The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5% to balance inflation control with economic growth. This decision is part of the RBI’s ‘withdrawal of accommodation’ strategy (mint) (adda247).
Economic Projections
GDP Growth: The RBI projects a 7% GDP growth for FY25, indicating strong economic resilience (mint) (adda247).
Inflation: The Consumer Price Index (CPI) inflation is forecasted at 4.5% for FY25 (mint) (adda247).
Non-Policy Measures
Sovereign Green Bonds: Plans to trade at the International Financial Services Centre (IFSC).
RBI Retail Direct Scheme: Launch of a mobile app for easier access.
UPI Enhancements: UPI to support cash deposits and Prepaid Payment Instruments (PPIs).
CBDC Distribution: Central Bank Digital Currencies to be distributed via non-bank payment operators (mint) (adda247).
Upcoming Surveys
The RBI has launched the ‘Inflation Expectations Survey of Households’ and the ‘Consumer Confidence Survey’ to gather data for future monetary policies (MoneyIndia).
Overall, the RBI‘s latest policy decisions reflect a balanced approach to supporting economic growth while managing inflation and enhancing financial inclusion.
Comments by Experts:
Mr Ashwin Chadha, CEO, India Sotheby’s International Realty
As expected, the MPC has decided to keep the repo rate unchanged at 6.5%. This decision aligns with the MPC’s calibrated measures to tackle persistent inflation. The RBI has successfully maintained the resilience of the Indian economy, contributing to sustained growth momentum even amidst a challenging global environment.
The good news is that CPI inflation continues to soften, and the GDP growth rate is projected to remain above 7% for all quarters of FY2024-25. Additionally, the monsoon is expected to be favorable, reducing potential risks to the economy.
Given these positive indicators, we anticipate optimistic sentiments to continue, also the upward trend in housing demand, particularly in the high-end and luxury segments, will persist for the foreseeable future.
Mr Vimal Nadar, Senior Director & Head of Research, Colliers India
“In the first MPC meeting after the recently concluded general elections, the RBI has maintained status quo. The repo rate remains at 6.5% and withdrawal of accommodation continues. This decision comes against the backdrop of a concerted effort to contain inflation close to 4% on a durable basis. Furthermore, an upward revision of FY 2025 GDP growth rate projection by 20 bps to 7.2% will fuel business optimism across sectors including real estate.
A stable financing environment will continue to benefit homebuyers and developers in both residential and commercial real estate. As central banks across the world ponder over rate cuts, the timing and pace of such reductions in India will remain a key monitorable and should provide further boost to residential activity in the ongoing fiscal year. Developers & institutional investors in the real estate sector will meanwhile continue to expect continuation of structural reforms and policy support from the incoming Central government.”
Mr. Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution Pvt Ltd
We welcome the Reserve Bank of India’s decision to maintain the repo rate, as it brings stability to the economic scenario. The RBI commitment to controlling inflation remains crucial, to maintain growth and resilience.
The revised GDP growth projection, now expected to be between 7.2% and 7.3% for FY25, aligns well for the economy. A robust economy, coupled with stable interest rates, promises to elevate disposable incomes and bolster borrowers confidence.
It appears that the RBI MPC may continue this pause for the next couple of meetings in FY2025, with a focused view on liquidity management.
Piyush Bothra, Co-Founder and CFO, Square Yards
Interest rates significantly influence consumer sentiments, particularly affecting the majority of buyers in the low-to-mid segment. The current market upcycle is driven by the premium segment, which is relatively less sensitive to minor interest rate changes. Hence, the central bank’s decision to maintain the status quo is a bit disappointing. A reduction in the benchmark rates would have been ideal as it would have given further buoyancy to the real estate market, especially in the low-to-mid segment, and would have helped a lot of first-time home buyers realize their dream of owning a house.
Although the FY25 forecast for economic growth has been upwardly revised to 7.2% from 7%, and inflation is expected to remain within the target band of 2-6%, signaling towards a positive macroeconomic scenario that will buoy the homebuyer sentiments. Given the current outlook, we anticipate the demand momentum to remain strong in property markets across all major cities in India.
Shrinivas Rao, FRICS, CEO, Vestian, said, “RBI kept the repo rate stable at 6.5% for the eighth consecutive time on the back of strong growth momentum. It is a welcome move as headline inflation is still above the RBI’s upper limit of 4% despite marginally easing to 4.83% in April 2024 over the previous month. Moreover, the inflation is anticipated to increase in May 2024 due to an increase in the prices of food items amid nationwide heat waves.”
Rao added, “This is probably the last time RBI will maintain status quo. The repo rate may start its descent from the upcoming MPC meeting as higher kharif production is expected amid an above-normal monsoon, easing the prices of food items. Furthermore, this reduction in repo rates may provide respite to the real estate sector and fuel the growth momentum further.”
Ms. Shraddha Kedia-Agarwal, Director, Transcon Developers
“We welcome the Reserve Bank of India‘s decision to maintain the status quo on interest rates which reflects a cautious approach towards balancing economic growth and inflationary pressures. It offers stability in borrowing costs, supporting project planning and execution. Developers should remain agile and adapt to market shifts, focusing on innovation and meeting evolving consumer demands. Monitoring inflation trends and collaborating with policymakers will be crucial for navigating the current landscape and fostering sustainable growth in real estate.”
Mr. Aman Sarin, Director & Chief Executive Officer, Anant Raj Limited
We welcome the RBIs move to keep the repo rate unchanged. For the eighth consecutive time the RBI has decided to keep the repo rate unchanged at 6.5%. The RBI’s decision to maintain the status quo on the policy rate is driven by inflation, which remains at a comfortable level of 4%. This will keep the Liquidity and the Cost of Borrowings at static level, thus, helps to keep the cost under control. Real estate Sector will benefit due to static cost of borrowings and price stability and will result in better Profitability in long run from ongoing Projects.