7th October 2024: The Reserve Bank of India (RBI) is set to begin its three-day monetary policy committee (MPC) meeting today, October 7, and will conclude on October 9 (Wednesday). During this critical meeting, policymakers will assess current economic conditions, including inflation trends and growth projections, to determine the appropriate stance on interest rates. Market participants are keenly watching for signals regarding the RBI’s approach to balancing inflation control with economic support, particularly in the context of evolving global economic challenges. The outcomes of this meeting will provide important insights into the RBI’s strategy for navigating the financial landscape in the coming months.

Mr. Sanju Bhadana, MD, 4S Developers:

The RBI is expected to maintain status quo as inflation risks persist. The apex bank is likely to monitor more factors like the emerging geo-political tensions, monsoon and inflation before it possibly undertakes rate cuts in the coming months. In view of the slowing down of property sales and launches in September quarter, a rate cut would be ideal during this festive season to spur demand.

Shiwang Suraj, founder and director of Gurugram-based property consulting firm InfraMantra:

The RBI must initiate rate cut cycle as housing sales have begun to show signs of slowdown. The fatigue from homebuyers is not only a result of rising home prices but also high mortgage rates. The RBI must look at ways to reinvigorate the housing momentum in view to balance the host of concerns that domestically or globally may affect India’s growth story.

Anuj Puri, Chairman – ANAROCK Group

The RBI’s upcoming monetary policy announcement will, as always, have implications on different industries and markets. The housing market is especially sensitive to changes in acquisition cost since in India, most home buyers use home loans. A cut in the repo rate would result in lower interest rates on home loans, which makes EMIs more manageable for borrowers.

Of course, interest rates are not the sole factor to influence purchase decisions – property rates also play a big role. As per ANAROCK Research, average residential property prices across the top 7 cities have collectively seen a significant 46% jump since 2021. More attractive interest rates can help improve overall affordability, and this can help catalyse housing sales during the festive season. Improved sales also benefit developers as better sales improve their cash flows and reduce their borrowing expenses for projects.

Equally importantly, a rate cut would help boost overall market sentiment and woo back investors. After many years of largely staying away from housing because of low price growth, investors returned to it after the COVID-19 pandemic because both demand and prices started going up. Currently, many investors have taken a breather as prices appear to have peaked out, but more attractive lending rates can bring them back to the market.

That said, we need to be realistic. While the recent US Fed cut would have prompted the RBI to follow suit, the fact is that the global economy is facing considerable uncertainty because of the ongoing geopolitical tensions. It is a tightrope walk for the RBI and it is therefore possible that it will hold on to the current repo rate for now, until these pressure ease.

Mr. Amit Jain, Chairman and Managing Director, Arkade Developers on the upcoming Repo rate expectation:

“The real estate industry has benefited from the stable repo rate since February 2023, which has maintained lending rates for various borrowings, including home loans. However, given the constrained headroom and mounting inflationary pressures, we anticipate a 25bps to 30bps rate cut in October. The rate cut will increase borrowing, boosting home sales further, particularly during Q3FY 24–25’s festive seasons. As the festive season is around the corner, it is one of the most important times for home sales. Rate reductions will boost demand in all markets, but particularly in Mumbai, which recently passed the one lakh home sales milestone in record 9-month time.”