RBI’s rate pause a boon for homebuyers ahead of festive season

The Reserve Bank of India’s rate setting panel has kept the repo rates unchanged at 6.5% in its fourth bi-monthly policy today, as per expectations. This comes as good news for the homebuyers, especially as the festive season has already kicked in. After hiking interest rates through 2022, the central bank has held rates since February this year.

“The unchanged repo rate is a festive bonanza for homebuyers and gives them yet another opportunity to make cost-optimized home purchases. We are entering the festive quarter with a very strong momentum in housing sales, and unchanged interest rates will act as a major catalyst for growth in the residential market,” says Anuj Puri, chairman, ANAROCK group, a property consultant firm.

The fourth pause in policy rates is a positive development for the real estate sector, particularly the residential segment. According to real estate services firm JLL India, residential sales for the first nine months of 2023 have already touched 91% of the annual sales of 2022.

In fact, going ahead, there may be even better news for homebuyers. “There is a possibility of a policy rate cut in 2024 provided the GDP growth and inflation support such a stance of RBI. In that scenario, we would likely see a further growth trajectory in the real estate sector, particularly the residential segment,” says Samantak Das, chief economist and head research & REIS India, JLL.

The 250 basis point hike cycle, which ended in February, had not only made home loan EMIs a cause of concern for new homeowners, existing homeowners had to bear the brunt too.

Borrowers normally extend the tenure to keep their home loan EMIs the same when the interest rates go up, but it had reached a point where the home loan tenures had jumped to over 50 years and homeowners had no option but to increase their EMI to pay off their home loan before retirement.

But as of now, the momentum seems upbeat. “With the ongoing festive season, we are already witnessing a surge in inquiries and we are expecting around 20% growth compared to last year’s festive season. This naturally offers a context for consumers to go in for their dream homes as the overall climate is geared towards sustained demand and the fact that home buyer confidence is at an all-time high,” says Ramani Sastri, chairman and MD, Sterling Developers.

The RBI's decision to pause on rate hikes is good news for homebuyers, offering them continued access to relatively low-interest rates and potentially more affordable housing options.