The Reserve Bank of India's (RBI) decision to maintain the repo rate at 6.5% for the 10th consecutive time comes with a significant shift in its policy stance to 'neutral' from the earlier 'withdrawal of accommodation.' This shift suggests that while rates have remained stable, the central bank is preparing for potential future adjustments, including rate cuts, depending on inflation and economic trends. This development has been seen as a positive signal for the real estate market, particularly during the festive season, when stable interest rates are expected to keep equated monthly instalments (EMIs) for home loans manageable, boosting both current and prospective homebuyers.

The decision to hold the benchmark rate was made by the Monetary Policy Committee (MPC), comprising three RBI officials and three external members, who voted five to one in favour of maintaining the repo rate at 6.5%. The last rate adjustment was in February 2023, when it was raised from 6.25% to 6.5%. However, the shift to a neutral stance, the first change since June 2019, signals the possibility of future rate cuts.

RBI Governor Shaktikanta Das emphasised the importance of maintaining a balance between inflation control and economic growth. He mentioned that food inflation is expected to decrease in the coming months, although core inflation-excluding volatile food and energy prices-appears to have bottomed out. The RBI kept its inflation forecast for FY25 at 4.5%, while the GDP growth forecast remained at 7.2%. Das also highlighted the need for flexibility in responding to economic uncertainties, including geopolitical risks and weather-related shocks that could affect commodity prices, especially crude oil, where India has a high dependence on imports.

Industry leaders have welcomed the RBI's decision. Mr. Prashant Sharma, President of NAREDCO Maharashtra, stated that maintaining the policy rate at 6.5% provides a stable environment, crucial for both homebuyers and developers as it allows them to plan with certainty. He also pointed to the projected GDP growth of 7.2% for FY25, which offers an optimistic outlook for the real estate sector. Similarly, Mr. Deepak Nair, COO of The Mentors Real Estate Advisory Pvt. Ltd., appreciated the neutral stance as it leaves room for future rate cuts, which could lower borrowing costs and improve liquidity for the sector.

Mr. Anil Mutha, Chief Visionary & Co-Founder of Nandivardhan Group, added that this decision signals the central bank's readiness to navigate changing economic conditions. A stable interest rate environment boosts market confidence, encouraging developers and home buyers alike. Ms. Shraddha Kedia-Agarwal, Director of Transcon Developers, emphasised that while the decision supports a favourable lending environment, caution is still needed due to the gradual and uneven moderation of inflation.

Suman Chowdhury, Chief Economist and Executive Director at Acuite Ratings & Research, noted that while the MPC has not given explicit guidance on rate cuts, a reduction could be on the cards by December 2024 or February 2025, provided inflation remains under control. Aditi Nayar, Chief Economist at ICRA Ltd, echoed this view, suggesting that a modest rate cut of up to 50 basis points could occur over the next two policy reviews if inflationary risks-both domestic and global-do not materialise.

Mr. Samyak Jain, Director of Siddha Group, noted that the real estate market has shown strong performance, driven by increased demand for homeownership and rising incomes. He is optimistic that demand will surge in the coming months, particularly during the festive season. Mr. Govind Krishnan Muthukumar, Co-founder of Tridhaatu Realty, said that while the unchanged rate provides short-term stability, the real estate sector is hopeful for a more accommodative stance in the future, which could further stimulate homebuyer sentiment. He believes that any future rate reductions could drive sustained momentum in the housing sector.

The RBI's policy stance also reflects concerns about potential risks in the non-banking financial company (NBFC) sector. Governor Das highlighted the aggressive growth in some NBFC asset classes, especially microfinance, which could pose risks to financial stability. He also noted the buildup of stress in unsecured loan segments, such as consumption loans, microfinance loans, and outstanding credit card debt. The central bank is closely monitoring these risks and may take necessary steps to mitigate them.

Further, the RBI announced an increase in transaction limits for digital payments. The pre-transaction limit for UPI123Pay (for feature phones) has been doubled to INR 10,000, while the UPI Lite wallet limit has been increased from INR 2,000 to INR 5,000. The per-transaction limit for UPI Lite has also been raised to INR 1,000. These measures are part of the central bank?s efforts to enhance digital payment infrastructure and support financial inclusion.

In summary, the RBI's decision to maintain the repo rate at 6.5%, along with its shift to a neutral stance, has been widely welcomed as it signals stability while leaving the door open for future rate cuts. With the economy projected to grow at 7.2% in FY25 and inflation expected to moderate, the real estate sector is poised for growth, especially during the festive season. However, vigilance is necessary, particularly in light of global uncertainties and potential risks in the NBFC sector. The increased UPI transaction limits also reflect the RBI's commitment to adapting to evolving market conditions and promoting digital growth.