Real estate sector welcomes RBI’s status quo on policy rates

New Delhi [India], February 11: Real estate sector has welcomed the Reserve Bank of India (RBI) decision to maintain the status quo on key policy rates saying the low-interest rate regime would boost the growth of the housing sector.

Welcoming the RBI’s decision, Aditya Kushwaha, CEO and Director, Axis Ecorp said, “MPC has decided to keep the key policy rates including repo rate, reverse repo rate, MSF rate unchanged. This clearly indicates RBI’s pro-growth stance, which is required in this post-pandemic phase.”

“For a durable recovery, continued policy support is warranted and RBI has given a clear indication in this regard. Today’s policy action will continue to benefit the interest rate and have a positive impact on the real estate sector,” Kushwaha said.

RBI’s Monetary Policy Committee (MPC) on Thursday decided to keep repo rate and reverse repo rate unchanged. This is the tenth consecutive time that the central bank has kept these rates unchanged.

Additionally, it has also maintained an ‘accommodative stance’ in regards to the economy. RBI Governor has also stated that the GDP growth of 9.2 per cent in FY22 (2021-22) would take the Indian economy above pre-pandemic level and projected 7.8 per cent growth for the next financial year 2022-23.

“By leaving the rates unchanged and continuing the accommodative stance MPC has sent out a clear signal that they are focused on the long-term growth of the economy. The projections also indicate that inflation is on a downward trajectory, which is another positive indicator,” said Vinit Dungarwal, Director at AMs Project Consultants Pvt. Ltd.

“We welcome this move by RBI as it helps in holding the interest rates and sustaining the current growth momentum in the real estate sector. This move will help in improving affordability, lead to demand generation and have a multiplier effect on the overall economy,” Dungarwal said.

Abheek Barua, Chief Economist, HDFC Bank, said the RBI’s policy decision was on the expected lines.
“The RBI policy was largely on expected lines with, yet again, a clear emphasis on ensuring that the economy is on a path of durable growth recovery. It showed a clear tilt towards growth and a view that inflation, where elevated, is driven more by the supply disruptions rather than entrenched demand-side pressures,” said Barua.

“Also, its projections show that inflation is on a downward trajectory. This was the first policy of the calendar year and perhaps set the tone for the rest of the year. Were that indeed the case, the RBI is likely to follow a gentle approach to the normalization and ultimately withdrawal of monetary support, unlike Western central banks that have switched to a hyper-aggressive mode. This is consonant with the growth and inflation dynamics specific to India,” he said.

“With current market circumstances, the apex bank’s accommodative stance on the status quo and holding the repo and reverse repo rates unchanged is an honorable and cautious move. We predict that housing will experience a huge influx of new buyers as a result of the Government’s focus on affordable housing, which was evident even in the Budget,” said Pradeep Aggarwal, Co-founder & Chairman, Signature Global, and Chairman – ASSOCHAM National Council on Real Estate, Housing, and Urban Development.

There are some players that believe that RBI should have considered revising the reverse rate to factor in rising inflation. Talking about the same Atul Goel, MD, Goel Ganga Group & President (Elect.), NAREDCO Pune said, “The RBI objective must be attached to the growth as the past two years were significantly stressful for the country.”
“The RBI policy review might be raising the reverse repo rate as per the suggestions of the monetary policy committee, however, the important part is to keep the price variation within check for the consumers. The expectations are around 15 to 20 basis points. But overall it would be the RBI way of handling the inflation limits is to be seen rather than the actual conditions prevailing in the country,” said Goel.