9th Oct 2024: The Reserve Bank of India (RBI) has decided to maintain the repo rate at 6.5%, marking a continuation of its current monetary policy stance. This decision comes amid mixed economic signals, with inflation showing signs of moderation but still remaining above the central bank’s comfort zone. The RBI aims to strike a balance between fostering economic growth and controlling inflation, recognizing the potential impact of external factors such as global economic conditions and geopolitical tensions.

 By holding the repo rate steady, the RBI hopes to provide stability to the financial markets and support ongoing recovery in key sectors like manufacturing and services. Analysts suggest that the decision reflects the central bank’s cautious approach, allowing for a careful assessment of economic indicators before considering any adjustments. As businesses and consumers navigate this environment, the RBI’s commitment to monitoring inflation trends and growth prospects remains critical in shaping India’s economic landscape.

 Anuj Puri, Chairman – ANAROCK Group

 With the fundamentals of the Indian economy remaining strong despite global headwinds, geopolitical tensions and inflation well within control, the RBI has once again decided to keep the repo rates unchanged at 6.5% – thus helping the housing market to maintain momentum during the festive season. While a repo rate cut would have been preferable, it is clear that the RBI is on a tightrope walk and must keep various macro-economic factors in mind.

 From the point of view of homebuyers, the relatively affordable home loan interest rate regime will continue at a critical time for the Indian housing market – the festive season – amid rising housing prices and tapered sales. Q3 2024 saw average housing prices rise by a cumulative 23% in the top 7 cities even as average prices in these markets collectively rose to approx. INR 8,390 per sq. ft. by Q3 2024-end, from approx. INR 6,800 per sq. ft. in Q3 2023.

 Housing sales also declined to an extent in Q3 2024, even as prices rose. As per ANAROCK data, Q3 2024 saw residential sales go down by 11% annually against Q3 2023. New launches also fell by 19% in this period.

 The unchanged home loan rates are much-needed demand support in the ongoing festive quarter. We are expecting faster sales momentum in Q4 2024 when compared to the preceding quarter. This year’s festive quarter may see similar demand to that seen in this period a year ago, if not higher. Over 1.27 lakh units were sold across the top 7 cities back in Q4 2023. Unchanged interest rates will play and important role in achieving and maintaining this momentum.

Mr. Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd

The RBI’s decision to hold rates steady aligns with expectations, to keep inflation under check. While the recent rate cut by the US Federal Reserve has sparked similar hopes in India, the domestic situation remains distinct, with the central bank prioritizing inflation management within its target range. Yet policy stability bodes well in the ongoing festive season which promises to be a significant phase in terms of real estate demand as the industry is hopeful of the continued rise in residential sales. As and when a rate cut is anticipated soon, which, when implemented, will benefit both homebuyers and real estate developers to capitalize on the market and strengthen overall economic growth.

Mr. Mohit Jain, Managing Director, Krisumi Corporation

The apex bank’s stance to keep the rates unchanged for the tenth consecutive time is on the expected lines. While the real estate industry was hoping for an interest rate reduction, a status quo is the next best outcome for the industry. Stable rates ensure consistent EMIs, giving homebuyers the confidence to plan their purchases. Furthermore, the expectation of potential rate cuts in the coming months is also boosting optimism in the real estate market and we expect the robustness in demand to continue over the next few years.

Mr. Pankaj Kalra, CEO, Essar Oil & Gas Exploration & Production Ltd (EOGEPL)

“The RBI’s decision to keep the interest rate steady at 6.5% reflects a measured response to current inflationary concerns. This decision provides a stable economic environment that is vital for planning and investing in long-term project financing and capital allocation. The decision to uphold the ‘Withdrawal of Accommodation’ stance aligns with our expectations and supports economic stability, ensuring that we can continue our exploration and production activities without the added uncertainty of fluctuating borrowing costs. At EOGEPL, we will use this stable interest rate to promote growth and help strengthen India’s energy sector.”

Dr. Esha Khanna, Assistant Professor at Sarla Anil Modi School of Economics, NMIMS

 MPC’s adjustment in monetary policy to neutral is much needed and exhibits a balanced outlook on inflation and growth. Revised upward growth forecasts, downward adjustments of headline inflation toward the target, sufficient liquidity conditions, diminished volatility in the rupee, and robust external demand are several positive factors. Moving forward, decisions regarding rate cuts will be contingent on changing inflation dynamics, as core inflation has increased. There is a considerable risk related to food and metals, with uncertainty arising from volatile global factors, as highlighted in today’s policy statement. The RBI may postpone a rate cut by an additional quarter if upside risk to inflation continues, though real policy rates currently hover around 2 percent. Despite high real policy rates, Investment demand is at a decadal high, indicating that investment is propelled by robust economic demand and favorable production conditions owing by a gradual reduction in inflation rather than by alterations in interest rates. Overall, the shift in stance to neutral has created opportunities for a rate cut in the near future, which is expected to affect bond yields and likely result in a bullish market in the short term.

