LIVE: RBI Monetary Policy Review: Reactions to MPC by experts, analysts and industry leaders - Who said what

RBI Monetary Policy Review, Reaction from experts, analysts and industry leaders: The Reserve Bank of India on Friday raised benchmark lending rate by 50 basis points, the fourth straight increase since May, as it extended its battle to tame stubbornly high inflation. The monetary policy committee (MPC), comprising three members from the RBI and three external experts, raised the key lending rate or the repo rate to 5.90 per cent - the highest since April 2019 - with five out of the six members voting in favour of the hike. 

Here is what experts, analysts and industry leaders have to say on RBI Monetary Policy Review September 2022:-

Rajeev Radhakrishnan, CIO-Fixed Income, SBI Mutual Fund. 

"The impact of external monetary tightening measures and its spill over effects have been evident in the policy stance and action today. To the extent that these factors prevail over the coming months, the terminal policy rate expectation locally could reset a bit higher. However, the overall focus on moderating surplus liquidity and adjusting policy rates to ensure real positive rates remains positive from a medium-term perspective."

Dr Sachchidanand Shukla, Chief Economist, Mahindra & Mahindra  

"The RBI’s decision to continue with yet another 50 bps Repo rate hike was in line with expectations. The RBI has a two-pronged objective – firstly, to keep inflationary pressures under check and secondly, to preserve financial stability by ensuring synchronous policy movement which is not out of sync with global monetary policy cycle. By keeping interest differential under check, RBI will not only provide cover to INR for an orderly movement but will also save ammunition by not having to run down precious Fx Reserves . It was also good to see the Governor eschew the tendency to provide constant forward guidance despite pressure from market participants. Being agile, data dependent & flexible to retain an element of surprise in such an uncertain environment is a prudent strategy. The move to rationalise criteria that allows Regional Rural Banks (RRBs) to provide internet banking facilities to their customers will help improve the reach of digital banking in rural areas."

Rajiv Sabharwal, MD & CEO, Tata Capital Ltd.

"A 50 basis point rate hike is a well-calibrated approach by RBI to safeguard the economy from significant shocks ahead of volatile economic conditions. This move will help tame the increased inflationary pressure, improve foreign capital inflow to arrest declining value of rupee against the US dollar. The stance of continuing withdrawal of accommodation is imperative to ensure inflation remains within target going forward. The recent correction in global commodity prices including crude oil, if sustained, may ease some cost of pressure in the coming months."

Dr Rashmi Saluja, Executive Chairperson, Religare Enterprises Limited 

"RBIs confidence on growth has led it to hike interest rates to deal with the global storm. With growth rate forecast for FY23 still at 7% despite series of rate hikes makes India an oasis in the desert. As far as inflation is concerned, the statistics revealed by RBI pertaining to crops is comforting. With crude oil prices on a downward trajectory we believe most of the hike in interest rates in this cycle is behind us. We believe that RBI and Government are handling the economy far better than there counterparts in other countries, said Dr Rashmi Saluja, Executive Chairperson, Religare Enterprises Limited."

Ravi Singhal, CEO, GCL

"As we can see, the governor of the RBI increased the RRR by.50 percent. The inflation target has passed. Rainfall is expected to be delayed. Approach to accommodate: Demand is expected to remain strong in the second half. Still, the inflationary effect is looming. The possibility of increasing interest rates is also increased."

Avinash Godkhindi, MD & CEO of Zaggle

“RBI’s decision to hike the repo rate by 50 bps is on expected lines and will help in taming the retail inflation which has remained high over the last few months. It may also help in addressing another concern of a depreciating rupee. In the past few months, the country has experienced an increase in investment activity suggestive of an economic revival and the current festive season is expected to give a further fillip to the economic activities. Amid several other short term global macro concerns such as geo-political tensions, global financial market volatility, crude oil prices, supply side disruption, and tightening global financial conditions, India remains the beacon of hope and an ocean of opportunity and RBI's move is in the expected and right direction.”

Satish Nair, Head - Treasury and Corporate Affairs, Vastu Housing Finance 

“The RBI increasing the rate by 50 basis points is in line with global movements that other central banks are taking considering the evolving global macro-economic environment. RBI has been very realistic on the growth forecast and we see that it will help our economy tide over the inflation wave. We see that RBI is constantly taking efforts to balance out the risk in a fair manner.”

Amit Gupta, MD, SAG Infotech

"Finally, we have an Inflation forecast for FY23 that remains at 6.7% as we all earlier expected due to rises in food prices. Another hard fact is that despite declines in growth, inflation remained at 6.7% in FY23, with an accurate GDP forecast at 7.4%. The US dollar is at a record high and we are seeing emerging markets' economic challenges including a slowing global economy, rising energy prices, spillovers from advanced economies, debt distress, and sharp currency declines. Although global recession fears are mounting and inflation is high, the Indian economy remains resilient. It has become more important for RBI to continue front-loading its rate hikes - providing a soft defence for the rupee - as global tightening increases."

 

Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life Insurance 

"RBI hiked the policy rate by 50 bps along expected lines and also maintained its stance as “withdrawal of accommodation” citing that the real policy rate (adjusted for inflation) is still trailing pre-pandemic levels. GDP growth estimate for FY23 has been revised down marginally from 7.2% to 7%, while inflation forecasts have broadly been maintained. This indicates that the central bank is somewhat comfortable with macro-economic situation in India relative to other peer emerging economies. Therefore, we feel that the RBI may be nearing the end of the rate hike cycle in India and future rate hikes will have more to do with supporting the Indian currency and also to some extent the inflation trajectory. Both equity and bond markets have taken this in a positive stride and have rallied post the policy announcement."

Manju Yagnik, Vice Chairperson, Nahar Group, Sr. Vice President, NAREDCO Maharashtra 

"The current hike of 50 bps from the RBI was on expected lines as it is extremely essential for India to control the rising inflation numbers. Rising inflation is an international phenomenon as even the US Federal Reserve hiked the interest rates by 75 basis points. The Indian real estate consumers, however, had already factored in this hike as was evident in the unprecedented registration numbers registered in the past 2 months. With real estate valuations expected to appreciate in the long term, this upcoming festive season should witness a massive uptick in demand as consumers would throng back to the market to take advantage of the multiple new projects and new offers. "

Amit Gupta, MD, SAG Infotech

"Finally, we have an Inflation forecast for FY23 that remains at 6.7% as we all earlier expected due to rises in food prices. Another hard fact is that despite declines in growth, inflation remained at 6.7% in FY23, with an accurate GDP forecast at 7.4%. The US dollar is at a record high and we are seeing emerging markets' economic challenges including a slowing global economy, rising energy prices, spillovers from advanced economies, debt distress, and sharp currency declines. Although global recession fears are mounting and inflation is high, the Indian economy remains resilient. It has become more important for RBI to continue front-loading its rate hikes - providing a soft defence for the rupee - as global tightening increases."

Dilip Modi, Founder, Spice Money

“India is at the forefront of building a world-leading digital financial infrastructure with financial inclusion as its core objective. In order to successfully transition into a digital economy, it is imperative that rural India, home to almost 70% of the population of India, participates actively in the digitalisation process. We are delighted with the announcement from the apex bank regarding the relaxation of internet banking norms for regional rural lenders.
Currently, regional rural banks, or RRBs, are allowed to provide Internet Banking facilities to their customers with prior approval of the Reserve Bank, subject to fulfilment of certain financial and non-financial criteria. With rationalisation and clearer guidelines, RRBs can offer these digital services in a better way, to a greater number of people thereby bringing the underserved population to the financial fold. While the popularity of digital methods like AePS has steadily grown across the rural sector, proving that with the right policy measures, and push from the government, this move will help further promote digital banking, and will accelerate the process of digital adoption.”

