Rate pause on expected lines, says Khara

The Reserve Bank’s decision to pause rate hike was largely on expected lines, State Bank of India (SBI) chairman Dinesh Khara said.

“The communication was nuanced and tailored to anchor market expectations for the future in terms of a durable glide path of inflation,” he said.

Mr. Khara said the bouquet of policy changes on the development front covers a wide spectrum and prioritises resolution, risk management, and digital innovation, and addresses issues relating to market microstructure.

“Overall, the policy is an apt statement in the backdrop of a global economy that is still mired in growth-related uncertainties and labour market rigidities,” he added.

Zarin Daruwala, Cluster CEO, India and South Asia markets (Bangladesh, Nepal and Sri Lanka), Standard Chartered Bank, said, “The MPC’s decision to hold rates reflects continuity in its approach of gradualism and reiterates its commitment to support growth as well as rein in inflation to target levels. RBI’s positive outlook on growth, inflation trajectory and other macro fundamental bode well for the economy.”

“This is also reflected in a stable rupee and steady long term rates. Rationalisation of the licensing framework for authorised persons under FEMA should ease access to India for foreign businesses and individuals. Permitting issuance of forex cards on RuPay will augment the reach and acceptance of the network internationally,” she said.

“The MPC status-quo was on expected lines as the lagged effects of past rate hikes are yet to fully play out. It also highlighted the central bank’s caution on inflation amid prevailing risks,” Crisil said in a statement.

“Inflation faces risks primarily from the impact of weather on food inflation. Meanwhile, growth will inevitably slow this year due to higher borrowing costs, among other factors,” it said.

“Net-net, we expect RBI to maintain status quo on rates in the next few meetings. We expect it to initiate cuts in the January-March quarter of 2024 as growth slows and puts a downside on inflation,” Crisil added.

Samantak Das, Chief Economist and Executive Director - Research & REIS at JLL India said, “With policy rates unchanged, potential homebuyers can continue to access housing loans at existing interest rates, thus boosting the demand for residential properties.”

“Indian residential market witnessed significant growth during the January-March 2023 quarter with the highest quarterly sales in last 15 years indicating strong demand, despite elevated mortgage rates and a rise in residential prices. Developers have met the rising demand with the quarter witnessing a decadal high in new launches,” he said.

This congruence in demand and supply is expected to lead to a sustainable growth trajectory in the residential segment, he added.

 K.T. Jithendran, MD & CEO, Birla Estates said, “The decision to maintain the repo rate at 6.50% is a judicious move, yielding favourable implications for current home loan borrowers.”

“The RBI has astutely acknowledged the influence of inflation and the prevailing sentiment of homebuyers towards the overall economy. Hence, this decision is expected to foster stability while instilling confidence in banks to extend credit to homebuyers, ultimately facilitating an increased flow of funds to the real estate sector,” he said.

“Consequently, this development is anticipated to bolster the demand for residential real estate, rendering it an enticing investment opportunity for prospective homebuyers,” he added.

Ashish Kukreja, CEO and Founder of Homesfy.in said, “The decision to maintain the repo rate at 6.5% is likely to fuel positive sentiments and significantly boost the housing demand in India.”

“The housing sector has witnessed remarkable growth in recent years, with numerous players experiencing substantial growth and a promising pipeline of new project launches. The persistent concerns surrounding escalating interest rates had cast a shadow over prospective homebuyers. But now, the government’s thoughtful move to keep the rates unchanged will surely bring relief,” he said.

“This stability in borrowing costs is anticipated to sustain the current sales momentum and alleviate apprehensions, encouraging more individuals to invest in properties. Overall housing market outlook remains promising in the near to medium term, which will further be supported by a firm launch pipeline and strong business development targets by most of the developers,” he added.