However, a subtle reminder to non-banking financial companies (NBFCs) to thoroughly assess their exposures in unsecured segments was essential, as NBFCs play a crucial role in financing MSMEs and have experienced significant growth in rural, small-scale, and unbanked sectors. These cover the varied financial requirements of the Indian economy, propelled by growth in lending, credit, and vehicle financing. Consequently, non-banking financial companies (NBFCs) must exercise greater caution as they experience larger balance sheets and an influx of public funds.

 Mr. Arsh Mogre, Economist Institutional Equities, PL Capital – Prabhudas Lilladher

  “The RBI’s Monetary Policy Committee held the repo rate steady at 6.5% for the tenth consecutive meeting, reflecting a cautious, data-driven approach amidst a global easing trend. Shifting to a ‘neutral’ stance indicates flexibility but not readiness for immediate easing. Governor Das’s firm message is clear: any rate cut will be contingent on achieving a durable alignment of inflation to the 4% target—a critical threshold that remains elusive amid persistent food price volatility and global uncertainties. The RBI’s inflation forecast for FY25 was kept at 4.5%, but the upward revision in Q3 to 4.8% signals rising caution over the impact of erratic monsoon patterns and geopolitical tensions. While strong Kharif sowing and high reservoir levels provide some relief, risks from La Niña and potential global supply shocks keep the inflation outlook precarious.

On growth, the RBI’s FY25 GDP projection remains robust at 7.2%, supported by resilient private consumption and investment, though early signs of moderation are evident in manufacturing and credit activity. This ‘neutral’ stance is not a precursor to rate cuts but a strategic recalibration which is “a calculated wait-and-see approach”, allowing the central bank to act swiftly if inflationary or growth dynamics shift sharply. Future cuts will likely be shallow (50-75 bps in FY25, starting from the Dec-24 meeting if growth indicators continue to show weakness), reinforcing that every policy decision remains ‘live’ and meticulously data-driven. The RBI’s stance is a clear signal: stability over stimulus, ensuring inflation is durably anchored before committing to a looser policy.”

Manish Chowdhury, Head of Research, StoxBox

 An unexpected change in monetary policy stance from “Withdrawal of Accommodation” to “Neutral” has provided leeway to the RBI for a rate cut going ahead. However, we believe that a December rate would hinge upon multiple factors aligning including the trajectory of food inflation, the global economic and monetary policy setting and major commodity prices including crude oil and metal. With high frequency indicators showing signs of fatigue recently, we believe that the upcoming festive season would be a crucial factor in deciding the possibility of any downward revision to economic growth forecast. Though the central bank has tried hard to downplay an early rate cut expectation, our sense is that a rate cut in Q4FY25 is on cards, with the probability of the event happening in December looking evenly balanced.

Vaibhav Shah, Fund Manager,Torus Oro PMS

 In line with expectations, MPC kept the interest rates unchanged at 6.5%. However with the change in stance to Neutral from Withdrawal of accommodation, we believe that the MPC has set the base for rate cuts either in December or early next year, as inflation seems to be on a continuous downward trajectory. The projections related to inflation and growth have not been altered significantly, leading on confidence on achieving the inflation path without any disrupting growth engine. MPC had a mention of cooling food prices which were the key volatile variable in the overall food inflation equation, which should help achieve the overall inflation target.

Mr Ashwin Chadha, CEO, India Sotheby’s International Realty

We were more hopeful of a rate cut this time around, after moves by the U.S. Federal Reserve and other central banks. But the RBI’s decision to hold the repo rate steady for the 10th time in a row shows that India is laser-focused on its own economic landscape, rather than following global cues.

One standout from the Monetary Policy Committee’s (MPC) meeting is the shift to a neutral stance, which suggests they’re open to more flexibility. While inflation is on a downward trend, it’s still not entirely stable, and the MPC is aiming for that 4% sweet spot.

A rate cut is certainly on the cards if inflation keeps cooling off, which looks promising in the near term.

For real estate, this steady approach is a win. With stable interest rates, homebuyers, especially during the festive season, will feel more confident in making their purchase decisions.

