RBI raises repo rate by 50 bps to 5.9%


May have a short-term impact on homebuyers’ sentiments

National, September 30, 2022: RBI Governor Shaktikanta Das on Friday announced that the central bank’s Monetary Policy Committee (MPC) has hiked the repo rate – or the key lending rate – by 50 basis points (bps) to a three-year high of 5.9 per cent.

From the real estate sector’s perspective, this upward revision before the festive season may impact the sentiments of home buyers, who have remained positive despite the hike in the property prices due to the consecutive rate hikes and other factors like increased stamp duty and rising construction costs.

Here are the reactions from the real estate experts:

Mr. Pritam Chivukula – Co-Founder & Director, Tridhaatu Realty and Treasurer, CREDAI MCHI

“RBI ‘s decision to hike the interest rates to tackle the inflation and ensure domestic economic recovery was a no-brainer. The sharp acceleration of rates consecutively for the third time in a short period may have a short-term effect on the sentiment of homebuyers as low interest rates have been the biggest factor in the resurgence for real estate demand in the last two years. We hope that the State Government will step-in to lighten the homebuyer’s load by reducing stamp duty to boost the sentiments in the festive season.”

Mr. Kaushal Agarwal – Chairman, The Guardians Real Estate Advisory

“The recent consecutive rate hikes by the RBI were aimed at re-anchoring the inflation expectation and strengthening the economy. Thus far, the rise in property prices due to the increased interest rates, metro cess and higher stamp duty had not affected real estate sales over the last few months, thereby confirming that there is genuine demand for housing. But this move by the RBI to hike the repo rate again ahead of the festive season might temporarily limit the growth momentum of the real estate sector.”

Mr. Cherag Ramakrishnan, Managing Director, CR Realty

”With  the upward trajectory in interest rates firmly established by RBI, the homebuyers while feeling the pinch in the short term may rush to purchase their homes and lock in their home rates at the earliest. This has been the trend in the last quarter, and we see that trend accelerating in the coming two quarters as well. Based on the sales data of the last two quarters, even post the rate hikes, the off season sales are at an all time high. The fear of rising property prices and further interest rate hikes is only further fueling the latent demand conversion. With limited inventory close to readiness, the demand for ready or close to possession homes will see an exponential increase in the coming quarters.”

Ms. Shraddha Kedia-Agarwal, Director, Transcon Developers

“RBI’s decision to hike the policy rates for the fourth consecutive time was anticipated on the back of high inflation and economic recovery. We had already started seeing a vertical movement in the home prices from the past couple of months which had a minimal impact on the housing demand. But, this decision will further put a dent on the homebuyer’s sentiments impacting the overall demand for a short period of time.”

Mr. Jitrendra Shah, Managing Director, Rockford Group 

“The decision by the RBI to hike the repo rate to pre-pandemic levels was anticipated to keep the inflationary expectations under check. This move may impact the overall growth of the industry by dampening sales momentum while property prices are already on rise. However, we believe that this will also encourage the fence-sitters to make the most of the current schemes offered by developers in the market and take the plunge.”

Mr. Bhushan Nemlekar, Director, Sumit Woods Limited

“Due to the pandemic and the geopolitical issues, the input costs were already high and now with these consecutive rate hikes, it will only dampen the spirit of the entire real estate value chain. The cost of borrowing for both developers and buyers will be impacted and this will result in undesired rate hikes across the spectrum. However, we did not see much impact on the buying spree in the last couple of months since there are genuine buyers in the market to keep the momentum going.”

Mr. Jitesh Lalwani – President, HomeSync Real Estate Advisory

“RBI’s decision to hike the key policy rates for the third time in a row will have a serious impact on the housing loan EMIs but we are still bullish about the real estate sector the way it has performed in the past few months. Yes, homebuyers are concerned about the skyrocketing property prices but  we believe that this move may push homebuyers who are still deliberating to seal the deal. However, we urge the Government to take some necessary measures to control the rise in property prices so that it will help to boost the demand in the upcoming festive season.”

Dr. Sachin Chopda, Managing Director, Pushpam Group

“RBI’s decision to hike the policy repo rate was anticipated, factoring the rise in inflation. The rate hike is likely to shrink liquidity in the economy overall, especially impacting the investor’s sentiments. There will be a short-term pause on the minds of the investors while assessing the volatility of the current market dynamics. However, they are bound to return soon in the market during the ongoing festive season.’’