    Ankit Kansal, MD and founder at Axon Developers, stated that the latest decision by the RBI to hike the repo rate is on the expected lines.

    “The global economic outlook has improved, yet the uncertainties persist. Besides geopolitical threats and market volatility, the prices of petroleum and non-oil commodities are increasing, which will weigh on the global economic growth. This can impact inflation, which already is rising high in India. Thus increase in rates makes perfect sense as the objective should be to strike the right balance between growth and inflation,” Kansal said.

    Stating that realty sector not just constitutes 8 per cent of the GDP but also is the second most employment generator after agriculture, Kansal urged the government to take balancing initiatives like rationalization of GST rates, reduction in stamp duty, lowering of capital gain taxes, and increase the income tax waivers on home loan interests that can directly accelerate the overall property market.

    Ashwani Kumar from Pyramid Infratech welcomed the recent announcement, calling it a “smart move”.

    “Though the hike is a bit disheartening as no major push was given to the real estate sector in the Union budget, the market trends are expected to keep the popularity of projects going upwards. The continuous hikes in repo rates have resulted in an increase in home loan interest rates. However, buyers’ incline has been towards both residential and commercial projects, stabilizing the real estate sector,” Kumar said.

    Narayan Bhadana, MD at 4S Developers, stated that the hike was widely anticipated, and the RBI handled it admirably by only making a little adjustment.

    “This may have a short-term impact on homebuyers, but it will have a long-term favourable benefit. The real estate sector has been performing well as a result of a high demand for Grade A developments, and this trend is projected to continue,” Bhadana said.

    Rajesh K. Saraf, Managing Director at Axiom Landbase Pvt Ltd, stated that middle-income groups or homebuyers in the inexpensive category may face a little stumbling block, but the overall expansion of the industry will be unaffected.

    “According to recent trends, the real estate sector has been performing fairly well, and this government decision will help it grow even more. Though the interest rate of 6.50% will slightly burden homebuyers, the economy would be strengthened by the measure. We hope that this increase does not create a significant gap between builders and buyers,” Saraf said.

    Manoj Gaur, president at Credai NCR and CMD Gaurs Group, stated that these rates have now been increased six times because of global economic crises cited by RBI.

    “The previous increases did not have much impact but this increase may start affecting the sector. With no major push for the real estate sector in the union budget and lower inflation forecast RBI could have avoided the increase. However we hope because of high market sentiment the effect could be nullified.”

    Prateek Mittal, Executive Director at Sushma Group, that this is the first repo rate increase in 2023, which projects that RBI will maintain an assiduous policy stance to square off the inflationary woes.

    “The moderate hike in repo rate demonstrates that RBI might go for lower repo rate hikes in 2023 as the economy is much better regulated and managed than the situation was in 2022. As far as the real estate sector is concerned, the hike will not dampen housing or commercial space demand as real estate becomes one of the most reliable and sought-after investment portfolios for traditional and new-age investors.

    L.C. Mittal, Director at Motia Group, stated that the sustainable demand for real estate continues to rise by epic proportions, especially luxury realty won’t bear a significant impact on end-users due to high disposable income strengths and portfolio diversification ambitions.

    Sumit Agarwal, Director, Sales & Marketing, Grandthum, the revised repo rate may afflict retail sales for a brief period due to an imminent hike in retail loans.

    “However, the overall macro-functioning and demand will not face a downturn. In fact, the GDP growth of the country is projected at 6.5 per cent for 2023-24, and the real estate sector will expand its share in India’s GDP based on the growing demand,” Agarwal said.

    Amit Modi, Director, County Group, President CREDAI (WUP), stated the bank’s recent hike of 25 basis points will surely help in controlling the inflationary concerns, but we are also looking forward to stable interest regime for a long term period to help millions of first times buyers across the country.

    “In our view the present hike should not cause much concern, as the quantum is still relatively less,” Modi said.

    Sanjay Sharma, Director at SKA Group, stated that coupled with the tapering inflation and the projected GDP growth for the current financial year, the sector should easily absorb the impact.

    “However, this is the sixth straight hike taking the total quantum to 6.5 per cent, the highest in four years. Therefore, it is crucial to understand that buyers and developers both look for stability in interest rates. We do hope that the RBI takes a positive note of our demand,” Sharma said.

    Yash Miglani, MD at Migsun Group, stated that the marginal repo rate hike was expected by industry players.

    “The real estate end-users might face a short-term effect on home loan mortgage rates, but it would not cause much of a consequence on the overall scheme of things and demand for housing,” Miglani said.

    Ashwinder R Singh, CEO at Residential Bhartiya Urban, stated that interest rate increases are often a sign of a strong and growing economy, which always leads to more job opportunities, higher wages, better financial security, and more home sales for many households.

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