Vivek Goel, Co-founder and Joint Managing Director, Tailwind Financial Service Pvt Ltd

"Following up on its August policy, the Monetary Policy Committee (MPC) continued the rate hike cycle with another 50 bps hike to take the repo rate up to 5.9%. Broadly, the policy was in line with expectations given the backdrop of Fed rate hike and currency volatility. The governor reaffirmed resilience being seen on the domestic front amidst a turbulent global backdrop due to inflationary pressures and aggressive policy tightening. This, along with over optimism in India's ability to steer through the crisis , looks to have reassured the markets with major indices rising sharply post the policy. For investors holding debt mutual funds or bonds broadly the hike had been priced in and mark to market impact should be limited. Investors in liquid and money markets will further benefit from higher accruals as yields have now moved up to above 6%. We are also seeing a slew of NFOs for target maturity funds as 5-10 year yields are now upwards of 7% and provide a good opportunity for investors to lock-in returns at these levels."

Pankaj Malik, Chief Financial Officer, Fullerton India 
 
“The policy is on expected lines and is clearly driven by global factors that are impacting the economy in an undesirable way at present. We feel that 50 basis points is a cautious approach by the RBI. The increased rate hike will also impact home loan interest rates, particularly for the affordable housing sector. However, with the increased economic activities across the country along with the festive demand, we see that the impact of rate hikes will be minimal on serious home buyers.” 

Gaurav Chopra, Founder & CEO, IndiaLends

“The rate hike announced by RBI is in line with expectations. It's too early to comment on how and when lending institutions would pass on the hike to customers. However, we believe such measures will bring the focus back to consumers' credit profiles and the importance of maintaining healthy credit scores. It is all the more important that consumers continue to service their debt responsibly. If unable, they must speak with their respective lending institutions to identify measures to keep the EMIs affordable. We believe financially prudent individuals would leverage the opportunity to demonstrate good borrower behaviour and try to offset some of these increased costs by qualifying for lower interest credit through a strong credit profile.”

Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Company

"MPC continues to do a fine balancing act, despite the adverse global backdrop of chaos in rates and FX markets due to hyper-aggressive stance of central banks to rein in the elevated Inflation. RBI has stuck to its overarching focus of nurturing the nascent recovery of growth and has avoided any sort of collateral damage so far and continues to bubble wrap the economy. Clearly, with today’s frontloading of rate hikes, the future course of rate hikes appears to be very shallow, given the imminent softer patches of global growth and receding Inflation trajectory. Overall ‘well thought out and a balanced policy."

Suren Goyal, Partner, RPS Group

"RBI’s hike in repo rate will have some impact on the current housing market. However, the overall impact will be limited, and the industry will continue to perform well in the coming time. There are plenty of buyers both in the cost-efficient as well as premium & trendy segments. Interestingly expats are also showing tremendous interest in real estate and the investor class is also pivoting lured by the tangible nature of the asset. Price growth so far has been moderate and this is one of the best times to buy homes. Moreover, the pandemic has also induced buyer interest in other categories such as plotted developments, villas, and farmhouses. Though these are niche segments, their growth will help the overall industry."

 

Avinash Godkhindi, MD & CEO of Zaggle

 “RBI’s decision to hike the repo rate by 50 bps is on expected lines and will help in taming the retail inflation which has remained high over the last few months. It may also help in addressing another concern of a depreciating rupee. In the past few months, the country has experienced an increase in investment activity suggestive of an economic revival and the current festive season is expected to give a further fillip to the economic activities. Amid several other short term global macro concerns such as geo-political tensions, global financial market volatility, crude oil prices, supply side disruption, and tightening global financial conditions, India remains the beacon of hope and an ocean of opportunity and RBI's move is in the expected and right direction.”

 
Sumit Chanda, CEO & Founder – JARVIS Invest

“The increase in repo rate by 50bps today among other measures to curb inflation was in line with the actions taken by the central banks across the world. The markets had factored this in and the response to this was immediately visible. While the inflation concern still exists, the outlook hasn't changed which is a positive. From the stock market's perspective, we will continue to track the US inflation numbers and the FED outlook which will, to a large extent, dictate the course of the markets over the next few months. The Q2 FY 22 results will start coming in soon and since this is the beginning of the festival season, it will be interesting to watch the demand trends. The Jarvis AI tool suggests the current nifty levels are good to invest.”

Shanti Lal Jain, MD & CEO of Indian Bank 

“Increasing the Policy rates by 50 bps has been in line with the market expectations. This calibrated action was needed to pull back headline inflation closer to the RBI tolerance band and keep inflation expectations anchored so as to ensure that growth is sustained. RBI has continued with its pragmatic approach of supporting growth while keeping check on inflation. This is evident by its decision to remain focused on withdrawal of accommodation. The increase in policy rate will also preserve the forex reserves and put a check on depreciation of rupee.”

Dr. Ravi Singh, Vice President and Head of Research, Share India

"In line with the expectation, RBI has increased the repo rate by 50 basis points and is already discounted by the market. The indices and stocks are currently witnessing weakness taking cues from the selling pressure in the global markets. Nifty may sustain the support of 16800 levels if the international markets show reversal. A rebound in Nifty may show the levels of 17200 else the downside levels of 16500 is possible. Being inflation and rupee weakness still major concerns which needs to be improved keeping economic growth in pace, Investors should wait till the market sentiments stabilises for fresh entry."

Raghvendra Nath, Managing Director – Ladderup Wealth Management Private Limited
 
“The general consensus on the street was a 50-bps rate hike and RBI came through with it. The ripples from the global disruptions will act as headwinds to the economic growth in India which is indicative from the announcement of a contraction in the expected GDP number. Indian markets had already factored in the rate hike hence the markets have been resilient. Going forward, slowdown in global markets and high inflation would be key determinants of further rate hikes in India.” 

Y. Viswanatha Gowd, MD & CEO of LIC Housing Finance

“RBI's hike in the repo rate by 50 bps is on expected lines and can be considered a well-measured decision. It is with the clear intention to safeguard the economy from any adverse implication out of the ongoing global financial turmoil. India's economy continues to show resilience and looks promising despite the disruptions. The encouraging growth in the consumption pattern will continue to have a positive rub off on the home loan demand aided by festive sentiments."

 
Atul Goyal, CFO, Brigade Group

"The hike in REPO rate is on expected lines in order to tackle inflation. We expect to see only minimal impact on the real estate sector and increase in interest rates for corporate loans will be marginal. Home loans are generally linked to floating interest rates with longer tenures. In most cases EMI’s will remain the same with the duration of loan getting adjusted. The economy remains strong, and we expect buyer sentiment to be positive. We are currently witnessing a consistent demand for real estate, and we anticipate the current momentum to continue with increased hiring and salary hikes in the IT and ITE’s sectors. There is also the availability of surplus income with investment preference being real estate."

Shiv Parekh, Founder, hBits

"The RBI MPC hiking repo rate by 50 bps is on the anticipated lines. Due to Covid, followed by the Russia Ukraine war, inflation is a matter of concern across the entire globe, and it is expected to keep rising for some more time. However, the investor sentiment is still positive across the globe, in India, people are looking at investment options in the country. Added with the festive season, this is a good time for investments. While rates have been hiked in the US and the UK too, in India, this is the fourth consecutive rate hike by RBI. In the housing real estate sector, it will lead to a rise in EMIs for home buyers, however, despite the growing price rise, there is a clear demand in the housing real estate. Similarly in the commercial real estate sector and in fractional ownership, there is a growing demand. This is a great time for investors to invest in something like fractional ownership. The stock market is already volatile and is expected to go through a hit in the coming times. Gold prices are also fluctuating. Though gold ETF is expected to give some good returns, but it equally driven by market volatility. This is the best time to invest in fractional ownership, as it can help investors beat inflation and have a steady income."

Mahendra Jajoo, CIO,  fixed income, Mirae Asset  investment Managers.

"Global headwinds outweigh domestic positives: Even as domestic macro environment remains constructive, headwinds emanating from global monetary policy set up and uncertain geo political conditions continue to pose challenges, seems the core message from MPC. The fast-evolving world order and consistent repricing hikes by major central banks globally did not miss attention of RBI. Addressing the spill over from it, MPC delivered 50bps rate hike. Though inflation projections were retained notwithstanding softer commodity and oil prices, growth forecast was lowered by 20bps to 7.0% for FY23 considering drift from a slowdown expectation globally. While the dissenting voice from one member for just a 35bp hike does seem to leave an early message for a slowdown in pace of rate hikes going forward, incoming data remains the key focus area. A further rate hike in next policy may be effected if the global inflation level remains elevated."

