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Below Perspective on RBI MPC Announcement By Mr. Shishir Baijal, Chairman & Managing Director, Knight Frank India

INTEREST RATE PAUSE TO BE SUPPORTIVE OF HOUSING DEMAND

“We appreciate the decision of the RBI to maintain the REPO rate unchanged for the second consecutive time. Although inflation still remains higher than the tolerance level, it has decreased over the last few months, allowing the RBI to maintain its stance. We believe that this status quo will facilitate positive decision-making for home buyers.

 The decision to pause is well justified, as the inflation outlook for FY24 is within the central bank's tolerance range. However, the momentum in key macro-indicators related to growth is uneven. Indicators such as GST collection, manufacturing and services PMI, and E-way bills suggest strength in economic growth. However, certain crucial growth indicators, particularly consumer durable goods in the IIP (Index of Industrial Production), which reflects household consumption, have yet to show sustained recovery. Therefore, maintaining the policy rates unchanged for a while will support consumer demand amid diminishing inflation, thereby fostering economic growth.

 Regarding the real estate sector, the trajectory of India's economic growth will be beneficial. Despite a significant increase in interest rates, the sector has been performing well. Real estate loan demand from both housing and commercial segments has remained strong, despite a 150 bps rise in the base lending rate (MCLR) over the past year. However, we remain cautious about the industry, as the complete transmission of the repo rate hikes to lending rates is yet to be observed.”

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