RBI hits pause button, keeps rates unchanged due to inflation pressure

6^th February 2020: The Reserve Bank of India (RBI) the apex bank of the country released the Sixth

Bi-monthly Monetary Policy Statement for the current financial year. The monetary policy committee assessed the current macroeconomic situation and continued with accommodative stance and kept the Repo Rate unchanged due to inflation pressure. Considering that there is a direct link between repo rate and market rate of interest on home loan, one of the foremost real estate players in Delhi-NCR, KW Group shared its opinion on this step taken by the RBI.

Pankaj Kumar Jain, Managing Director, KW Group said, “Considering the rising inflationary pressures and slowing GDP growth, the industry was expecting the RBI to cut repo rate by at least 25 basis points in this last monetary policy statement of the current financial year, but the apex bank chose to maintain status-quo second time in a row which is an utterly disappointing move for all the stakeholders of the real estate sector.”  He added that the timing of this policy review was significant as it came just after the announcement of the budget which largely turned out to be a non-event for the real estate sector.

“If a rate cut was announced in this policy review it could have spread much-desired positivity in the real estate market. Still, all is not lost, and it’s the time the apex bank should immediately issue directions to the home loan providers to pass on the benefits of the repo rate reduction of 135 basis points accumulated all throughout this financial year,” said Jain.

The industry stakeholders are of the opinion that it’s urgent to bring down the home loan rates to enthuse buying momentum in the market. While the MPC decided to continue its accommodative stance rather than announcing a rate cut, the homebuyers struggling with the other household requirements due to high rate of inflation, remain reluctant to enter the competitive housing market.