Puneet Pal, Head – Fixed Income, PGIM India Mutual Fund 

"The MPC Policy announced today is a very well balanced and nuanced policy. It was in line with market expectation with no surprises. The Policy Repo rate was hiked by 50 bps which was in line with market expectation though some sections of the market were expecting a hawkish commentary from RBI, which did not materialise. The decision to raise rates by 50 bps was with 5-1 majority. RBI lowered its GDP growth forecast for FY23 to 7.00% from 7.20% earlier while retaining the inflation forecast at 6.70%. We expect rate hikes to continue going ahead though expect some steepening of the curve given that currently it is pretty flat. We recommend that investors should increase their investments in actively managed short duration products, while selectively looking at dynamic bond funds as per their risk appetite."

Kalpesh Dave, Head Corporate Planning & Strategy, Star HFL

“The rate hike of 50 bps was expected given the inflationary headwinds faced by the RBI and depreciating INR against the US dollar. One expects the increase interest at environment to continue till the inflation get stabilised at 4% with a tolerance band of 2 to 6%. Aug 2022 inflation of 7% and hike by US Fed has resulted in another increase in the REPO rate. One would expect rise in borrowing cost for HFCs and NBFCs and resultant pass on to the end customer who are at floating rate. It makes sense for borrowers to carefully plan their borrowings taking into account increased rates in the loans. This rate increase may make FD rate attractive for depositors while the pass on by the banks on their liability side may be flat. One expects RBI to maintain this stance of increased rate regime till macros on inflation numbers are stabilised.”

K V Srinivasan, Executive Director & CEO, Profectus Capital

“RBI increasing the rate is in line with the global trend to combat inflation arising from the pandemic and the geopolitical situation. While most countries are also facing falling growth rates, India has remained an exception with GDP growth projected at 7%. While cost of capex is likely to increase, i don't believe this will impede the capex cycle as Indian industry especially MSMEs has the capacity to absorb this."  

Gaurav Aggarwal - Senior Director, Paisabazaar

"The 50 bps hike in repo rate and the MPC’s decision to continue with the withdrawal of accommodation is on expected lines. Aggressive monetary policy action from major central banks and domestic inflation rates exceeding the MPC’s mandated inflation bands has made inflation-growth management tricky for the MPC. While the guidelines are yet to be published, the RBI’s announcement to rationalize the internet banking facility provided by the Regional Rural Banks (RRBs) should help in promoting digital banking in the rural areas. The repo rate hike by the RBI would eventually lead the banks and NBFCs/HFCs to increase their lending rates. Home loans linked to repo rates would have the quickest transmission of increased policy rates. The transmission of the increased policy rates to fresh home loan borrowers would depend on the interest rate reset dates fixed by their banks as per their lending guidelines. The interest rates for existing home loan borrowers would be increased from the interest reset dates set by their lenders. Till then, they would continue to repay their home loans at existing interest rates. Lenders would increase the interest rates of existing floating rate home loans linked to MCLR or other rate-setting benchmarks as and when the increased repo rates starts increasing the cost of funds for the lenders. The 50 bps repo rate hike by the RBI should eventually lead the banks and deposit-taking NBFCs to further increase their deposit rates. Moreover, the widening gap between credit growth rate and deposit growth rate may also force the banks to opt for steeper deposit rate hikes to meet increasing credit demand."

Satish Nair, Head - Treasury and Corporate Affairs, Vastu Housing Finance  

“The RBI increasing the rate by 50 basis points is in line with global movements that other central banks are taking considering the evolving global macro-economic environment. RBI has been very realistic on the growth forecast and we see that it will help our economy tide over the inflation wave. We see that RBI is constantly taking efforts to balance out the risk in a fair manner.”

Rohan Pawar, CEO of Pinnacle Group

 "The RBI raised the repo rate by 50 basis points to 5.9%, as expected; this is the necessity of the hour to manage inflationary pressures. The MPC has also stated its desire to exit the accommodative stance in order to keep inflation within target while boosting growth. The increase will have an impact on new home buyers because mortgage loans will  rise increasing the EMIs and reducing eligibility for new loans. This coupled with economic uncertainty may cause some delay in the decision making process of home buyers but we believe the overall demand will continue to remain robust."

Venkatesh Gopalkrishnan, CEO, Shapoorji Pallonji Real Estate

"The RBI increasing the interest rate by 50 basis points was an expected move to combat the inflationary growth in the country. This move might impact the home loan category, which may influence the buying sentiments of affordable to mid-segment home buyers. While we may not witness a great upward trend given the current scenario, we have seen good business in recent times, which is likely to continue. Though inflation is high, with the government's initiatives to control it, our industry should be able to move forward. Overall, in comparison to the global trend of inflation, the real estate sector is hopeful that this rate hike will not completely dampen the buying sentiment. Additionally, the ongoing festive season is likely to bring in some positive movement as homeownership remains important for home buyers and will eventually result in sales, especially in the luxury and premium categories. With developers offering various schemes, we believe that now is the time for homebuyers to take advantage of these benefits."

 V P Nandakumar, MD and CEO, Manappuram Finance Ltd

“Confronted with multiple challenges stemming from geo-political tensions, major central banks pivoting to more hawkish stance and spiralling inflation, the MPC has served the best policy prescription by raising the repo rate by 50bps to 5.9% while keeping systemic liquidity in surplus mode. This in my view will keep the Indian currency insulated from high volatility while keeping inflation expectations well anchored. Lowering GDP forecast to 7% mirrors a more realistic assessment of economic growth.  On the whole, the MPC’s decision has been on expected lines in the given macro-economic scenario.”

Pranjal Kamra, CEO - Finology Ventures

"Inflation concerns have kept the globe worried for a while. For instance, India’s FY23 inflation is projected to be around 6.7%, well above the RBI’s threshold of 6%. Central banks in all major economies have taken up aggressive monetary policy measures to combat inflation. Continuing withdrawal of its accommodative stance, the RBI has hiked the repo rate today by 50 basis points to 5.9%, an anticipated move welcomed by the markets. Interest rate hikes by advanced economies like the US & UK have given rise to the fear of recessionary situations and this fear has taken over stock markets all around the world. Emerging markets too are facing the brunt of this, in addition to a strong dollar, a slowdown in global growth, elevated food and energy prices and debt crisis. However, the RBI governor is of the opinion that India remains comparatively more resilient than its peers. With an FY23 GDP forecast of 7%, it remains to be seen how the central bank strikes a perfect balance between inflation control and growth."

Madan Sabnavis, Chief Economist, Bank of Baroda

“The RBI policy was more or less on expected lines which is also the reaction of the markets – stocks, bonds and currency. Given the commentary in the speech, it does appear that we could expect a further 50-60 bps increase in rates in the coming months that can take the terminal rate to 6.4-6.5%. The fact that inflation will be high will be the chief driving factor as there are some upside risks to the number of 6.7% due to developments on the agricultural side. The RBI does appear to be more confident on growth, where the target has been lowered marginally which appears to be more due to statistical reasons. All the high frequency indicators show that growth will be stable this year with limited downside risk. The stance remains withdrawal of accommodation indicating that there is scope for further reduction in surplus liquidity in the system. The RBI has merged the 14 and 28 days variable rate reverse repo auctions, which is more to ensure that liquidity does not get locked in for a longer period of time creating spikes in the money market rates.”

Siddarth Bhamre, Head of Research, Religare Broking Ltd.

"RBI raising repo rate by another 50 bps was very much in line with market expectations but it’s the confidence of RBI in the economy which has been the highlight of monetary policy. Governor’s confidence that GDP growth rate for FY23 will remain at 7% comes from his statement, “the late recovery in kharif sowing, the comfortable reservoir levels, improvement in capacity utilization, buoyant bank credit expansion and government’s continued thrust on capital expenditure. Above statement continues to instil our belief that India may continue to outshine other economies during the challenging global scenario and despite the Governor mentioning the sharp rise in interest rates by FED as a third shock after COVID and Ukraine scenario. He also made an interesting comparison between June 2019 and the current state of policy. Inflation and interest rates numbers then and now indicate, despite MPCs stance being that of withdrawal its policy is still accommodative which leaves more room for further hike in interest rates with less impact on growth."

Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank
 
"The hike in the repo rate by another 50 basis points in today’s meeting and maintaining the stance of withdrawal of accommodation are on expected lines. The RBI commentary has been a finely balanced one – while global risks are discussed extensively, the RBI appears confident on the growth momentum in the Indian economy in the coming months. The modest downward revision in the FY23 GDP growth target to 7%, from 7.2%  earlier, and leaving the inflation forecasts largely unchanged are on expected lines. While today’s RBI communication suggests future policy to remain data dependent and another round of rate hike cannot be ruled out, overall, the MPC refrained from springing any major surprise leading to broadly favourable reaction from most segments of financial markets."

Ali Kochra, Chairman and Managing Director, Kochra Realty

"Realty Central bank’s move to increase repo rate by 50 basis points is a result of adverse global conditions. However since the growth is positive and strong it will have little impact in medium and long term. While curbing inflation is a long and slow process, next 12-15 months are important. Real estate has remained strong post covid and we are positive about its growth in future too. In a growing economy certain corrections are bound to happen however our growth and progress are closely watched by the world for good business." 

 Vikas Garg– Head of Fixed Income, Invesco Mutual Fund 

“Amidst challenging global monetary policy backdrop, RBI stays with a 3rd consecutive rate hike of 50 bps and keeps a tight vigil on domestic inflation. Continuation with “withdrawal of accommodation” signals more rate hikes to come. External factors holding well as of now but needs to be monitored closely. Re-assurance on ample systemic liquidity provides relief to the shorter segment. Overall, in line with market expectations as of now but we expect market volatility to remain high with fast evolving global backdrop.”   

 
Muzammil Patel, Global Head of Strategy and Corporate Finance, Acies

"RBI’s stance on monetary tightening is consistent with its global peers. Central banks globally have resorted to monetary tightening as they walk the tightrope of balancing inflation transmitted by global dollar strength with domestic growth aspirations. As supply side inflation driven by higher borrowing costs starts to rear its head, the central bank will see its headroom for future policy rate hikes keep reducing."

Anurag Mathur, CEO, Savills India

“With the 50 bps increase, benchmark lending rate in the country has reached 5.90%, significantly higher than the 5.15% in pre-pandemic times. The RBI has been cognizant of global headwinds including heightened inflation and revised FY 23 GDP growth rate downwards by 20 bps to 7.0%. Although inflation projection for the current fiscal year has been retained at 6.7%, it remains beyond the tolerance zone. Moreover, with central banks of major economies upping the ante in the fight against inflation, RBI’s continued withdrawal of accommodation could mean a steady upward trajectory of domestic lending rates in the near term. Rising interest rates are likely to translate into higher equated installments and put more pressure on the final demographic unit at the household level. RBI’s steely resolve to restore price stability is likely to result in temporary pain-points across economic sectors especially automotives and residential real estate, where mortgage-based end-user purchase is highly prevalent. On the brighter side for real estate sector, office markets have signaled the beginning of a growth stage. 2022 is likely to witness 55-60 mn sq.ft. of leasing activity in the country. The warehousing and logistics sector stands to benefit from the recently launched National Logistics Policy, which aims to streamline shipping, and lower logistics costs throughout the country. Meanwhile, REITs in the country have received a further boost, with SEBI allowing them to raise funds through short-term commercial papers.”

Avinash Godkhindi, MD & CEO of Zaggle  

“RBI’s decision to hike the repo rate by 50 bps is on expected lines and will help in taming the retail inflation which has remained high over the last few months. It may also help in addressing another concern of a depreciating rupee. In the past few months, the country has experienced an increase in investment activity suggestive of an economic revival and the current festive season is expected to give a further fillip to the economic activities. Amid several other short term global macro concerns such as geo-political tensions, global financial market volatility, crude oil prices, supply side disruption, and tightening global financial conditions, India remains the beacon of hope and an ocean of opportunity and RBI's move is in the expected and right direction.”

Puneet Pal, Head – Fixed Income, PGIM India Mutual Fund

"The MPC Policy announced today is a very well balanced and nuanced policy. It was in line with market expectation with no surprises. The Policy Repo rate was hiked by 50 bps which was in line with market expectation though some sections of the market were expecting a hawkish commentary from RBI, which did not materialise. The decision to raise rates by 50 bps was with 5-1 majority. RBI lowered its GDP growth forecast for FY23 to 7.00% from 7.20% earlier while retaining the inflation forecast at 6.70%. We expect rate hikes to continue going ahead though expect some steepening of the curve given that currently it is pretty flat. We recommend that investors should increase their investments in actively managed short duration products, while selectively looking at dynamic bond funds as per their risk appetite."

 K V Srinivasan, Executive Director & CEO, Profectus Capital

“RBI increasing the rate is in line with the global trend to combat inflation arising from the pandemic and the geopolitical situation. While most countries are also facing falling growth rates, India has remained an exception with GDP growth projected at 7%. While cost of capex is likely to increase, i don't believe this will impede the capex cycle as Indian industry especially MSMEs has the capacity to absorb this."

Mohit Ralhan, CEO at TIW Capital

“The 50 bps hike in the repo rate by RBI is along the expected lines. RBI has to not only look at domestic inflation but also consider the policy actions of the US Fed. The current environment is quite challenging for emerging markets with the rising price of energy and agricultural commodities, currency depreciation, ongoing military conflicts and the looming threat of global recession. Although India is relatively doing better, it can’t remain insulated for long enough. RBI has the herculean task of balancing growth, inflation and the value of INR. It has done quite well on the inflation front with inflation in Q3 expected to be at 6.5% even if oil reaches the price of USD 100/barrel. Inflation is expected to go down to below 6% in Q4. INR has depreciated against the US dollar as all other major currencies and here also the depreciation in INR is lower than most of the major currencies. Also, the growth forecast for India at 7% still remains quite good. Right now, the domestic situation looks under control but risks are rising.” 

Nilesh Shah, Group President & MD,  Kotak Mahindra Asset Management Company

“The RBI gave a “Mai Hoon Na” policy doing a fine tight rope walking between Inflation, Growth and Stability. The RBI is batting on a difficult pitch against a hostile bowling. Rapidly deteriorating global situation, drawdown of systematic liquidity and FX reserves, inflationary pressure and Growth concern are testing the RBI. The RBI has so far batted with few misses. Most important thing is that they haven’t lost the wicket and kept score board moving. The RBI has been proactive and data driven to deal with rapidly evolving situation. They have assured the market that they are in safe hands in the global storm.”

Lakshmi Iyer, Chief Investment Officer (Debt) & Head Products, Kotak Mahindra Asset Management Company

“50 bps repo rate hike delivered was in line with expectation. Growth forecast was lowered marginally and CPI forecasts unchanged, which is what we had estimated. Key concerns seem to emanating from global factors and to a lesser extent domestic events. The RBI also is mindful of the currency movements given USD strength. We view the policy as neutral and ready to act in response to incoming data, both global and domestic. Bond yields could see some respite buying in the near term, but would continue to closely monitor global yields, especially UST for way forward. Also weighing in on bond markets would be the likelyhood of India bonds’ inclusion in Index, which May not culminate anytime soon”

 

 

Churchil Bhatt, Executive Vice President & Debt Fund Manager, Kotak Mahindra Life Insurance Company Limited

“With a 50bps policy rate hike, the MPC has delivered just what was expected by financial markets. Inflation projection for FY23 was kept unchanged at 6.7%, while GDP growth projection was revised marginally lower to 7%. However, in spite of the policy rate hike, the stance of policy remains as “withdrawal of accommodation”. This leads us to believe that in light of domestic inflation situation, the MPC will continue with further policy rate tightening. However, India’s inflation problem is far more benign and manageable in comparison to what most of the world is facing. Hence, markets may take comfort in the fact that the future policy tightening by RBI will be relatively unhurried. While RBI remains vigilant on the currency front, it expressed comfort on the external front owing to India’ stable macros and comfortable forex reserves. With the no-surprise policy out of the way, domestic rates market will now focus on global factors and prospects of India’s inclusion into Global Bond Index. We expect 10Y Government Bond to trade in 7.25%-7.50% band in the near term.”

