How Corporate India Reacted To RBI's MPC Decision

The Reserve Bank of India (RBI) Governor, Shaktikanta Das announced on Thursday April 6,2023, the decision of monetary policy committee (MPC)to keep the repo rate on hold, with "a readiness to act". The RBI has a mandate to ensure that retail inflation remains at 4 per cent with a margin of +/-2 per cent.

After 6 consecutive rate hikes, this would be first time the MPC decided not to change it, but hold it for now, despite the sticky inflation. However most economists and analysts were anticipating a 25 basis points hike.

But this decision has been a welcome move by Corporate India, lets see what some of them have to say.

Sandeep Bagla - CEO, Trust Mutual Funds

There is nothing hawkish about the policy. RBI/MPC has taken a pause, kept the repo rates unchanged, against majority market view. The stance remains unchanged at the 'enigmatic withdrawal of accommodation'.

We expect both GDP and inflation to be significantly below RBI year end estimate of 6.5% and 5.2% respectively. Interest rates are likely to soften considerably from current levels. Bonds will perform well this year generating capital gains over and above the coupon rates. Passive investments like fixed deposits will underperform debt funds.

Cyrus Mody, Founder & Managing Partner, Viceroy Properties

The RBI's announcement was a prudent one as the governor kept the repo rate unchanged at 6.5%, bringing the total hike since May 2022 to 250 basis points, including six hikes. The economy is showing signs of improvement but the central bank wants to keep inflation in check. It is expected that going ahead the RBI will pause the rates at this level and start easing the rates from CY25. The central bank is aiming to strike a balance between growth rate and inflation.

We hope that a regular monsoon year will help with lower inflation thereby ease in the interest rates. MMR as a market will continue to witness strong demand as various transit infrastructure projects see completion and commissioning in the next 12-18 months. Also, projects developed by reputed names will continue to see demand due to their quality construction and timely delivery.

Anuj Sharma - Chief Operations Officer - IMGC

Maintaining status quo on rates gives market stability and predictability, which can sustain home demand and grow the real-estate market. Increased rates have settled in now and a pause should help. When interest rates remain steady, potential homebuyers are more likely to be confident in their ability to acquire a loan and complete a purchase.

Anuj Puri, Chairman - ANAROCK Group

Much against general expectations, the RBI decided to keep the repo rates unchanged at 6.5% today. This is indeed good for the residential real estate market, which faces a tough road ahead amid massive layoffs by large corporates the world over. India is not decoupled from global economic dynamics and their invariable impact on the housing uptake here. The RBI's decision to keep the repo rates unchanged comes as a welcome respite to homebuyers.

This particularly gives relief to affordable and mid segment homebuyers who feared a possible rate hike today, making property buying via home loans even harder. As is, affordable housing has been under stress since the pandemic. This segment unit priced less than Rs 40 lakhs, saw its overall sales share dip between 2019 and 2022 and further in Q1 2023. ANAROCK Research indicates that back in 2019, out of the total sales of nearly 2,61,400 units across the top 7 cities nearly 38% sales were in the affordable segment.

But in 2022, out of the total 3,64,880 units sold across the top 7 cities altogether, about 26% were in the affordable category. There has been a further dip in overall sales share in Q1 2023, as well. Out of total 1.14 lakh units sold in the top 7 cities in Q1 2023, affordable housing comprised just 20% share (or approximately 23,110 units sold).

It bears keeping in mind that after the remarkable performance in Q1 2023, the housing market is now staring at major headwinds with layoffs, rising property prices, etc. which will pose a challenge in the short-term. The respite of home loan rates remaining unchanged is therefore very welcome.

Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares

With inflation still elevated and recent rate hikes by most major central banks, chance of a 25-bps rate hike was considerable. The RBI opting for a pause seems to suggest that the central bank expects softer inflation and growth. With this, it seems that the RBI has come to the end of rate hike for this cycle. Unless there was a big surprise either on inflation or growth, we expect the RBI to remain in pause mode during 2023.

Nitin Bavisi, CFO, Ajmera Realty & Infra India Ltd

The RBI decision to keep the repo rate unchanged comes as a positive surprise for most sectors. Real estate will rejoice the most. Given the current setup, we expect inflation to moderate going forward. Inflation being a primary concern of the RBI, the repo rate check shall continue. The economic activity is expected to grow at a rate of 7% of the previous fiscal. Add to that the ease in rates, which will further support growth.

We foresee a resilient upward demand trajectory going forward. The momentum in the market is currently driven by the need to upgrade to a better living and the admiration of real estate as a weatherproof asset class which will continue during the year and the due credit goes to this move from the RBI.