RBI's Repo Rate Hold Ensures Continued Home Sales Growth

12 Jun 2023 CW Team

The Reserve Bank of India's decision to maintain the repo rate at 6.5% for the second consecutive time is anticipated to support the continuous growth of the real estate market. This is particularly beneficial for residential sales in the affordable, low- and mid-income housing sector, which is sensitive to changes in interest rates.

The central bank had previously raised policy rates by a total of 250 basis points through six consecutive increases starting from May of the previous year, ultimately reaching the current repo rate of 6.5%. However, in April, they decided to halt the rate hikes.

As a result of these increases, the real estate sector experienced an increase in costs, affecting more than 260 related industries. Housing loan rates also rose from a record low of 6.6% a year ago to approximately 9% currently. The affordable housing segment, which is particularly influenced by interest rates, had already started to feel the impact of these rate hikes.

Real estate developers expressed their approval of the central bank's accommodative approach, appreciating the decision to pause the repo rate hikes, especially as the record-high inflation gradually subsides.

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