Dr. Poonam Tandon, CIO, IndiaFirst Life Insurance Company
 
"The RBI raised key benchmark rates by 50bp and continued with withdrawal of accommodative stance. Given that the global environment remains challenging with financial conditions tightening and fears of recession mounting, RBI stated that all segments of the financial markets are in turmoil globally and emerging market economies are also confronted with challenges of slowing growth, higher food and energy prices, spillovers from advanced economy policies, debt distress and sharp currency depreciation. Against this, the RBI has lowered the FY23 real GDP growth target to 7% versus 7.2% earlier even as domestic economic activity remains stable with resilient agriculture sector and strong credit demand. Moreover, despite the recent correction in commodity prices, CPI inflation target for FY23 has been kept unchanged at 6.7% on upside risks to food prices. The inflation forecast assumes Brent crude at $100/bbl in the 2HFY23. On the liquidity front, excess liquidity has moderated with LAF moving to deficit. The RBI has also decided to conduct only 14 day VRRR auctions from now on (merge 28 day VRRR with 14 day auctions). The RBI stated that intervention in FX market have been undertaken judiciously to curb volatility. Overall, the policy was largely in line and macro-economic stability remains the key focus area."

Sakshi Gupta, Principal Economist, HDFC Bank

"The RBI raised the policy rate by 50bps to 5.9% as expected, aligning itself to aggressive monetary tightening globally. Moreover, the rate move was in response to continued domestic inflationary risks and growth that broadly continues to hold up. The central bank kept its inflation forecast unchanged at 6.7% in FY23 while lowering its GDP growth forecast by 20bps to 7% -- the latter in response to the lower-than-expected Q1 GDP numbers. The RBI kept its stance unchanged at “withdrawal of accommodation” justifying it by the fact that liquidity remains in surplus, and the policy rate trails behind the inflation rate. The central bank drew a comparison with 2019 when the stance was last neutral, and liquidity was in a deficit mode while the policy rate was higher than inflation – indirectly alluding to real positive rates in the economy. On liquidity, the RBI continued to re-iterate that it would conduct fine tuning operations to manage liquidity conditions. The central bank could gradually move towards maintaining liquidity conditions that are consistent with the operating rate becoming the repo rate, implying further upside for short-term rates in the economy. On the rupee, the RBI emphasized that their strategy would be focussed on maintaining investor confidence and anchoring expectations and that their FX reserves remained comfortable, signalling that FX interventions are likely to continue and be focussed towards defending any extreme volatility in the rupee."

Abhishek Kapoor, Chief Executive Officer, Puravankara Limited 

“In view of the current state of the global financial markets, the Reserve Bank of India's (RBI) decision to increase the repo rate by 50 basis points to 5.9% is on expected lines considering the surge in inflation and recent rate hikes by the US Fed and central banks of the UK and the EU. Currently, we do not see an impact on the business, as demand for new properties remains buoyant during the festive season that extends over the next two quarters.  While we are in a good position, we have to see the sustainability of continued rate hikes, especially from Q1 2023. If this rate hike sustains, then we will have to be careful and watch for the impact it will have on economy and business from next year. The Government and the RBI will have to be cautious about not compromising growth while managing inflation.”  

Rajiv Shastri, Director and CEO NJ AMC

"The hike is along expected lines, given the pressure on the currency and elevated inflation. There are mixed impulses for inflation with international commodity prices moderating even as manufacturers start to pass on earlier increases as demand remains robust. However, inflation may slow down as such hikes subdue demand, which would create room for the RBI to pause. We believe that we are close to a peak in terms of policy rates and the possibility of further hikes appears to be low."

Ashish Narain Agarwal, Founder and CEO at PropertyPistol.com

"The anticipation surrounding the repo rate has been over as the Reserve Bank of India (RBI) announced the fourth consecutive hike with the rise of 50 basis points to tame the continuously growing inflation. The repo rate now stands at 5.9% affecting the home loan rates for property seekers. The move was necessary to balance the economy hampered due to geopolitical tensions. The real estate sector will have a marginal impact on the real estate sector as it is going strong post-pandemic and growth momentum has been maintained with buyers looking for quality homes and developers offering variety to them. Buyers can look at long-term home loan tenures and one of the best competitive interest rates offered by banks and financial institutions. Although the surge was necessary, it can be termed as short term impact which will stabilize soon. With the festive period going on, the buyers who have made up their minds to buy consider the property appreciation of the future."

Amit Goenka, MD and CEO at Nisus Finance 

"The RBI action is in line with global trends and is designed to protect against a further slide of the rupee, which will make India more attractive as an investment destination. However it may cause a slight slowing down of GDP growth (currently overheating at 13.5 percent) which is also a judicious step given that inflation target is at 6.7 percent against an actual achievement of 7 percent."

Sandeep Bagla, CEO - TRUST Mutual Funds

"While RBI has hiked rates by 50 bps, the stance still remains at removal of accommodation. RBI has acknowledged that the policy is still accommodative. Rates would have to hiked more to reach a neutral situation. Bond markets had already built in the 50 bp hike and are likely to remain range bound. In the medium term, inflation is likely to keep rates high."

Dhiraj Relli, MD &CEO, HDFC Securities

"The MPC voted to raise the repo rate by 50 bps taking it to 5.9% as widely expected while remaining focused on the withdrawal of accommodation. A higher rate hike is justified in the backdrop of inflation remaining at elevated levels with the projected trajectory being above RBI's target during the entire forecast horizon. Economic growth has remained resilient in the face of an adverse global environment. The recent sharp depreciation in the rupee (although well managed compared to other emerging countries) might have weighed on members’ decision in favour of a larger rate hike, addressing external sector imbalance and reducing the interest rate differential. Unchanged inflation forecast at 6.7% for FY23 (and 5% in Q1FY24) is reassuring with a high average crude oil price of US$ 100 per barrel considered in this, providing a cushion. FY23 GDP projection was lowered marginally from 7.2% to 7% for FY23. Overall, it was a prudent policy announcement with no negative surprises which is reflected in the impact on the 10-year yield and stock markets. The next stage of response could be calibrated; we expect the terminal repo rate would be 6.25-6.40% by FY23 end.”

Pradeep Aggarwal, Founder and Chairman, Signature Global (India) Ltd 

"Increase of repo rate to 50 BPS by apex bank seems an accommodative move as per current micro and macro economic conditions globally as well as domestic markets. Inflation is about 7% and the government and apex bank would be taking corrective measures to curb the inflation.  However, considering the ongoing festive season combined with high market sentiments affordable and mid segment housing is going to witness a huge spike in demand. We are highly bullish that sales data would increase approx 20 to 30 % in this quarter and YOY basis also."

Vikas Garg– Head of Fixed Income, Invesco Mutual Fund

“Amidst challenging global monetary policy backdrop, RBI stays with a 3rd consecutive rate hike of 50 bps and keeps a tight vigil on domestic inflation. Continuation with “withdrawal of accommodation” signals more rate hikes to come. External factors holding well as of now but needs to be monitored closely. Re-assurance on ample systemic liquidity provides relief to the shorter segment. Overall, in line with market expectations as of now but we expect market volatility to remain high with fast evolving global backdrop.”   

Avnish Jain, Head Fixed Income, Canara Robeco Asset Management Company
 
“In line with market expectations, RBI Monetary Policy Committee (MPC) raised repo rate by 50bps to 5.90%, while maintaining stance of “withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth”. Such a move was largely anticipated as global central banks have been raising rates aggressively in last 6 months to fight high inflation in developed economies, not seen in decades. While inflation in India has not been so high, it has still been above MPC’s target of 6% since start of the fiscal 2023. However, inflation has been on downtrend after touching 7.8% in June 2022 and is expected to ease to 5% by 1QFY2024 (as per RBI projections). The MPC was in a backdrop of continued headwinds from geo-political tensions, tightening financial conditions, volatile currency markets as well as reversal of portfolio flows. Indian macro conditions have been relatively better with sound GDP growth, and moderating inflation, though external sector has been under pressure due to high commodity prices, and portfolio outflows. However, the Indian currency has fared much better in comparison to some emerging market currencies as well as developed market currencies. Drop in crude oil prices has been a welcome development for India as it will help stabilizing the external sector as well likely will reduce inflation going forward. RBI MPC reduced the projection for GDP growth for FY2023 to 7% (from 7.2% in Aug 22 policy) whilst maintaining inflation projection of 6.7% in full year FY2023. RBI further expects inflation to fall to 5% in Q1FY2024."

