RBI MPC June 2023: The Reserve Bank of India on Thursday again hit the pause button and decided to keep the key benchmark policy rate (repo rate) at 6.5%. The RBI MPC was expected by many to keep its benchmark repo rates unchanged in the backdrop of the prevalent scenario marked by continuing volatility in global commodity prices, financial markets and supply chain constraints, besides domestic factors like monsoon prospects.
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The real estate industry has welcomed the decision to not touch the already high repo rate. Experts see the housing sector to get the benefit of rate-pause.
Boman Irani, President, CREDAI National, said, “On the back of RBI’s decision to maintain the repo rate at 6.5%, we expect both housing supply and demand to sustain its ongoing momentum. However, given that the inflation is at an 18-month low, there is scope for the RBI to reduce the repo rates in the upcoming MPC meetings, to stimulate growth across all industries.”
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Anuj Puri, chairman, ANAROCK Group, said, “This gives some respite to prospective homebuyers looking to avail of home loans in the near future. The unchanged repo rate can help maintain the momentum in housing sales, which has so far been firing on all cylinders in 2023. As per ANAROCK Research, we saw housing sales in first quarter of 2023 scale new heights, breaching the one lakh mark at 1.14 lakh units across the top 7 cities.”
“Given the current unchanged rates, the outlook for those looking to buy their first home via a home loan soon remains favourable. Interest rates from most banks will continue in single digits. With top banks, they currently hover between 8.7 to 9.65%. A future rate hike, if any, may push the rates into double digits. The persisting financial instabilities in advanced economies of the world may have repercussions in India, causing the RBI to take such a step to face these headwinds,” Puri said.
Ramani Sastri, chairman and MD, Sterling Developers, said, “The decision to keep the repo rate unchanged is a positive development for home buyers and investors, as it provides them with some stability and reduces uncertainty and volatility associated with interest rate fluctuations. Any further increase in policy rates means that interest rates on home loans may hit an all-time high and touch almost double-digit, which could have a substantial impact on buyer sentiments and affordability, which in turn can curtail demand. Another hike would also lead to even higher borrowing costs for developers too.”
“Hence, we expect a continuation of existing policy rates through 2023. Undoubtedly, a further reduction in interest rates in the near future would be preferred to bolster overall market confidence and make it more enticing for home buyers and support the growth momentum in the real estate sector,” Sastri said.
After the last MPC meeting in April, the RBI paused its rate hike cycle and stayed with the 6.5% repo rate. Prior to that the central bank had cumulatively hiked the repo rate by 250 basis points since May 2022 in a bid to contain inflation. The MPC met in the backdrop of consumer price-based (CPI) inflation declining to an 18-month low of 4.7% in April.
The Reserve Bank governor recently indicated that the May print would be lower than the April numbers. The CPI for May is scheduled to be announced on June 12.
The government has mandated the RBI to ensure CPI inflation at 4% with a margin of 2% on either side.
In April 2023 MPC decision, RBI Governor Shaktikanta Das had said the MPC would not hesitate to take action in the future.
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