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Below Perspective On Expectations From the upcoming RBI MPC Meeting by Mr. Shishir Baijal, Chairman & Managing Director, Knight Frank India

RBI is likely to soften the pace of its rate hike in the upcoming MPC meeting as inflation is expected to moderate in the coming months given that global commodity prices and the domestic wholesale prices have softened from the peak witnessed early this year. Also, as seen in the Q2 FY23 GDP print, except for the service sector, a degrowth was seen in most of the core sectors such as industry, manufacturing etc. Hence, with inflation potentially showing signs of ebbing and growth concerns coming to the fore, we expect the RBI to hike its repo rate by a comparatively subdued 30-35bps in the upcoming MPC meeting.

From a real estate perspective, 190bps of repo rate hike so far has already transmitted into a 105bps of rise in the MCLR rates. The mortgage rates have increased in line with the MCLR and the cumulative growth in residential sales in the last six months have understandably begun showing some signs of slowing. The affordability of the home buyers has also reduced by 10% since the beginning of this interest rate hike cycle. Hence, a 30-35bps of repo rate hike by the RBI would be reasonable in this cycle to address inflation without impacting growth to a large extent. A comparatively lower impact on mortgage rates will also be helpful in supporting homebuyer demand as the year draws to a close.  

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