Dr Vikas Gupta, CEO and Investment Strategist, OmniScience Capital

"The 50 bps rate hike was in line with the expectations and the Indian equity market has taken it positively. The most important point in the Governor's speech was the statement that forward guidance "may even destabilise financial markets". However, the RBI is quite optimistic about the Indian economy and is fully in control in terms of inflation, currency, and Forex reserves. RBI is also very careful to not destabilize the financial markets. It is clear that while the future rate hikes could have been indicated, the Governor believes, based on the actual impact of Fed's guidance on the US and global financial markets that such a guidance would destabilize the Indian financial markets. The RBI Governor has clearly given a clue. It is a given that if the Fed will hike rates and RBI will have to follow suit. RBI also has the issue of no November meeting while the Fed has a November meeting. It becomes likely that RBI will do an out of turn meeting and rate hike in November. Therefore, the November meeting and rate hike cannot be ruled out."

Manoj Gaur, President CREDAI-NCR & CMD, Gaurs Group

"The current 50 BPS repo rate hike by RBI now takes it higher than the pre-pandemic levels. At one level it reflects the confidence in the economy and future growth outlook at another level it was necessitated by the recent global developments such as the Russia-Ukraine conflict including aggressive monetary policies pursued by global central banks. Even though it will have a marginal impact on the real estate sector but I wish RBI had deferred this increase for the post-festive season. The buyers sentiments so far has remained buoyant towards residential real estate signalling the preference for real estate as an asset class. We are confident the buoyancy will remain intact."

Ashwinder R Singh, CEO, Residential, BhartiyaUrban

"This rate hike is in line with global trends and is aimed to contain inflation and other economic slump concerns. This could have a direct impact on homebuyers in the affordable segment. Mid-tier developers may suffer margin and cash flow pressures due to higher debt servicing requirements on their corporate debts unless they endeavor to minimize their debt by being conservative and decreasing discretionary costs. This will lead to lower credit originations from banks with limited fresh capital in circulation for marginal real estate developers."

Amit Modi, President CREDAI Western UP & Director ABA CORP

"The hike of 50 basis points by RBI has once again raised the repo rate from 5.4% to 5.9%. The first and foremost impact of this decision would be the rise in interest rates for home loans. This would be a setback for the middle-income-group homebuyers as it would again cost them more than the previous annum. However, this is an efficient step to curb inflation as there is an overall increase in Input costs across the globe. We look forward to avoiding any major gap between builders and buyers due to this hike."

Yash Miglani, MD, Migsun Group

"RBI has depicted a smart move by announcing a nominal hike of 50 basis points in repo rates. This is a good measure to curb inflation in various segments that lead to an increase in the overall cost of projects. The increasing prices of real estate projects, both plots and built-up setups, have led to a rise in prices. This will help the realtors incur the input costs quite conveniently and make the projects efficient enough."

Nayan Raheja, Raheja Developers

"While the last repo rate hike was aimed at controlling inflation, the present hike by 50 BPS has been majorly as a result of, as the RBI Governor had said, the aggressive monetary tightening by the world’s major central banks. Even though the quantum at present is still 5.9% it will definitely impact the long-term growth of the real estate market as this rate hike not only raises it above the pre-pandemic levels but also takes away the psychological cushion with the possibility of a further increase in the interest rates."

Sanjay Sharma, Director SKA Group

"The recent hike has raised the repo rate from 5.4% to 5.9%, introducing a slight change of 50 basis points. The hike is marginal and would not have any major impact on buyers as the rates would increase minimally. This was quite expected with the global scenario prevailing in real estate. Developers would witness a convenient method of coping with input costs with the help of this decision by RBI."

Ankit Kansal ,MD & Founder, Axon Developers

"Today's hike by the RBI was on the expected lines. Across the world, major economies such as USA and UK are hiking the rates to cool the economy and cut inflation. RBI’s rate hike is also on the lines of controlling inflation and protecting the economy from overheating. However, the overall housing demand is robust and it will be able to absorb any shock emanating from the rise in rates. Real estate demand is a complex socio- economic phenomenon, which is a by-product of a complex process. It does not only include bank rates but a host of other factors such as growth in the middle class, job market & disposable income, demographics dividend, growth in nuclear families, percentage of women in workforce, and others. To a great extent, these factors are signaling a robust recovery in Real estate and despite not so favorable home loan rates and a surge in raw material prices, FY 22 is set to be a record year for real estate sales."

Amit Jain, Director, Mahagun Group

"The minimal hike of 50 basis points in repo rates by RBI was quite expected, and the organisation has unveiled it quite well, avoiding any major difference in overall value. Middle-income groups or homebuyers from the affordable segment may suffer a minor hurdle, but there would not be any major difference in the overall growth of the sector. The real estate sector has already been doing quite well as per the recent trends, and this decision by the government would bring it more growth."

Ashwani Kumar, Pyramid Infratech

"In its monetary policy review, the Reserve Bank of India (RBI) increased the policy repo rate by 50 basis points (bps) to 5.9%. In the current fiscal year, the repo rate has increased four times. The RBI made the decision to abandon its supportive approach while promoting growth during its Monetary Policy Committee (MPC) meeting. Home loans are still quite affordable in pricing. Thus, consumer lenders continue to be in a favorable position overall with regard to the Instalments they should pay. On Inflation, the RBI expects it to come within its 6% upper band by Q4 FY23 and 5% by Q1 FY24. Inflation has most likely peaked for India. This means that RBI is mostly fighting the interest rate hikes of the Fed rather than domestic inflation which is relatively benign. On Forex reserves to the Governor mentioned that nearly 67% of the drop in the reserves is due to mark down in the asset values due to increasing yields on the US bonds and not due to spending. Markets had largely expected the increase and the reaction was muted. 10Y G-SEC rose to 7.40%, just before policy announcement,  and recovered to trade around 7.33-34%.  Going forward the policy outcomes are likely to be driven by incoming data, actions of global central banks as well currency markets. In the short term, 10Y yield may trade in 7.20-7.40% range."

Dr. Samantak Das, Chief Economist and Head of research and REIS, JLL, India

“The decision by RBI to increase the repo rate by 50 bps for the fourth consecutive time to 5.90 % is along the expected lines as the Central Bank aims to rein in inflation, maintain global interest rates parity and ensure the stability of the currency. Retail inflation has been hovering above RBI’s upper target of 6% since February 2022 with the recent August number at 7%. The rate hike is intended to arrest the persistent rise in inflation which is impacting economic growth. The Fed interest rate hike and its outlook have also prompted RBI to take this step. The GDP outlook has been marginally lowered to 7.0% for the financial year 2022-23 from an earlier forecast of 7.2%. The repo rate hike does not augur well for the real estate sector, especially the residential segment as it will result in increased mortgage rates. The transmission of change in repo rate is based on an individual bank’s decision. Since April 2022, RBI increased the repo rate by 140 bps, while home loan rates moved up by an average of 80 bps - more than 50% has been transmitted to date. Taking a cue from the previous transmission, we expect the home loan interest rates to go up in the range of 25-30 bps. However, the interest rate after this hike would be still below what the homebuyers had to pay 8 to 9 years back- more than 10%. It is likely that banks might also delay the transmission, taking into account higher housing demand during the festive season. Sales of residential units have increased by more than 2x during the first half of 2022 vis-à-vis the same period last year and the growth trajectory is maintained during the July-September quarter. With today’s hike in repo rate, the revised home loan EMI would increase by an average of 8-9% as compared to 6 months back. The continuous rise in home loan EMI is hence, expected to act as a sentiment disruptor. We believe that home loan interest rates inching towards 9% and above may result in moderation of housing sales growth in the medium term, especially post the current festive season.”

