Inflation Under Check At 6.5%

We are at the beginning of a multi-year real estate bull market buoyed by high disposable incomes, said Squareyards

MUMBAI, June 8 (The CONNECT) – Reserve Bank of India (RBI) Governor Shaktikanta Das today announced that the Monetary Policy Committee has decided to keep the key policy repo rate unchanged at 6.5 percent. 

The announcement could have a positive impact on consumer sentiment, benefiting the interest-sensitive real estate sector, according to industry voices.

BizNewsConnect presents a cross section of views:

Parag Sharma, Whole-time Director & Chief Financial Officer, Shriram Finance: The RBI’s measures over the last two years and the Indian economy’s resilience have resulted in India’s inspiring success in taming sticking of inflation of inflation. The CPI inflation during March-April 2023 was within the tolerance limits for the first time in the last 12 months. While the CPI inflation is projected at 5.2% for FY24, it seems within manageable levels. Urban and rural demand has stabilised, cement output and import of capital goods are buoyant, and flow of resources to commercial sector have increased. Also, fixed investments by manufacturing companies rose in FY23 after dipping in FY22.
The healthy indicators have prompted the MPC to retain the policy repo rate at 6.5% — a second successive recommendation for pause in rate hikes. However, it has still kept a tight leash on monetary conditions by continuing its strategy of withdrawal of accommodation. These are appropriate steps at the current juncture as we anticipate a normal monsoon and navigate the uncertain geopolitical situation.
Nevertheless, we are confident that India’s fundamentally strong financial ecosystem will ably support a buoyant business outlook to achieve the forecasted GDP growth of 6.5% for FY24.

Sandeep Runwal – President, NAREDCO Maharashtra: The RBIs decision to keep repo rates unchanged at 6.50 per cent is a welcome move, but a reduction in the repo rates would further help improve home buyer sentiments and fuel home sales. It would put more money in the hands of the home buyer encouraging him to go ahead and make a home buying decision. However, the RBI has been successful in containing inflation rate within permissible limits. The Indian economy is resilient to global headwinds and has fared remarkably well.

The government has initiated a slew of positive policy measures which have sustained housing sales. This in addition to the government’s decision to not raise the Ready Reckoner (RR) rates in the state for 2023-24, did boost homebuyers’ sentiments. We once again urge the government to relax stamp duty rates which will fuel interest in home buyers. We hope that these positive developments will keep the homebuyers encouraged to come forward and buy their dream home.”

Pritam Chivukula – Vice President, CREDAI-MCHI and Co-Founder & Director, Tridhaatu Realty: The RBIs decision to keep the repo rate unchanged at 6.50 per cent is a good move which has curbed inflation levels within acceptable limits. This is the second consecutive pause in repo rate hike which will definitely improve market sentiments, propelling housing demand.  We are seeing a buoyant housing sector where home buyers are coming forward to buy property. This reflects a healthy outlook for the sector and we can expect the government to continue with industry friendly policies that will sustain housing sales. We hope that the State Government steps in to lighten the homebuyer’s load by reducing stamp duty to further boost home buyer sentiments and boost home sales.

Kaushal Agarwal – Chairman, The Guardians Real Estate Advisory: We commend the RBI for maintaining the repo rate at 6.5% during FY24’s second bimonthly monetary policy meeting. This decision reflects their commitment to stability and proactive economic management. It is particularly beneficial for the real estate sector, as lower home loan rates will drive growth and encourage property investment. The availability of attractive financing options due to low-interest rates makes it easier for potential buyers to purchase homes, stimulating the market. Existing homeowners burdened by past rate hikes will also find relief. We appreciate the resilience of the Indian economy and anticipate positive impacts on growth. The RBI’s prudent decision-making will contribute to sustained development in the real estate sector.

