In its monetary policy meet on Wednesday, the RBI maintained status quo and continued with the accommodative policy stance which, industry experts and realtors felt, was in line with expectations and will act as a catalyst for economic growth.
The MPC meeting, in fact, took place at a time when the country is coping with high inflation, despite the fact that the rate has declined from its peak in June 2021, when it was above 6%.
“However, the economy grew at a record pace of 20.1 per cent in the April-June quarter compared to the same period last year, when a nationwide lockdown caused by the Covid-19 outbreak had halted almost all economic operations. The pandemic and lockdown was a silver lining for the real estate sector given it is a safe-haven and tangible asset at the time of crisis. This led to increased investment and home-buying in the last two years. A low home loan interest rate regime has been greatly instrumental in further stimulating India’s real estate sector, especially during the festive season. The sentiment for the real estate sector, therefore, remains positive and the same is also reflected in the S&P BSE realty index as it continues upward movement,” observed Ram Raheja, Director, S Raheja Realty.
Thankfully, most high frequency indicators have bounced back to pre-COVID levels. However, some slack in the economy remains.
“The low interest regime and adequate liquidity into the system are critical to further strengthen the domestic market. Even while the RBI has announced measures to further mop up excess liquidity, it has also convinced that adequate liquidity will be maintained as required. We hope, the monetary policy announced today will help maintain the economic growth momentum even in the wake of the new variant Omicron,” said Shishir Baijal, Chairman & Managing Director, Knight Frank India.
The low interest rate regime has been instrumental in reviving the real estate sector in the last 6 quarters through their systematic approach. “RBI’s efforts, along with other demand stimulant measures, have helped revive demand that had been languishing for close to 7 years prior to 2020. The continuance of the accommodative stance will help further the cause for the sector,” Baijal added.
Already, SENSEX and NIFTY are rallying ahead, indicating positive sentiments. An unchanged repo rate, amidst most of the macro-economic factors remaining in the safe zone, will continue to foster economic recovery. Some industry experts, however, felt that it was the right time to reduce the repo rate by 25 bps at least, which would have helped further accelerate liquidity in the market.
“The RBI has estimated an FY 22 GDP growth of 9.5%, which will further drive positive sentiments. However, the regulatory agency could have thought of reducing the repo rate by 25 basis points this time to further accelerate liquidity in the market. Increased liquidity and spending will help corporates, businesses, and SMBs in India, thereby spurring growth. Moreover, as the inflation is pegged at 5% (within the safe zone of 2-6%), the RBI can think of slashing the repo rates. This will also help to mitigate any potential risk coming out of the Omicron variant,” said Ankit Kansal, Founder & MD, 360 Realtors.
Uddhav Poddar, MD, Bhumika Group, also had a similar view. “While the MPC expectedly maintained status quo on the policy rates, we would have hoped for a reduction in rates to uplift the sentiment, especially when customers have started regaining their faith back and have began treading towards making high-end purchases. Lower EMIs play a critical role in order to rekindle demand and make real estate assets more appealing,” he observed.
Whatever be the case, a majority of developers welcomed the RBI decision.
LN Jha, Director, SKA Group, said, “As the inflation is pegged at 5% (within the safe zone of 2-6%), the RBI decision to keep the repo rate unchanged at 4% was very much on the expected lines. Simultaneously, the sustenance of accommodative stance also bodes well for the emergence of a strong economy, out of the sustained revival path. With the new variant being found, these are crucial times which require high degree of monetary and fiscal support, and the RBI is dealing rightly with it. This decision will have a long-lasting impact in ensuring consistent growth to the entire real estate sector and its ancillaries.”
“The RBI policy stance has been supportive for residential real estate for the last nine meetings as it has kept the policy rates unchanged, which helped realtors clear inventory and cash on the improved market sentiment post Covid. With the repo rate unchanged again, the real estate industry will keep reaping the benefits of conducive policy support,” said Honeyy Katiyal, Founder, Investors Clinic.
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