Here is some good news for the affordable housing market.
Had it not been for the pandemic, the RBI could have taken a different stance for the benchmark rates today. However, the spectre of inflation in the country looms too large, prompting the RBI – as expected – to keep the repo rates unchanged at 4% and reverse repo rate at 3.35%. This is the seventh consecutive time that the RBI has maintained the status quo, largely on account of the ongoing COVID-19 uncertainties.
On the upside, the RBI did confirm that economic activity is reviving with the ebbing of COVID-19 in most states across the country. Also, the real GDP forecast for the FY 2021-22 remains at 9.5% in the wake of the vaccination drive that is in full swing in India. All this is a positive sign for the affordable housing & residential market, which has strong correlations to the overall state of the economy.
The unchanged repo rate regime works well for home loan borrowers as the floating retail loan rates, which is directly linked to external benchmark repo rates, have been at the lowest level in the last two decades. The continuation of this low-interest rate regime supports the environment of affordability which has become the new hallmark of the housing market – during the pandemic, and even before.
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