Vivek Mohanani – MD & CEO, Ekta World: The Indian economy has stood out strong and resilient against global headwinds. The RBI’s decision to maintain the status quo for the second consecutive time was an expected move to focus on stability. Another repo rate hike by the RBI would have not augured well for the real estate sector as home loan interest rates are already at a higher level. Any further increase in policy rates would have had a substantial impact on buyer sentiments and affordability, which in turn could have curtailed demand. A further reduction in interest rates in the near future would be preferred to bolster overall market confidence and make it more attractive for home buyers.

Samyak Jain – Director, Siddha Group: The decision to maintain the status quo by RBI in its key policy rates for the second time in a row was on the expected lines. This comes at a time when property prices are on the rise, adding a huge financial burden to the end consumer. The decision will unlikely have an immediate impact on homebuyers, but it does offer some stability to the real estate sector. This may trigger the decision of many home buyers who were actively seeking to buy their desired home. We look forward to government intervention by providing some relief to home buyers in the form of reduced stamp duty rates which will lighten their burden further.

Himanshu Jain, VP – Sales, Marketing and CRM, Satellite Developers Pvt. Ltd. (SDPL): Keeping the current market conditions and inflation in mind, the move by the RBI was expected to keep the economy on track and sustain financial stability. The rising property prices had already added to the woes of the homebuyers and now the decision of RBI to not hike the repo rate yet again has brought a much needed relief to the homebuyers. Also, for first-time home buyers, acquiring a home is considered as the biggest asset and this decision is likely to have a positive impact on a buyer’s decision.”

Atul Banshal, Director-Finance, Omaxe Ltd: We welcome the RBI’s decision to maintain the status quo on key policy interest rates. As anticipated, the RBI has displayed a growth-supportive policy stance.
However, following a series of successive policy rate hikes, the real estate sector had anticipated some relief from the central bank in the form of a modest rate cut. Such a move would have bolstered demand and, subsequently, the overall economy. Consequently, we maintain our expectation that the RBI will opt for a policy rate reduction in the next review meeting, providing a much-needed impetus to various sectors, including real estate, and fostering economic growth

 RBII’s unabated commitment towards ‘withdrawal of accommodation’ is on expected lines and essential in the current uncertain global economic environment, marred with tight financial conditions, elevated inflation & geopolitical tensions. RBI’s move to keep the repo rate unchanged at 6.5% reinforces the Central Banks’s effort to support domestic growth and creating a conducive lending ecosystem. The latest inflation at 4.7% is encouraging, however needs to be aligned with other high-frequency indicators to buoy growth in a sustainable manner. As home loan rates are already at elevated levels of 9% and above, this is a significant breather for lenders, developers & homebuyers. First time homebuyers will be better placed to make their home buying decision in a stable lending rate regime. Fence sitters in the affordable & mid segment will have greater visibility of their EMIs & thus effect buying.

Amit Goyal, Managing Director, India Sotheby’s International Realty: In line with expectations, the Reserve Bank of India (RBI) has maintained the policy rate at 6.5% for the second consecutive time, following a series of six consecutive rate hikes. The RBI’s decision reflects their cautious approach in light of the persistent inflationary pressures and their potential impact on domestic consumption growth.
However, the positive aspect is that the pause in rate hikes will instil a sense of optimism among borrowers and we expect the housing sales momentum to continue.

Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd: We appreciate the change in policy approach by the apex bank and decision to maintain the policy rate, instead of voting for another increase. This demonstrates a positive intent towards supporting the housing market and benefiting homebuyers.
Home loan borrowers have embraced the previous interest rate hikes, and as long as the home loan interest rates hover around 9% per annum, it is unlikely to have a significant impact on housing demand.

V Swaminathan, executive chairman, Andromeda sales and Apnapaisa.com: The RBI’s decision to maintain the policy rates unchanged is positive news for borrowers, especially considering the global apprehensions that persist in advanced economies. However, the Reserve Bank of India remains focused on preserving price and financial stability while ensuring adequate flow of financial resources to all productive sectors of the economy.
It is encouraging to note that domestic macroeconomic fundamentals are strengthening, with resilient economic activities, moderated inflation, comfortable current account deficit, and robust credit growth.
If the situation persists or improves further, we can anticipate a potential rate cut in the next monetary policy review.

