Mr. Anurag Mathur, CEO, Savills India on today's RBI announcement.
“While domestic inflation remains within RBI’s tolerance levels in recent months, the Monetary Policy Committee (MPC) of the RBI has advocated a 25-bps increase in benchmark lending rates; the sixth consecutive hike that takes the overall increase to 250 bps in FY23. As a result, the benchmark lending rate stands at 6.5%, with the accommodative stance still withdrawn. While it is understood that retail lending rates would be affected for new home loans, auto loans, institutional borrowing, etc. in reality, lending institutions are likely to increase the tenures for ongoing EMIs.
The important point is that the gradual and spaced-out rate-hikes have meant negligible impact on overall consumption – as the GDP growth rate has been forecast at 7.0% for FY23. Remarkably, the residential segment was undeterred and witnessed record sales in 2022. Commercial real estate too continues to be in recovery mode. There remains a strong belief that this could be the final increase of the current rate-cycle, and hence, the supply side will hope for the return of stability in rates through most of this year. The real estate sector did get some announcements in the recent Union Budget. The increased allocation to PMAY programme, the push for real estate growth in tier II and III cities, the annual INR 10,000 Cr allocation to Urban Infrastructure Development Fund, together signalled the overall direction of policy, and the 25-bps rate increase will not be a roadblock in view of these larger goals, or a major impact on the demand in the medium to long run. Going forward, the increase in financing cost and continued high raw material costs on the residential segment, however, could play a crucial role and it is there that next few rate-decisions will be vital.” – Anurag Mathur, CEO, Savills India
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