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RBI’s monetary policy: Raised repo rates by 25 bps to 6.5 percent

RBI’s monetary policy: Raised repo rates by 25 bps to 6.5 percent

The Reserve Bank of India (RBI) headed by Governor Urjit Patel on Wednesday announced a second straight 25 basis points hike in repo rate to 6.5 per cent. For the second time in two months, RBI raised the interest rate on inflationary concerns. Repo rate is the key rate at which the RBI lends short-term funds to commercial banks.

Here’s what industry experts have to say about the new repo rate:

Dr. Niranjan Hiranandani President, National Real Estate Development Council (NAREDCO): Neutral Stance on policy, but hiked rates: RBI seems to be playing both sides of the equation.

Anuj Puri, Chairman – ANAROCK Property Consultants: The 25 bps increase in the repo rate announced in today’s third bi-monthly monetary policy was in line with our expectations. Amidst rising inflation, depreciating rupee and other global macroeconomic risks, this increase is fairly justified.

While this may lead to a hike in home loan rates as well, the overall real estate sector now rests on a strong footing and buying decisions may not be altered by these marginal changes.

Mr. Anil Saraf, Chairman & Managing Director, ASF Group: Just about when markets started looking up a bit, and robust direct and indirect tax collection started trickling in, this increase in repo rate by RBI will plateau the accelerating pace of the economy. Naturally, the cost of funds will go up. This will also adversely impact investor sentiment which in turn will further effect the real estate sector.

Mr. Ashwin Sheth, CMD, Ashwin Sheth Group: This is the first time in 5 years that the RBI has hiked the repo rate and reverse repo rate back to back. The repo rate which now stands at 6.50% will directly impact home seekers and make them cautious. In lieu of this hike, the banks will be able to decide whether to charge additional markup over and above MCLR or not. Banks had already begun increasing interest rates and any homebuyer, especially the first-timers should not wait any longer to take a loan. While this decision was taken to contain inflation, a rate cut at this stage would have offered some respite. We hope the RBI addresses this concern in the next announcement scheduled in October.

Mr. Parveen Jain, CMD of Tulip Infratech:  The increase in repo rate shall have a negligible effect on the Real estate, Housing Finance and Home loans as a slight increase or decrease in Repo rate does not matter which is bi-monthly and not a permanent fixture.

Instead, we need to look at the larger picture that the increase in repo rate is being done to strengthen the banking system and the economy which shall become more growth-oriented and stabilized in the long run without affecting the Real estate & Housing Finance. Hence we should take the increase in repo rate in a positive way for the overall economic growth of the nation.

Samyak Jain, Director, Siddha Group:  Housing sales will surely be impacted with the hike in the repo rate announced today in the third bi-monthly policy. The lending rate that has been raised to 6.5% is in line with RBI’s stance on the rise in inflation and economic growth forecast, which, in turn, leaves very little scope for a rate cut that could spur growth for the realty sector. Homebuyers may face an increase in interest rates on home loans as banks will realign the rates as per the announcement. The decision to purchase low ticket size homes might also get pushed further.

Rahul Singla, Director, Mapsko Group: As a developer, we are welcoming this step taken by the government. The Reserve Bank of India has increased the key repo rate (the rate at which the central bank infuses liquidity in the banking system) by 25 basis points to 6.50%. It is likely to impact the sentiments of the buyers. We hope that financial institutions may cut down on their lending rates for their customers.

Gaurav Mittal, MD, CHD Developers: The repo rate has increased again by 25 bps to 6.50%. With the introduction of RERA, there is transparency in the sector and the rise in repo rate is not likely to hurt the sentiment of the buyers. We also hope that the RBI would relax its monetary policies in the near future which can drive demand and sales in the market.

Mr. Ssumit Berry, Managing Director:  BDI group, The increment in the Repo rate may seem to dampen sentiments in the market but for the real estate fraternity, it may have little or no impact. As almost all home loans these days are on floating rates, the increase and decrease in home loan rates do not impact the working of residential real estate sector much and tends to balance each other in the long term.


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