Mr Vimal Nadar, Head of Research, Colliers India

While RBI has kept the benchmark lending rates unchanged at 6.5%, a change in stance from “withdrawal of accommodation” to “neutral” indicates its clear direction for a possible reduction in interest rates in the foreseeable future. This ongoing stability in repo rate should provide a significant thrust to residential real estate during these festive months as home loan interest rates are likely to remain steady.

Typically, Q4, marked by higher inclination of homebuyers to wrap-up property purchases during the auspicious period combined with instantaneous liquidity benefit aided by developers offering attractive discounts, has historically provided the final push to housing sales across the major markets in the country. Additionally, steady borrowing costs and recent extension of Input Tax Credit (ITC) by the Supreme Court can potentially benefit property developers engaged in construction of commercial office buildings.

Nishant Srivastava CEO of Torus Wealth

 Decision to maintain the repo rate at 6.50% aligns with expectations and demonstrates a continued focus on managing inflation. While neutral stance suggests a cautious approach to future monetary policy. Given the ongoing geopolitical tensions and global economic uncertainties, the RBI’s decision to prioritize inflation control is prudent. Its important to monitor economic indicators closely to assess the impact of this policy on growth and development.

Gurmit Singh Arora, National President, Indian Plumbing Association

In the RBI’s policy review on June 8, 2023, it was decided once again to keep the [repurchase] policy rate stable at 6.5% and the bottle is one available option after the 9th hike justification. It is the economy which is performing on many indicators but struggling on inflation to give room to the other idea. By going for a neutral stance they dispense with the necessity or the ability to undertake any policy action even in the future, it is more flexible. Though this stability in rates provides some breath to the present borrowers especially the schul creditors, this is a far shot from the sort of demand which an easing in the rates could have provided especially to the real estate space. The stable forecast on the GDP growth and inflation rates for FY25 still entails the possibility of India’s growth recovery over the medium-term based on prudent assumptions. However, the concern regarding the swelling enthusiasm in the property market that was sought before the holiday season might remain unfulfilled. Barring those two strategies, it seems homebuyers and of course new home owners will have to contend with this moderate rate environment either by way of new market innovations or cash inducements and adjusted value proportions in order to spark actions in real estate sales and purchase transactions.

Anurag Goel, Director at Goel Ganga Developments

In this case, there was nothing particularly surprising in what RBI Governor Das said regarding the repo rate remaining unchanged at 6.5%. Especially considering the RBI, Das said that in the environment of uncertainty existing at the time. This shift towards neutral posture is somewhat soft speaking, it’s a preparatory change it makes for easing policy. This decision, while keeping the status Quo of EMIs, vertically disadvantages the real estate sector.

On the one hand, it offers a stable environment in which planning and investment may be conducted over the long term. On the other, it deprived the market of the increased demand which a rate cut could have delivered during the all-important festive period. There is no change in GDP and inflation estimates for FY25, indicating faith in the do-nothing policy. However, volumetric parameters in strategy may need to be revisited by property market stakeholders as interest rate cut policies are likely to be absent.

LC Mittal, Director, Motia Group

The RBI’s decision to keep the repo rate unchanged for the tenth time at 6.5% is acknowledged to be a reasonable move under the current circumstances given high inflationary tendencies. The shift to a neutral stance signals the RBI’s commitment to aligning inflation with growth, ensuring that the market conditions remain favorable for sectors like real estate. As for the lack of a hinge to echo any change in borrowing rates, we perceive home loan EMIs currently to remain steady, which would, in turn, positively impact demand in the housing market.

Aman Gupta, Director, RPS Group

The RBI’s neutral stance after a prolonged period of holding the repo rate at 6.5% indicates a cautious yet optimistic approach towards managing inflation and growth. In addition, while this decision reduces volatility in borrowing rates which are of concern to real estate contractors and individuals, it also calls for budgeting because the threat of inflation still exists. We believe this move will help maintain confidence in the housing sector, but continuous vigilance is required to adapt to any shifts in the economic landscape.

Keshav Mangla, General Manager Business Development, Forteasia realty pvt ltd.

Like every other major financial institution in the world, the RBI has experienced criticism of its decision to keep the repo rate unchanged at 6.5%, the tenth such posture in a row, while easing the stance to neutral. Such policy directed at mitigating growth in the economy versus controlling inflation has its consequences on the real estate market. For instance, the result of stable interest rates may not necessarily be the most favorable for homebuyers and developers as it cuts off the advantage that comes with decline in interest rates. On the other hand, with the onset of the festive season which is characterized by a matter of fact annual surge in property sales, the sector is likely to have to offer additional cuts in pricing in order to stimulate sales. It is doubtful that given the unchanged GDP growth and inflation targeting for FY25, the RBI continues to view such a policy mix as appropriate for efficient growth of the economy. In any case, the audience of challenges in the real estate sector is however, a favorable environment that does not mean all the real estate industries equally benefit from such stability in the interest rates.

