Considering the recent slowdown in economic growth momentum and inflation going up, RBI decided to keep the repo rates unchanged at 6.5% for the eleventh consecutive time.
To address the liquidity woes, it decided to slash the cash reserve ratio (CRR) to 4%. This cut in CRR is positive for the Indian real estate sector, as banks will have higher lending capacity. This directly supports developers to borrow more for development.
A repo cut in repo rate would have helped boost housing sales momentum further, particularly since we have seen sales tapering in the last two quarters. However, the continuation of relatively affordable home loan interest rates will attract borrowers from this segment, especially since housing prices saw a significant rise in the last quarter.
As per ANAROCK Research, Q3 2024 saw average housing prices rise yearly by a cumulative 23% in the top 7 cities even as average prices in these markets collectively rose to approx. INR 8,390 per sq. ft. by Q3 2024-end, from approx. INR 6,800 per sq. ft. in Q3 2023.
With prices rising, housing sales declined to some extent in Q3 2024. As per ANAROCK Research, Q3 2024 saw residential sales go down by 11% annually against Q3 2023. New launches also fell by 19% in this period.
Thus, the unchanged home loan rates support demand in the ongoing period. Further, given that sales were tapering in the last two quarters, developers too have been cautious about hiking prices lately. In this scenario, it makes sense for homebuyers to press the 'buy' button as the overall cost of acquisition of a property will remain relatively affordable.
