RBI expected to maintain status quo as MPC meeting begins; realty sector optimistic on repo rate

Industry experts suggest this decision comes amid rising geopolitical uncertainties, particularly in the Middle East

October 7, 2024

Gov Shaktikanta Das to announce decision on Oct 9

The Reserve Bank of India (RBI) is anticipated to keep its monetary policy unchanged during the ongoing three-day Monetary Policy Committee (MPC) meeting, which commenced on Monday under the leadership of Governor Shaktikanta Das. Industry experts suggest this decision comes amid rising geopolitical uncertainties, particularly in the Middle East.

The six-member committee is currently evaluating interest rates and assessing the overall economic landscape, with the RBI Governor set to announce the MPC’s decision on October 9.

Shishir Baijal, Chairman and Managing Director of Knight Frank India, highlighted that growing geopolitical tensions, especially in the Middle East, pose inflationary risks that could impact crude oil prices. Despite elevated interest rates, he noted that India’s economic growth remains robust, particularly in home sales, which continue to show strong momentum. This resilience could provide the RBI with the leeway to maintain the repo rate at its current level of 6.5%.

Experts also pointed out an imbalance between credit and deposit growth, with credit growth outpacing that of deposits. This situation may encourage the RBI to keep policy rates steady for a longer period.

For the real estate sector, a reduction in the repo rate could lead to lower home loan interest rates, making EMIs more affordable for potential buyers. Anuj Puri, Chairman of Anarock Group, emphasized that the housing market is particularly sensitive to changes in acquisition costs, as most home buyers in India rely on loans.

“While interest rates aren’t the only factor influencing purchase decisions—property prices also play a significant role—more attractive interest rates could enhance overall affordability and potentially boost housing sales during the festive season. Improved sales can also benefit developers by enhancing cash flow and reducing borrowing costs for ongoing projects,” Puri explained.

Despite the recent interest rate cut by the US Federal Reserve, experts believe that the RBI is likely to adopt a cautious approach given the global economic uncertainties stemming from ongoing geopolitical tensions. As such, the RBI may choose to hold the current repo rate steady until these pressures subside.

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