Ms. Rajani Sinha, Chief Economist, CareEdge Ratings on RBI Policy

 “With the change in stance, the MPC has given itself the flexibility to cut rates going forward, depending on how the domestic and global conditions pan out for CPI inflation. While the RBI governor indicated the comfort provided by surplus monsoon and healthy Kharif harvest, he remained cautious of certain inflationary risks. Any adverse weather conditions, escalation of geo-political conflicts and the recent sharp increase in commodity prices needs to be monitored for future inflation trajectory.

 We feel that there are chances of a shallow rate cut of 25 bps in the December policy, followed by another 25 bps in the March policy, provided food inflation moderates. While the Central Bank remains optimistic on growth, some moderation in recent high frequency economic indicators like core sector, PMI Manufacturing, GST collections, passenger car sales also give reason for the RBI to look at rate cuts going forward. Expectations of further rate cuts by major global Central Banks including US Federal Reserve is also supportive of a rate cut by RBI.”

Ms. Madhavi Arora, Lead Economist, Emkay Global Financial Services

 RBI strikes a balance
The policy decision this time around wasn’t easy, and was indeed tricky for the RBI to find a balance in its policy biases with so many moving pieces. The MPC had a lot to process on domestic and external front:
(i) Incipient weakness in growth indicators,
(ii) Demand-led core disinflationary impulse despite noisy food dynamics, but a still-elusive 4% inflation target;
(iii) Comfortable banking liquidity, easy financial conditions on net;
(iv) The fluidity of global narratives with global fears of re-ignition of ‘high for long’ scenario, amidst Fed’s massive 50bp cut in Sep;
(v) Geo-political stress and upcoming US election event risk which could materially disturb Asian FX dynamics, amid ratcheting up of US-China trade war.
Thus, no rate action, in conjunction with stance change to neutral with stress on being ‘actively disinflationary’ is indeed their best bet to prep ground for start of a shallow easing cycle, possibly but not necessarily from December.
✓ The Gsec market has rejoiced the stance change and this, in conjunction with announcement of FTSE EMBI inclusion, has led to a 7-8bps rally in 10-yr yield from yesterday’s levels. The Repo-10yr spread has now compressed to 25bps.

Mr. Aman Sarin, Director & Chief Executive Officer, Anant Raj Limited

The RBI’s decision to keep the repo rate unchanged was expected, considering ongoing inflation concerns and global geopolitical uncertainties. However, with each MPC meeting, the likelihood of a rate cut increases, and we could see one in the coming reviews if current improvements continue.

Currently, home loan interest rates hover around 9.25%, a level that remains manageable for many borrowers. Also, given the stable rates for over two years, real estate demand has consistently grown, fueled by rising incomes, lifestyle upgrades, and economic growth. We are already seeing strong demand this festive season, which is likely to continue, regardless of any changes in interest rates.

Mr. Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution Pvt Ltd

The RBI’s decision to keep the repo rate unchanged wasn’t a surprise, though many expected a rate cut, which could have boosted retail loan demand during the festive season.

However, lending institutions are stepping up with festive offers. For example, SBI is offering car loans starting at 9.05% interest with zero processing fees, providing borrowers with significant savings. HDFC Bank has launched its “Festive Treats” campaign, with car loans starting from 9.40% interest and up to 100% financing on select models, along with special cashback and down payment discounts.

These offers are aimed at capitalizing on the festive demand and helping customers secure better deals.

Rajiv Agrawal, Co-Founder, Saarathi Realtors

 The RBI has once again decided to hold the repo rate for the tenth consecutive time. It brings cheers among the homebuyers as the relatively affordable home loan interest rate regime will continue during the festive season. This means if you have already applied for a home loan your EMI burden will not go up for the next couple of months. The RBI move will give a much needed relief to the realty sector as the festive spirit has gripped the industry.

Certified Financial Planner, Lt. Col. Rochak Bakshi (Retd.), Founder and CEO of True North Financial Services

Given the recent food inflation volatility and the escalation in the Middle East crisis, I expected the RBI to remain cautious and consider a rate cut only in the December meeting. While the 10 year bond has reacted by the yield falling by 7bps to 6.74%, the inflation related data going ahead will decide the future course of action. As of now, it’s only a wait and watch mode for both the bond and equity markets after the immediate fall in the 10 year bond rates.

