RBI retains repo rate at 6.5% for 11th consecutive time
The Reserve Bank of India’s (RBI) governor Shaktikanta Das announced today that as decided in the Monetary Policy Meeting (MPC), the repo rate will remain unchanged at 6.5%. This is the 11th consecutive time when it remains unchanged. Of the six members in the Monetary Policy Committee (MPC), four members voted in favour of maintaining the repo rate. Two members voted for reducing the policy repo rate by 25 basis points.
The RBI also maintained status quo in the Bank Rate and the Marginal Standing Facility (MSF) at 6.75%. The Standing Deposit Facility (SDF) rate is maintained at 6.25%. The fixed reverse repo rate stands at 3.35%. The gross domestic growth (GDP) projection was upheld at 7.2% for FY25.
The RBI Governor mentioned that the cash reserve ratio (CRR) was cut by 50 basis points from 4.5% to 4%. With this step, Rs 1.15 lakh crore of liquidity will be infused into the banking system.
The real GDP growth forecast for FY25 has been revised to 6.6% from the earlier 7.2%.
Repo rate is the interest that the RBI charges from banks and financial securities for the short-term loans in India. Lower repo rate fosters economic growth and a higher repo rate can slow economic growth.
The RBI’s MPC meeting was held from December 4 to December 6 and led by RBI Governor Shaktikanta Das.
The RBI’s MPC meeting was held from December 4 to December 6 and led by RBI Governor Shaktikanta Das.
What is the impact of unchanged repo rate on the real estate market?
The RBI’s decision to keep the repo rate unchanged for the 11th consecutive time reflects concerns over inflation, despite lower-than-expected growth in the September quarter. With housing affordability under pressure due to rising property prices, a rate cut could have boosted the real estate sector, particularly amidst slowing urban demand and moderation in wage growth. However, housing demand remains strong, especially in the high-end and luxury segments, with most new launches in the December quarter targeting these categories. Targeted measures, like adjustments to the Cash Reserve Ratio (CRR), can inject liquidity to sustain this momentum. Balancing inflation management with demand stimulation will be crucial for long-term stability and growth in the sector.
Anshuman Magazine, chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE
The RBI’s decision to keep the repo rate steady reflects its stance to balance economic growth with inflation concerns. Stable interest rates provide much-needed predictability for homebuyers and developers, fostering market confidence. With steady borrowing costs, we anticipate sustained demand for housing, particularly in the affordable and mid-segment categories. Notably, RBI has reduced the Cash Reserve Ratio (CRR) by 50 basis points to now stand at 4%. This is expected to inject INR 1.16 lakh crore of liquidity into the banking system, boosting banks’ lending capacity and driving economic growth.
Ashwin Chadha, CEO, India Sotheby’s International Realty
RBI’s decision to keep the repo rate unchanged is a balanced step in managing inflation. For the real estate sector, this stability ensures unchanged mortgage rates and supports the robust demand we’ve been witnessing in housing sales, particularly in the premium and luxury segments. With inflationary pressures under check and buyer confidence holding steady, we remain optimistic about continued momentum in the market, driving long-term growth.
Vimal Nadar, head of research, Colliers India
The RBI, in its last MPC meeting of 2024, has maintained neutral stance keeping repo rate unchanged at 6.5%. The Central Bank taking note of recent aberrations in inflation and growth, has toned down FY 25 projections, revising GDP growth forecast downwards and inflation forecast upwards to 6.6% and 4.8% respectively. Stable repo rate translates into stability in interest rates and augurs well for the Indian real estate sector. Housing sales across major cities of the country are likely to end on a strong note in 2024. Additionally, developer confidence in residential and commercial segments will continue to reflect in healthy launches of residential units and Grade A office completions in the near term.
Shrinivas Rao, FRICS, CEO, Vestian
As expected, RBI kept the repo rate unchanged at 6.5% for the 11th consecutive time, keeping the investor sentiment stable for real estate. This decision could be attributed to global macroeconomic uncertainty, escalating geopolitical conflicts, and headline inflation in October 2024 crossing the RBI’s upper tolerance limit of six percent. However, the central bank eased the monetary policy by reducing the CRR (Cash Reserve Ratio) by 50 bps to 4% as GDP slowed down to 5.4% in Q2 FY25. This may boost the liquidity in the market and help the GDP grow.
Pradeep Aggarwal, founder & chairman, Signature Global (India) Ltd
The Apex Bank’s decision to maintain the repo rate at 6.5% while reducing cash reserve requirement by 50 basis points, reflects a balanced and prudent approach to sustaining economic stability while fostering growth. This continuity provides a stable environment for the real estate sector, enabling developers to plan with confidence and homebuyers to benefit from favorable borrowing costs.
However, a rate cut in the future could infuse much-needed liquidity into the real estate sector, accelerating growth and enhancing accessibility for buyers. As India continues to experience robust economic activity, this stable monetary stance will act as a catalyst for long-term growth and investment across industries.
G Hari Babu, National president, NAREDCO
The Reserve Bank of India’s decision to maintain the repo rate at 6.5% and reduce the cash reserve ratio (CRR) by 50 basis points to 4% is a balanced approach to sustaining economic stability while fostering liquidity. This move aligns with the real estate sector’s ongoing need for growth support amid evolving market dynamics. The unchanged repo rate ensures continued affordability for homebuyers and stability in lending rates, both critical factors in sustaining the demand momentum witnessed in residential and commercial real estate. The reduction in CRR is a welcome step, as it releases additional liquidity into the banking system, providing financial institutions with greater flexibility to offer loans at competitive rates.
Buyer sentiment in the real estate sector remains positive, and real estate has received the highest investment of 17% in Alternative Investment Funds during the first half of 2024-25. This move by the RBI will further boost the real estate sector. However, we hope that the RBI will consider reducing repo rates in its next decision to give a greater impetus to affordable housing. For the real estate sector, liquidity is pivotal in driving construction activity and meeting delivery timelines, especially for affordable housing projects that cater to a significant segment of aspiring homeowners. The neutral stance reflects a careful consideration of inflationary pressures and economic growth, which reassures the industry of a stable monetary policy environment. This policy announcement underscores the RBI’s commitment to creating an enabling ecosystem for businesses and consumers alike. The real estate industry remains optimistic about its role in contributing to India’s economic growth trajectory under such supportive measures.
Dr. Niranjan Hiranandani, chairman, NAREDCO
The recent RBI monetary policy announcement didn’t deliver the anticipated 0.50 bps repo rate cut, raising significant concerns about India’s economic growth trajectory. A rate cut in CRR will augment the credit lending capacity of banks, making more funding available in the market to enhance business growth. This adjustment retains a confident and optimistic tone while clearly conveying the potential benefits of such a policy change for India’s economic landscape.
While the RBI argues that high interest rates help curb food inflation, this view neglects the pivotal supply-side constraints affecting food prices. Though monetary policy influences demand, it is supply-side factors that substantially drive food inflation. A strategic reduction in interest rates could have stimulated sustainable GDP growth while addressing inflation through supply-side measures.
Lower interest rates would have made home loans more affordable, propelling demand in the real estate sector, particularly for affordable housing. Despite stable macroeconomic conditions and a robust domestic economy, the absence of a rate cut threatens the growth of affordable housing. The Indian real estate sector is currently experiencing strong momentum, driven by increased banking and foreign.
Source: housing.com
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