Piyush Bothra, Co-founder and CFO, Square Yards: The Reserve Bank of India’s decision to maintain the status quo for the second time is a welcome move and in line with the expectations. This affirms the view that interest rates will only have one direction which is downwards. This is a big positive for the home buyer as they know that their EMIs down the line will only decrease further. A lot of fence sitters are expected to jump in, and the developers are likely to cash in on this pent-up demand. We firmly believe that we are at the beginning of a multi-year real estate bull market buoyed by high disposable incomes, high affordability and moderate-to-low interest rates.

V Swaminathan, executive chairman, Andromeda sales and Apnapaisa.com: The RBI’s decision to maintain the policy rates unchanged is positive news for borrowers, especially considering the global apprehensions that persist in advanced economies. However, the Reserve Bank of India remains focused on preserving price and financial stability while ensuring adequate flow of financial resources to all productive sectors of the economy.

It is encouraging to note that domestic macroeconomic fundamentals are strengthening, with resilient economic activities, moderated inflation, comfortable current account deficit, and robust credit growth.
If the situation persists or improves further, we can anticipate a potential rate cut in the next monetary policy review.

Piyush Bothra, Co-founder and CFO, Square Yards: The Reserve Bank of India’s decision to maintain the status quo for the second time is a welcome move and in line with the expectations. This affirms the view that interest rates will only have one direction which is downwards. This is a big positive for the home buyer as they know that their EMIs down the line will only decrease further. A lot of fence sitters are expected to jump in, and the developers are likely to cash in on this pent-up demand. We firmly believe that we are at the beginning of a multi-year real estate bull market buoyed by high disposable incomes, high affordability and moderate-to-low interest rates.

Ishaan Singh, Director, AIPL Group: We commend the apex bank for deciding to maintain the policy rate, rather than voting for another increase. This decision showcases a positive commitment to supporting the housing market and ensuring favorable conditions for homebuyers.

Murthy Nagarajan, Head-Fixed Income, Tata Mutual Fund: The Monetary policy statement reiterated its commitment on withdrawal of accommodation to ensure inflation progressively aligns with the target, while supporting growth. Headline inflation is projected to decline in 2023-24 from its level in 2022-23 but still be above the target of 4 % , warranting continuous vigil. GDP growth is maintained at 6.5 % levels and CPI inflation is projected at 5.1 % versus 5.2 % stated in the April 2023 policy.  

RBI,  consumer survey on CPI inflation is projecting 60 basis points fall in expectations from September 2022 levels. However, early results of RBI surveys polled for manufacturing, services and infrastructure firms expect input and output prices to harden. This survey and global development of interest rate hikes by developed countries like Australia and Canada has led to RBI adopting marginal hawkish stance.  

Macro-economic factors are favorable like lower commodity prices, lower oil prices.  Food inflation is moderating due to record rabi production . The Rupee is expected to be stable due to lower current account deficit, FII Inflows of 8.2 billion in the current financial year. All these factors could bring current year CPI inflation below 5 % levels against RBI projection of 5.1 % levels.  The 10 year g sec yields is expected to trade in the band of 6.95 to 7.10 in the coming months.”

Ajit Banerjee CIO, Shriram Life Insurance Company: RBI on expected lines continued with the rate pause decision which it had announced in April’23 and maintained the status quo on stance on withdrawal of accommodation as the fight for taming the inflation continues. It has emphasised on the continued global fluidic situation prevailing. The policy tone was balanced, but it remained non-committal on the decision on  future rate actions by MPC. Probably it is very unlikely if RBI would precede the Fed in reversing its course of rate hikes in the future.

RBI lowered FY24 inflation projection by 10 bps to 5.1% Y-o-Y basis and retained FY24 GDP projections at 6.5% Y-o-Y. Slowing inflation and a robust economic recovery are certainly aiding the RBI to stay put on rates but it has raised concerns on the global growth slowdown and the resultant impact it will have on the domestic economy.

After today’s meeting, it seems that the present pause by RBI on rate actions may continue for this calendar year.