Samir Jasuja, Founder & CEO, PropEquity

The property market has exhibited consistent growth despite stable interest rates. The property market looks buoyant and both homes sales and launches will get a festive push to stabilise the total number at 2024 levels after experiencing a record high 2023. A rate cut would only add to this buoyancy.

Sanju Bhadana, MD, 4S Developers

In view of the ongoing geo-political tensions in the Middle East and the fear of food and oil inflation inching up, the RBI’s move to maintain status quo on interest rate is prudent. While growth and inflation projections are broadly in lines with RBI’s estimates, the global political and economic developments could play out in the coming quarters on India’s growth and inflation.

Shiwang Suraj, founder and director of Gurugram-based property consulting firm InfraMantra
We expected a slight cut in repo rate considering the fact that property sales and launches have been slowing down over the last three quarters of 2024. Amid global uncertainties and fear of growth slowing down and inflation going up, a rate cut would have been an ideal scenario to boost the property market.

VS Realtors (I) Pvt Ltd founder and CEO Vijay Harsh Jha

 A rate cut would have helped in reducing interest on home loans thereby increasing homebuyers’ participation in the property market. This would have given a boost to the already flagging housing sales and launches during the festive season.

Saurav Ghosh, Co-founder, Jiraaf

“Clearly the Monetary Policy Committee is cautious about its movement. The current inflation drop is being attributed to positive base effects. Therefore, the RBI seems to be taking a wait-and-watch approach to carefully monitor the trajectory of inflation and then move the needle in the right direction. It’s likely that before the next financial year, the RBI will decide to cut the interest rates.”

Nikunj Agarwal, CFO and Head of Lending Alliance, Propelld

“The RBI’s decision to hold the repo rate at 6.5% and shift to a neutral stance brings stability to the lending sector. With no immediate hikes in lending costs, institutions can continue providing affordable loans. This also offers directional optimism for a potential rate reduction regime in the near future. However, the neutral outlook signals cautious monitoring of inflation, which could influence future rates, making this period crucial for expanding access to credit while watching economic trends closely.”

Rahul Jain – CFO, NTT DATA Payment Services India

“Increase in per transaction limit to Rs 10,000 from Rs 5,000 under UPI 123 and enhanced limits in UPI Lite is a big positive. Under-served categories such as senior citizens, and users from rural India with limited usage of digital means may find this beneficial. Enhanced limits can be particularly useful to make utility bill payments and for payments to other users.

This welcome move from the RBI comes after the SEBI’s directive to allow UPI based block mechanism for funding secondary market trades in the capital market. Overall, the use-cases for UPI are increasing. This augurs well for both the consumer as well as for the industry, as payments become more efficient and convenient.”

Mr. Gaurav Garg, Research Analyst, Lemonn Markets Desk

“The RBI’s shift to a neutral stance, is in line with our expectations, and indicates readiness for potential rate cuts, possibly starting in December, depending on incoming data. Overall, we believe MPC acted in a prudent way to balance the domestic growth priorities with global uncertainties like rising crude prices and geopolitical tensions. RBI appears to be comfortable with the growth outlook for H2 FY25 while remaining confident on the last mile disinflation process. As such, we expect any rate cut cycle to be shallow – may be limited to two 25bps rate cuts in the H2 FY25, possibly starting from December.

From markets perspective, Equities had reacted positively after the decision of stance change with rate sensitive realty and banking stocks seeing gains while benchmark yields moved lower.”

Manish Jain, director – institutional business (equity & fi) division at mirae asset capital markets views on RBI MPC.

RBI turned to be slightly dovish Little twist in quarterly numbers due to unfavorable quarter (extended monsoon and elections this year). But overall maintained annual estimates with improvement in 2nd half of year which is estimated to continue till next fiscal. Upcoming indicator prints will be unfavorable but the above average rainfall (will support agricultural growth), rising manufacturing activities, improving rural/ urban demand and rebounding investments will drive the growth. MPC highlighted concerns on the NBFC sector on unsecured loan segments; could expect slowdown in bank credit growth going forward Globally growth is resilient. Major central banks have started easing cycles and improving global trade will aid growth. Risks/ uncertainties from manufacturing slowdown, geopolitical escalations, adverse weather and US elections persist. Possible rate cuts in upcoming meetings. Continuation of inflation downward trend, strength in core sector growth and contained geo-political escalations will support the possible RBI pivotal.