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Below the Quote on RBI Monetary Policy - rate cut would help catalyse housing sales by Anuj Puri, Chairman - ANAROCK Group

The RBI’s upcoming monetary policy announcement will, as always, have implications on different industries and markets. The housing market is especially sensitive to changes in acquisition cost since in India, most home buyers use home loans. A cut in the repo rate would result in lower interest rates on home loans, which makes EMIs more manageable for borrowers.

Of course, interest rates are not the sole factor to influence purchase decisions - property rates also play a big role. As per ANAROCK Research, average residential property prices across the top 7 cities have collectively seen a significant 46% jump since 2021. More attractive interest rates can help improve overall affordability, and this can help catalyse housing sales during the festive season. Improved sales also benefit developers as better sales improve their cash flows and reduce their borrowing expenses for projects.

Equally importantly, a rate cut would help boost overall market sentiment and woo back investors. After many years of largely staying away from housing because of low price growth, investors returned to it after the COVID-19 pandemic because both demand and prices started going up. Currently, many investors have taken a breather as prices appear to have peaked out, but more attractive lending rates can bring them back to the market.

That said, we need to be realistic. While the recent US Fed cut would have prompted the RBI to follow suit, the fact is that the global economy is facing considerable uncertainty because of the ongoing geopolitical tensions. It is a tightrope walk for the RBI and it is therefore possible that it will hold on to the current repo rate for now, until these pressure ease.

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