How will RBI's status quo on repo rate impact you during festive season? Experts decode

The Reserve Bank of India (RBI), in its fourth bi-monthly monetary policy meeting that concluded today (October 6), kept the repo rate unchanged at 6.5 per cent. The RBI maintained its GDP growth and consumer inflation projections for the current financial year at 6.5 per cent and 5.4 per cent, respectively.

According to CA Manish Mishra, Virtual CFO and Startup Advisor, the RBI's decision to maintain the status quo on the repo rate and inflation provides stability but also indicates a commitment to combating inflation.

Mishra suggests there will be mixed effects on people during the festive season.

"On one hand, stable interest rates can help keep borrowing costs in check, possibly encouraging spending. However, the focus on controlling inflation suggests that prices may not see a significant drop, which could impact the purchasing power of consumers," said Mishra.

Sharing his views on interest rates, Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers, said that interest rates would be higher for longer, which could be negative for common people as there were some expectations that rate cuts may start soon.

Hajra added that this policy is neutral for the ongoing festive season, as for most consumer-oriented sectors, this season is going to be one of the best festive seasons in a long time.

How would the status quo on rates affect home and automobile buyers?

The unchanged repo rate would be positive for home as well as vehicle buyers, as the stable repo rate will result in stable home loan interest rates.

According to Anuj Puri, Chairman, ANAROCK Group, the overall consumer market looks bullish across sectors, particularly the automobile and housing markets, which in many ways reflects the health of the economy.

"We are entering the festive quarter with a very strong momentum in housing sales, and unchanged interest rates will act as a major catalyst for growth in the residential market," said Puri.

As per ANAROCK Research, housing sales across the top 7 cities created a new peak in Q3 2023 (despite the usually slow monsoon quarter) and stood at 1,20,280 units as against over 88,230 units sold in Q3 2022, thus recording 36 per cent yearly growth. "Thanks to the stable repo rate and the resultantly stable home loan interest rates, we can expect the momentum to continue," Puri added.

Echoing a similar view, Jaatin Suratwala, MD and Chairman, Suratwwala Business Group, said as we step into the festive quarter, the housing market exhibits robust momentum in sales. The unchanged interest rates serve as a crucial catalyst, fostering an environment conducive to growth in the residential sector.

Giving an outlook on a reduction in the key rates going forward, Lincoln Bennet Rodrigues, Chairman and founder of The Bennet and Bernard Company, said 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.

"Overall, we believe that this momentum is projected to persist not only throughout the remainder of this year but also well into 2024," the expert added.

Cautioning the investors Amit Gupta, MD,  Sag Infotech said that they should closely watch the economy and be prepared in advance for any changes.

"It's important to note the underlying cautious stance, which implies that the RBI is maintaining a vigilant approach to combat potential inflationary pressures. Even though things look promising for now, it’s important for businesses and investors to stay alert. They should closely watch the economy and be prepared in advance for any changes in the bank’s rules. This will help them make wise choices and contribute to a stable and growing economy in the future," Gupta said.

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