Garima Kapoor, Economist, Elara Capital 

"Going forward, the domestic monetary policy may continue to be driven by the global monetary tightening cycle with aggressive stance of Federal Reserve reducing our degrees of freedom. Assuming indicated trajectory of fed funds rate of 4.4% by Dec 2022, we may see another 50 bps hike in remaining part of the current financial year, despite recent correction in commodity prices offering tailwinds and rural demand remaining subdued."

Ram Raheja, Director, S Raheja Realty

“We welcome RBI's prudent decision to hike rates, as it will help keeping the rising inflation in check. The recent correction in global commodity prices if sustained may ease cost pressures in coming months. This will eventually benefit the developers and the advantage will be passed on the homebuyers. Going forward India’s real estate will witness more high -ticket purchases with consistent demand from wealthy buyers. Today inflation is flying around 7% and we believe the government is doing whatever it takes to cool inflation.”

 Nitin Bavisi, CFO at Ajmera Realty 

“The RBI today increased the repo rate by 50 bps, the quantum of the rate hike was in line with the market expectation, focusing towards withdrawal of accommodative stance and also the real GDP for FY 23 forecasted as 7%. Markets also anticipate that this increase will lead to the higher end of the interest rate cycle. Increases in interest rates above this level may be concerning for long-term borrowers and may dampen consumer demand for the holiday season. At current levels, the real estate economics will continue to maintain its momentum, especially in short to medium term. From a long term perspective,  besides the domestic inflationary challenges, US Fed and ECB are expected to continue with the trend of raising interest rates which will necessitate rate hike action by RBI."

Pralay Mondal, MD & CEO, CSB Bank

“Today’s RBI policy announcement is on expected lines in a highly volatile global economic environment. Central Bank has kept macroeconomic stability as top priority with an eye on liquidity conditions, inflation,  growth, forex reserve and current account deficit. The external debt to GDP ratio is the lowest in India amongst larger economies, representing our relative strength. RBI's thinking of probability-based loan loss provisions is a prudent step in the right direction.”

Utsav Johri, Partner, JSA (law firm)

“The Monetary Policy Committee, in a bid to tame inflation, has hiked the Repo Rate by 50 basis points to 5.90 percent. With this third hike in the Repo Rate this financial year, the Repo Rate now stands almost back at the pre-pandemic levels. As the cost of borrowing for corporates and individuals will further increase, the Repo Rate hike may further slowdown the local lending activity in the country till the market adapts to the new rates. The Governor, in this speech, also announced a discussion paper on securitisation of stressed assets. Such framework, once implemented, will provide alternate mechanism for securitisation of stressed loans in addition to the currently available route of transfer to asset reconstruction companies, providing new avenues to banks and financial institutions to deal with stressed loans. The Governor also announced the discussion paper on the expected credit loss framework for loan loss provisioning for banks, this is also a welcome step to develop a more robust banking culture.”

Rohit Gera, Managing Director, Gera Developments

" While inflation is a concern and this issue needs to be addressed, the decision to hike rates ought to have been deferred -  raising interest rates at a time of uncertainty at the global level adds to concerns of a slow down in the economy. Interest rates are a sensitive issue for home buyers as rising interest rates  negatively impact affordability.”

Apurva Sheth, Head of Market Perspectives, Samco Securities 

"The Reserve Bank of India (RBI) hiked repo rates by 50 basis points to 5.90%. With this rate hike they have further closed the gap between inflation and interest rates which currently stands at 7%. We are in a much better position compared to all the other major global economies which are still struggling with high inflation and falling behind the curve. With the gap between our inflation and interest rates narrowing we expect the quantum and speed of rate hikes to reduce going forward."

Arun Kumar, Head of Research, FundsIndia

“ RBI's rate hike of 50 bps to take the repo rate to 5.90% was in line with market expectations. Given the aggressive rate hiking cycle by the US Fed, the low spread between Indian and US bond yields, and the strengthening USD, we expect RBI to do one more rate hike of 25-35 bps in December to take the repo rate close to 6.25%. Thereafter, we expect a pause, and the future trajectory will depend on incremental macro data.”

Dhruv Agarwala, Group CEO, Housing.com, PropTiger.com & Makaan.com 

The 50-basis point hike in repo rate to 5.9% was expected as the RBI intensifies its efforts to tame inflation. While banks will eventually be forced to pass on this increased cost to borrowers, the possibility of this happening during the ongoing festive season is low. Considering that a large number of home buyers in India make their purchase decision during this time of the year, financial institutions would not like to dampen the festive spirit by effectuating a rate hike immediately. Even when they do so, the robust buyer sentiment along with renewed investors' interest in the residential real estate market is likely to continue to support the demand for homes in India.

Jaspreet Singh Arora, Chief Investment Officer (CIO), Research & Ranking

"RBI’s decision to raise its repo rate unanimously by 50bps was in line with expectations and a function of US hiking rates. India has hiked repo rate by a cumulative 190bps since the pandemic lows but lower than US 300bps cumulative hike. Also, pertinent to note that India’s interest rate is still below its pre-pandemic levels at this juncture compared to the US, with India inflation also being lower than US. Despite the recent rate hikes, bank credit growth continues to pick up, clocking 16.2% YoY growth in September ‘22 which is a decadal high!  With normal monsoons and strong festive season demand expectations, India is in a sweet spot among major economies. Even as India’s GDP expectations have been downgraded from 7.2% to 7% for FY23, it is far higher than GDP expectations of major economies like US (2.3% for 2022) and UK (3.2% for 2022). The requirement of banks moving to ECL methodology is a step in the right direction and should not impact the banking system as most banks have healthy PCR levels."

Ramani Sastri - Chairman & MD, Sterling Developers Pvt. Ltd

The rate hike may impact the real estate sentiment when buyers are likely to invest in their dream homes during the ongoing festive season. Home loan interest rates may increase now, leading to short-term turbulence on overall housing demand.  The recent consecutive repo rate hikes had already added to buyers’ overall acquisition cost. With gradually increasing loan rates, homebuyers’ apprehension could set in quickly and they might adopt the wait-and-watch sentiment. The real estate sector had started seeing gradual recovery across key property markets, driven primarily by end-users and this decision will have adverse impact for the interest rate-sensitive sector. Subsequent rate hikes will also mean a deterioration of affordability as low interest rates have been the biggest factor in the resurgence for real estate demand in the last few years. However, we believe that there may be a silver lining, as affordability and the disposable incomes of new-age homebuyers are much better than what it was a few years ago. Despite the odds, we’re still hopeful as there is significant pent-up demand from a very large population base and first-time home buyers. Real estate is definitely an asset class that one must remain invested in today and in the long term and looking ahead, we do believe that markets will see sustained growth over the next few years.

Lincoln Bennet Rodrigues, Chairman & Founder, The Bennet and Bernard Company
 
"The perception of lifestyle has changed which is driving the demand for premium properties. While the recent hikes in key policy rates by the RBI to control the high rate of inflation have resulted in a moderate hike in loan rates, but the affordability of the home loan is still very good. We don’t see a significant impact on the luxury housing segments due to the current increase in repo rate hikes as the demand of home buyers in this segment is beyond these considerations. The impact of rate hike will be predominantly on the affordable housing side, which is primarily driven by sentiments and especially first-time home buyers who are heavily reliant on home loans. We believe the positive sentiment will continue in the luxury segment driven by changes in buying patterns post the pandemic. However, a reduction in the key rates going forward would be widely celebrated as low interest rates have been a crucial factor in the revival of overall real estate demand and improvement in the liquidity situation which is vital for the sector."

Ram Raheja, Director, S Raheja Realty

“We welcome RBI's prudent decision to hike rates, as it will help keeping the rising inflation in check. The recent correction in global commodity prices if sustained may ease cost pressures in coming months. This will eventually benefit the developers and the advantage will be passed on the homebuyers. Going forward India’s real estate will witness more high -ticket purchases with consistent demand from wealthy buyers. Today inflation is flying around 7% and we believe the government is doing whatever it takes to cool inflation.”

