‘Real estate may see huge investments’
Market experts have reacted to the RBI repo rate revision.
Samantak Das, Chief Economist, and Head – Research and REIS, India, JLL,
“RBI’s announcement of an increase in the policy rate by 50 basis points (bps) – the second consecutive hike – is along expected lines in the backdrop of persistent inflation, global headwinds, and macroeconomic situation. The prolonged rise in inflation which touched 7.8% in April 2022 has been due to supply chain disruptions created by the global geopolitical situation. RBI has been decisive in its intent to mitigate the impact of inflation on economic growth by increasing the policy rates and gradual withdrawal of liquidity.
The rise in policy rate is expected to act more as a sentiment disruptor for the home buyers given that mortgage rates are likely to inch up. However, the impact of the rate hike on home loan EMIs is unlikely to be significant as these loans are for a longer tenure. Banks and housing finance companies have only partially transmitted the previous policy rate hike. Also, interest rates are still likely to remain at decadal lows and hence, while the opportunity for homebuyers is reducing, it is critical to understand that affordability remains high and buying momentum is expected to remain largely intact.”
Anshuman Magazine, Chairman & CEO – India, South East Asia, Middle East & Africa, CBRE
“The RBI’s decision to raise the repo rate to 4.9% was a well-anticipated move, considering the steep rise in global inflation levels as well as the monetary tightening measures being adopted by central banks worldwide. We believe that this decisive action will go a long way in curbing mounting inflation levels in the medium term.”
Kenish Shah, Co-Founder, PropReturns “The further bump in the repo rate to 4.9% to battle inflation will bring huge investments into the real estate industry. Savvy investors will now stray away from fixed-income investments such as FDs and government bonds that are losing to inflation. The smart move at this point will be to diversify their portfolio using higher-yielding assets like commercial real estate. As seen in patterns before, rental yields in commercial real estate will be pushed up due to the sudden hike in interest rates and will become a powerful wealth creation tool for many investors. The hike in interest rates is a boon for the real estate industry.”
Ravi Singh, vice-president and head of research, Share india
In line with the expectation, RBI has increased the repo rate by 50 basis points and is already discounted by the market. The Ukraine-Russia war has led to an increase in inflation globally beyond tolerance level and is effecting the economic growth. However, most of the industries are already facing headwinds due to steep increase in raw materials cost and fuel prices, and a hike in the rates will further increase the burden. The Fed is also increasing the rate so there is the major possibility that apart from equity market, other markets like debt market and bond market may see some outflow anytime soon. Auto, real estate, banking and infrastructure stocks would be worst hit by the rate hike as loan financing is a major part of these sectors. FMCG, Insurance, Energy, Power and Utility sectors provides a cushion against rising interest rates.
Atul Goel, MD, Goel Ganga Group
RBI’s recent step to increase the repo rate by 50 basis points has been on the expected lines. To curb inflation, the regulatory bodies in India were required to control liquidity circulation in the economy. For a few months, the inflation rate has been above 6%, which is beyond the RBI’s safe zone. If not controlled, the inflationary pressure could destabilise an otherwise bullish Indian economy. Although the recent step will increase the home loan rates, an unstable economy is not conducive to the overall health of the real estate industry. For the industry to operate optimally, it is important that the economy continues to grow in a stable, inclusive, and steady fashion.
Manoj Dalmia, founder and director, Proficient Equities Private Limited
RBI has raised the repo rate by 40bps to 4.9% , the inflation projection for this fiscal is 6.7% and will remain above the tolerance band of 2-6% for three quarters in this fiscal, RBI is still expects the economy to grow at a rate of 7.2% . The SDF and MSF have been increased to 4.65% and 5.15% respectively, RBI is expected to reduce liquidity, reinforcing its fight against inflation and extending its effort to return monetary conditions. The cost of lending for banks is set to go up due to an increase in repo rate ,retail loans will face direct impact due to this.
Suren Goyal, Partner, RPS Group
We welcome the step of the apex body to increase the overall repo rates by another 50 basis points. This will help in clamping down on inflation and smoothen economic growth. A rise in inflation can soften the stance on an otherwise robust real estate industry. Already raw material prices are increasing and an unbridled rate of inflation will further drive the input costs northwards, therefore resulting in cost overruns for the developer fraternity. In such a case they will have no option but to pass on the price to the homebuyers. Meanwhile, the government should also take concentrated efforts to reduce the spike in prices of raw materials such as cement, bricks, steel, etc. This will also give some relief to the sector.
Ridhima Kansal, Director, Rosemoore
The lowering of the repo rate will ease the economy, control inflation, and set the stage for more sustainable growth. All these three parameters are greatly needed for retail sales to succeed in a vast country like India. The rate of inflation has been beyond the safe limit of 6% over the past few months and such a step was needed. A low-interest regime had to be altered toward a more holistic growth paradigm. Meanwhile, an overall robust economy will continue to drive retail sales in India, despite personal home finances becoming a little dearer. The job market is booming, e-commerce growing rapidly, and malls & shopping centers have resumed. This is a great sign for the retail industry in general. The current fiscal is the year, the industry was waiting for a while.