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RBI Monetary Policy: Housing Experts Hail 'Status Quo'

Experts closely watching the housing market have given their 'Thumbs Up' to the decision by the Reserve Bank of India (RBI) to maintain the status quo on key policy rates stating this to be the best time for homebuyers to buy their dream home.

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The developers, analysts, and experts have all hailed this move as a "significant" one owing to the upcoming festive season. "We welcome the RBI’s move to keep rates unchanged despite the inflationary pressures, as adequate liquidity, and stable repo rate will play a catalytic role in the robust recovery of the country’s housing sector," said Shishir Baijal, Chairman & Managing Director, Knight Frank India.

RBI maintained the monetary policy pause, keeping the repo rate unchanged at 4 per cent and the reverse repo rate at 3.35 per cent. In short, for homebuyers, the low home loan interest rates regime will continue in the market and help foster housing demand during the ongoing festive season. "Notably, this is a period when housing sales usually surge on the back of attractive offers by developers and lending banks. If ANAROCK's predictions are accurate, the ongoing festive quarter will see at least a 35-40% yearly rise in overall housing sales across the top 7 cities as against the same period in 2020. In Q4 2020, the top 7 cities saw total housing sales of nearly 50,900 units," said Anuj Puri, Chairman - ANAROCK Group.

While the RBI acknowledged the liquidity overhang, it also allayed fears that the liquidity measures will remain to support growth by extending the 'On Tap Special Long Term Repo Operations' (SLTRO) for Small Finance Banks till December 31, 2021. The RBI also further elaborated on the impetus towards certain payment system measures announced earlier including the introduction of retail digital payment solutions in offline mode and also some new technology-driven payment acceptance infrastructure for retail payments involving geotagging . "It was also announced that given the increased reach of NBFCs, an ombudsman for NBFCs will be implemented for strengthening grievance redressal," said Tirthankar Datta, Partner, JSA.

Rajni Thakur, Chief Economist, RBL Bank termed it "a very balanced policy decision". " The decision seems to be focussed entirely on domestic conditions at this time. Recent uptick in energy prices or impeding global rates development don’t appear to be a key concern and the inflation glide path for economy stays on track,“ Thakur said.

Nish Bhatt, Founder & CEO, Millwood Kane International pointed our that the excess liquidity as a result of the status quo will help address the anemic growth in credit offtake. "RBI retaining its GDP growth forecast for FY22 at 9.5% is a sentimental booster and the CPI forecast for FY22 lowered to 5.3 per cent from 5.7 per cent earlier despite high crude prices will help address any concerns on rising inflation," said Bhatt.  

On his part, Baijal of Knight Frank India said that over the last few quarters, there has been a fundamental change in buyers’ expectations and attitude towards homeownership, which has resulted in the residential real estate sector perform exceedingly well across all segments. "Many factors, especially demand stimulants like stamp duty cut and lower circle rates along with lowest ever home loan rates, have helped in converting latent demand to sales. RBI’s accommodative stance will allow banks to continue providing home loans at the current levels," he added.

Vikas Wadhawan, Group CFO,, and said: "We welcome the RBI's decision to keep key policy rates unchanged. This means that interest rates on home loans will continue at a historical low during the festive season, which is crucial for the revival of the housing sector as well as the Indian economy. Bank lending to NBFCs for priority on-lending is extended for 6-months, which will ease out the liquidity situation".

Commenting on the RBI decision, Amit Goyal, CEO, India Sotheby's International Realty echoed the industry sentiments. "RBI's status quo on policy rates means a  continuation of low home loan rates which will keep the demand momentum for homes going. In the last couple of months, we have witnessed a further reduction in interest rates of home loans to 6.5% per annum by leading financial institutions," Goyal said.

Ram Raheja, Director, S Raheja Realty termed the RBI's decision on the status quo as one along the "expected lines". "It has also affirmed to its accommodative stance, which will provide stability to the markets and give much-needed liquidity. It will also help in sustaining economic stability as well as keep the real estate sector stay afloat during these unprecedented times. The demand for homes is likely to continue to gain momentum going forward,’’ Raheja added.

Cherag Ramakrishnan, Managing Director, CR Realty hailed the RBI approach as "extremely productive and industry-friendly". Kaushal Agarwal - Chairman, The Guardians Real Estate Advisory underlined that the all-time low rates regime in the festive season will boost the housing demand and help the economy to get back to the pre-COVID levels.

Ashok Mohanani - President, NAREDCO Maharashtra pointed to the "revival" in the real estate sector and some related sectors because of the rising vaccination numbers. "This is the best time to buy a home as it gives the aspiring homebuyers a lifetime opportunity to purchase their dream home with various festive offers as well as all-time low-interest rates," he said.

Experts said that the housing sector is set to become a large driver of the economy with its contribution to GDP projected to increase from the current 7 per cent to 13 per cent by 2025. "Overall, we hope the government takes measures which strengthen the real estate sector and affirms robust infrastructure growth," said Lincoln Bennet Rodrigues, Chairman & Founder, The Bennet and Bernard Company, known for luxury holiday homes in Goa.

“The MPC expectedly kept the key rates unchanged unanimously and reiterated its accommodative stance both on rates and liquidity. However, Prof Varma’s dissent on the continuation of accommodative stance for foreseeable future continues to keep MPC in splits," Madhavi Arora, Lead Economist, Emkay Global Financial Services said.

Sandeep Runwal - Managing Director, Runwal Group and President-Elect, NAREDCO Maharashtra said it is imperative that low mortgage rates would continue for at least some more time now or maybe until the end of the year. "The end-user interest has increased mostly due to the all-time low home loan interest rate regime which has provided the required fuel for the growth of the economy along with the real estate industry," Runwal said.