Prasenjit Basu – Chief Economist, ICICI Securities

"The RBI’s MPC raised its policy repo rate by 50bp to 5.9% as we were expecting. We expect a further increase of 25bp at the December MPC meeting, by which time CPI inflation will likely moderate to 6% YoY as the strong kharip crop is harvested. Once real interest rates are positive, the MPC can pause its rate hikes. The RBI too believes that CPI inflation will average 6%YoY in H2FY23. All central banks (with the exception of China’s) are prioritising the fight against inflation. The US, Eurozone and UK currently have much higher inflation rates than their targeted levels of inflation. India is only marginally higher than its targeted inflation rate, but has stayed persistently above it for half a year, hence the need to persist with rate hikes. The current account deficit widened to 2.8% of GDP in Q1FY23, but India’s external debt declined US$617bn (19.4% of GDP) in June 2022. We expect the BoP current account deficit to widen to 3.3% of GDP in Q2FY23, but to then moderate to 1.6% of GDP in H2FY23 as crude oil prices recede." 

Sameer Kaul – MD & CEO,  TrustPlutus Wealth

"Indian central bank has raised repo rates by 50 bps along expected lines. As the governor has noted, global economy is in turmoil and India needs to be watchful both on the external account as well as in terms of the domestic fiscal situation. We expect the rbi to remain prudent in terms of balancing between growth and inflation."

RBI MPC: Browbeaten by the West

“The MPC delivered 50bps hike in line with expectations. Clearly, the fast-evolving world order and consistent repricing of Fed’s outsized hikes are strong-arming the EMs. This painful adjustment has not spared the RBI either, which realised the net cost of a supposed soft signalling via shallow hike could be higher than a larger hike of 50bps. This exposes the instability inherent with the classic EM central bank trilemma: one cannot have a stable currency, unfettered capital flows, and independent monetary policy all at the same time. This conscious front-loading could give them some breather next year on shallow hikes ahead. With inflation likely to be largely in line with RBI’s estimates, this week’s 50bps hike will make the ex-post forward real repo rate positive, albeit still lower than the RBI’s estimated real neutral rate of 0.8-1%. At this point, we still think that the RBI would not go too restrictive and terminal rate could hover near the estimated real rates, implying not more than 100bps hikes ahead, including today’s decision. However, the extent of global disruption will remain key to the RBI’s reaction function ahead.”

Cyrus Mody, Managing partner, Viceroy properties LLP 

"The RBI MPC hiking repo rate by 50 bps is on the expected lines. Inflation around the globe has become a concern and policy formulation is expected to hover around it. We are witnessing rate hikes across the world. The US Fed and the Bank of England have hiked rates in the past few weeks to control inflation that has hit multi-decade high levels. This is the fourth consecutive hike by the RBI. It will lead to a rise in the EMIs for homeowners as interest rates have cumulatively risen by 190 bps. But, a silver lining for India is that despite the rate hike we are witnessing demand for housing, unlike in the West and China where we can see a clear pricing pressure. With the fiscal situation improving, the Indian economy is expected to grow upwards of 7% for FY23 - going forward, we expect demand for larger homes and high-quality real estate projects to stay intact despite the rate or price rises."

Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE

“Given the inflationary pressure, the RBI's decision to increase the repo rate for the fourth consecutive time by 50 basis points to 5.9 % came as no surprise as the move is aimed at protecting forex. Considering the global headwinds facing the economy, we believe that the decision is a calibrated step towards balancing the inflation – growth dynamic.” 

Pritam Chivukula - Co-Founder & Director, Tridhaatu Realty and Treasurer, CREDAI MCHI

"RBI 's decision to hike the interest rates to tackle the inflation and ensure domestic economic recovery was a no-brainer. The sharp acceleration of rates consecutively for the third time in a short period may have a short-term effect on the sentiment of homebuyers as low interest rates have been the biggest factor in the resurgence for real estate demand in the last two years. We hope that the State Government will step-in to lighten the homebuyer’s load by reducing stamp duty to boost the sentiments in the festive season."

Kaushal Agarwal - Chairman, The Guardians Real Estate Advisory

"The recent consecutive rate hikes by the RBI were aimed at re-anchoring the inflation expectation and strengthening the economy. Thus far, the rise in property prices due to the increased interest rates, metro cess and higher stamp duty had not affected real estate sales over the last few months, thereby confirming that there is genuine demand for housing. But this move by the RBI to hike the repo rate again ahead of the festive season might temporarily limit the growth momentum of the real estate sector."

Cherag Ramakrishnan, Managing Director, CR Realty 

''With  the upward trajectory in interest rates firmly established by RBI, the homebuyers while feeling the pinch in the short term may rush to purchase their homes and lock in their home rates at the earliest. This has been the trend in the last quarter, and we see that trend accelerating in the coming two quarters as well. Based on the sales data of the last two quarters, even post the rate hikes, the off season sales are at an all time high. The fear of rising property prices and further interest rate hikes is only further fueling the latent demand conversion. With limited inventory close to readiness, the demand for ready or close to possession homes will see an exponential increase in the coming quarters.''   

Venkatesh Gopalkrishnan, CEO, Shapoorji Pallonji Real Estate

"The RBI increasing the interest rate by 50 basis points was an expected move to combat the inflationary growth in the country. This move might impact the home loan category, which may influence the buying sentiments of affordable to mid-segment home buyers. While we may not witness a great upward trend given the current scenario, we have seen good business in recent times, which is likely to continue. Though inflation is high, with the government's initiatives to control it, our industry should be able to move forward. Overall, in comparison to the global trend of inflation, the real estate sector is hopeful that this rate hike will not completely dampen the buying sentiment. Additionally, the ongoing festive season is likely to bring in some positive movement as homeownership remains important for home buyers and will eventually result in sales, especially in the luxury and premium categories. With developers offering various schemes, we believe that now is the time for homebuyers to take advantage of these benefits."

P Nandakumar, MD and CEO, Manappuram Finance Ltd.

“Confronted with multiple challenges stemming from geo-political tensions, major central banks pivoting to more hawkish stance and spiralling inflation, the MPC has served the best policy prescription by raising the repo rate by 50bps to 5.9% while keeping systemic liquidity in surplus mode. This in my view will keep the Indian currency insulated from high volatility while keeping inflation expectations well anchored. Lowering GDP forecast to 7% mirrors a more realistic assessment of economic growth.  On the whole, the MPC’s decision has been on expected lines in the given macro-economic scenario”

 

Shraddha Kedia-Agarwal, Director, Transcon Developers

"RBI's decision to hike the policy rates for the fourth consecutive time was anticipated on the back of high inflation and economic recovery. We had already started seeing a vertical movement in the home prices from the past couple of months which had a minimal impact on the housing demand. But, this decision will further put a dent on the homebuyer's sentiments impacting the overall demand for a short period of time."

Jitrendra Shah, Managing Director, Rockford Group 

"The decision by the RBI to hike the repo rate to pre-pandemic levels was anticipated to keep the inflationary expectations under check. This move may impact the overall growth of the industry by dampening sales momentum while property prices are already on rise. However, we believe that this will also encourage the fence-sitters to make the most of the current schemes offered by developers in the market and take the plunge."

Bhushan Nemlekar, Director, Sumit Woods Limited

"Due to the pandemic and the geopolitical issues, the input costs were already high and now with these consecutive rate hikes, it will only dampen the spirit of the entire real estate value chain. The cost of borrowing for both developers and buyers will be impacted and this will result in undesired rate hikes across the spectrum. However, we did not see much impact on the buying spree in the last couple of months since there are genuine buyers in the market to keep the momentum going."

Jitesh Lalwani - President, HomeSync Real Estate Advisory

"RBI’s decision to hike the key policy rates for the third time in a row will have a serious impact on the housing loan EMIs but we are still bullish about the real estate sector the way it has performed in the past few months. Yes, homebuyers are concerned about the skyrocketing property prices but  we believe that this move may push homebuyers who are still deliberating to seal the deal. However, we urge the Government to take some necessary measures to control the rise in property prices so that it will help to boost the demand in the upcoming festive season."

Dr. Sachin Chopda, Managing Director, Pushpam Group

"RBI's decision to hike the policy repo rate was anticipated, factoring the rise in inflation. The rate hike is likely to shrink liquidity in the economy overall, especially impacting the investor’s sentiments. There will be a short-term pause on the minds of the investors while assessing the volatility of the current market dynamics. However, they are bound to return soon in the market during the ongoing festive season.’’