Unchanged repo rate: Is this the right time to invest in real estate?
RBI keeps Repo rate unchanged at 4% amid Omicron scare
Coronavirus pandemic has severely affected the real estate sector in the country. With measures announced by the government, reduced repo rate and stamp duty cut in states like Maharashtra and Karnataka, the sector has been showing signs of recovery in the last few months. Due to the unexpected global headwinds propelled by the new Covid-19 variant. The economic recovery prompted Reserve Bank of India to maintain the policy rates leading to the repo rate going steady at 4%. The RBI has lowered the repo rate by a total of 115 basis points (bps) since March 2020, to help Asia’s third-largest economy to deal with the adverse effects of the Coronavirus pandemic. At 4%, the repo rate is currently 250 basis points lower than its level at the start of 2019.
Growth opportunity and impact on home buyers
RBI has kept the repo rate unchanged in order to support growth and rein inflation. Economic growth needs to be supported using monetary policy and this is the foremost reason that the RBI has continued its accommodative stance, which has invoked a sense of optimism. This works well for all home loan borrowers, as the environment of affordability will continue and will not harden anytime soon. The growth registered by the real estate sector in Q3 2021. In Q3 2021, residential sales witnessed an upward trajectory, increasing by 65% on a sequential basis. The real estate sector is expected to gain benefits from a regime of low mortgage rate, coupled with duty waivers, realistic property pricing and attractive offers leading to affordable synergy overall. The housing sector was quick to adopt digitalization and innovation and also witnessed a demand shift where offerings with best-in-class amenities became the most sought-after choice of buyers.
Impact on home loans
The low interest rates have been a crucial factor in the revival of the demand in the real estate sector. The buyers are coming back to the market and this might be the last opportunity for the homebuyers to purchase property with low interest rates before RBI decides to hike it in their next policy announcement. Growth in the prices of raw materials can further result in an uptrend in real estate prices. Already both public sector and private sector banks have eased their home loan interest rates. SBI and HDFC are offering home loans at 6.70% p.a. These are quite affordable rates keeping the historical data in mind. Interest rates on home loans are already at sub-7% level, with banks offering further sweeteners such as processing fee waivers among many others. In future the banks will continue to lend vigorously to the real estate sector, the second-largest employment generating sector in India