RBI to maintain rates, real estate sector to be disappointed

Only an unforeseen and sustained increase in inflation may compel the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) to revise upwards the repo rate, said the Chief Economist at Anand Rathi Shares and Stock Brokers. He also added that not in the near future the MPC will reduce the repo rate from the current 6.5 per cent. Repo rate is the rate at which the RBI lends to the commercial banks. This rate is used by the RBI as a financial instrument to control inflation. “Unless there is an unforeseen and sustained increase in inflation, it appears that the RBI has completed its monetary policy tightening for the present cycle. Nevertheless, it should be noted that the initiation of the rate reduction phase is not anticipated to occur in the near future,” Sujan Hajra, Chief Economist & Executive Director at Anand Rathivsaid. “Although it is improbable to occur during the present policy meeting, there is a possibility that the RBI might alter its policy stance regarding liquidity from a tightening approach to a neutral one, once retail inflation falls below 6 per cent,” Hajra added. Meanwhile players in the real estate sector wish the RBI would start reducing the repo rate. “Given the robust demand in the real estate sector nationwide, it is imperative that we maintain low-interest rates. This approach can effectively stimulate potential buyers to secure loans for property purchases, consequently invigorating overall real estate market activity. We anticipate that the RBI will ensure sufficient liquidity within the banking system, as this is paramount for enabling banks to offer lending and financing options to both developers and buyers. Such measures will, in turn, bolster the growth of the real estate sector,” Rajan Bandelkar, national president of the National Real Estate Development Council (NAREDCO), said. While hoping that RBI would maintain the current interest rate, Vikas Garg, Joint Managing Director, Ganga Realty said the cen