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With key policy rates unchanged, experts say real estate sales will exceed pre-COVID levels

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With key policy rates unchanged, experts say real estate sales will exceed pre-COVID levels

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The real estate industry hopes that continued patronage for home-buying will offset some of the pain points like rising commodity prices, which have in turn had an impact on material costs.

With key policy rates unchanged, experts say real estate sales will exceed pre-COVID levels
The Reserve Bank of India's (RBI) decision to keep the repo rate and the reverse repo rate unchanged at 4 percent and 3.35 percent respectively has come as a breath of fresh air for Indian real estate.
The RBI’s status-quo on these rates means that homebuyers will continue to enjoy low interest rates on home loans, which many feel, was a key factor in residential sales growing 72 percent pan-India in 2021.
“One of the important factors driving home-buying has been record-low mortgage rates,” said Samantak Das, Chief Economist and Head, Research and REIS (India) at JLL, adding that residential sales have reached 90 percent of their pre-COVID levels in 2019.
“With the unchanged policy rate, lending agencies will continue to maintain the prevailing low home loan interest rate,” Das said, adding, “Our expectation is that during the current calendar year, the residential sector will definitely surpass pre-pandemic sales levels backed by affordability synergy.”
In the run up to the central bank’s Monetary Policy Committee (MPC) meet, there was some speculation that the regulator would decide to hike the reverse repo rate, if not, the repo rate itself. In fact, former economic affairs secretary, Subhash Chandra Garg told CNBC-TV18 that he expected a hike in the reverse-repo rate, today.
“Heavy central borrowing has to be financed by the central bank, and this will impact thinking of the Monetary Policy Committee,” said former economic affairs secretary Subhash Chandra Garg in an exclusive chat with CNBC-TV18 on Wednesday. “I expect a rise in the reverse repo rate when the committee meets on Thursday.”
However, the RBI’s continued ‘accommodative’ stance has pleased developers. “As we begin seeing an increase in interest rates in certain western economies post-pandemic, there was some concern that India will follow suit,” said Farshid Cooper, MD, Spenta Corporation, “It is a relief for homebuyers that interest rates will continue to remain unchanged in the near future.”
Poddar Housing Managing Director, Rohit Poddar, said the MPC’s decision to keep rates unchanged was a step in the direction of economic recovery. “The government (RBI) has recognized the necessity to be the driving force behind economic recovery, only after which the private sector can contribute to this recovery by allocating capital to grow,” he added.
The industry now hopes that continued patronage for home-buying will offset some of the pain points like rising commodity prices, which have in turn had an impact on material costs. Several developers and real estate observers expect housing this year to register considerable year-on-year growth.
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