The country’s consumer price index inflation touched 6.4% in February, marking it the second consecutive month in which retail inflation remained well above the Reserve Bank of India’s acceptable range. Despite high retail inflation, the central bank maintained status quo during the Monetary Policy Committee (MPC) meeting in April and kept the repo rate stable at 6.5%. This move provided temporary relief to homebuyers.
Tracing the timeline, the RBI raised the repo rate for the first time in May 2022 to 4.4%, after keeping it constant throughout the COVID-19 pandemic at 4% (April 2020 to April 2022). Since then, the central bank has increased the repo rate intermittently by a cumulative 250 basis points to 6.50% in FY23. Although the decision was seen as an appropriate step to control increasing inflation, it caused concerns within the real estate sector. It was taken up at a time when the industry was seen to be recovering from the impact of the COVID-19 pandemic and was picking up pace after a long period of market downturn. Fortuitously, the momentum created by the pent-up demand in 2022-23 managed to somewhat offset the impact of the repo rate increase, and the year ended on an exuberant note, recording the highest number of residential launches and sales in nearly a decade. The growth post-structural reforms, such as RERA, GST, etc., in the Indian real estate sector is driven by strong fundamentals. These regulatory changes ushered transparency in the sector and boosted the confidence of stakeholders, resulting in a strong demand for housing post-pandemic.
