RBI's rate pause boosts real estate, inflation concerns linger: Experts

Kolkata: Experts from the real estate sector have praised the Reserve Bank of India's decision to keep lending rates steady, highlighting its positive impact on demand and affordability.

However, some concerns remain regarding potential inflationary pressures in the coming months, experts said.

Samantak Das, Chief Economist and Head of Research and REIS (India), JLL, noted the country's strong economic growth, reflected in the upward revision of the RBI's GDP forecast to 7 per cent.

He emphasised the record sales witnessed in the residential market, with January-September sales reaching a 15-year high.

Das said healthy macroeconomic fundamentals and some normality in the global economy next year are likely to support a repo rate reduction in 2024.

He expressed confidence that steady interest rates would further support the momentum in the residential market.

Niladri Bhattacharjee, Partner at Grant Thornton Bharat, acknowledged the potential for the high growth rate to trigger inflationary pressures, specifically impacting sectors like metals and mining.

While recognising the short-term benefit for the industry of holding rates, Bhattacharjee warned that inflation remains a concern in the long run.

Sushil Mohta, President of CREDAI-West Bengal, welcomed the unchanged repo rate, highlighting its positive impact on homebuyers by avoiding further pressure on home loan costs.

He acknowledged the challenges faced by the housing sector due to previous rate increases and expressed hope for a future repo rate reduction that would further benefit the sector.

Shishir Baijal, Chairperson and Managing Director of Knight Frank India, acknowledged the expected nature of the decision to maintain rates, aligning with global trends.

However, he expressed concerns about potential inflation risks arising from seasonal food price volatility. He acknowledged the decision's support for the current momentum in residential demand, especially within the affordable segment.

The long-term impact of this decision will hinge on the RBI's ability to navigate the delicate balance between supporting economic growth and controlling inflation.

Siddhartha Sanyal, Chief Economist and Head of Research at Bandhan Bank, said, "The narrative on growth and inflation dynamics was a balanced and pragmatic one. It is heartening to see the upward revision in growth expectations from the RBI, especially given stronger confidence in further broad-basing of domestic growth momentum.

"The RBI continues to keep all options open to manage liquidity as and when required. Today’s communication also underscores the central bank’s intent to remain proactive in assessing and mitigating brewing risks on all fronts." Anitha Rangan, economist, Equirus, said that RBI in line with market expectations held on to its repo rate at 6.5 per cent with a unanimous vote.

However, the big surprise was the revision in growth estimate for FY 24 to 7 per cent from 6.5 per cent, Rangan said.

"RBI has not revised its inflation estimate downward. This means that RBI is comfortable that at the current policy rate, growth is not inflationary but rather real-demand-led growth, she said.

Aalesh Avlani, founder and director, Credit Wise Capital, said the unchanged repo rate is a positive step for India's credit economy, particularly for customers in rural areas who can now borrow more freely.

This was witnessed during the recent festive season when vehicle sales reached record highs, largely due to steady interest rates and lenders passing on the benefits to customers.