RBI Pauses Repo Rate Hike at 6.5%

The Reserve Bank of India (RBI) has kept the policy repo rate unchanged at 6.5% in its bi-monthly meeting on April 6, 2023. The RBI’s Monetary Policy Committee (MPC) undertook a unanimous decision to not raise the policy repo rate for the time being. 

However, the move to pause the repo rate is for this particular meeting only. If need be, the MPC could initiate further action as would be required in its future meetings.

Most industry experts have welcomed the RBI announcements with a hint of warning that sticky inflation might prompt the apex bank to initiate a step to take to the tightening of monetary policy.

While going against the general expectation, the RBI, this time, decided to keep the policy repo rates unchanged at 6.5%. 

The move augurs well for the residential real estate market and comes as a welcome respite to homebuyers. Significantly, the decision gives relief to affordable and mid-segment homebuyers who were expecting a possible rate hike, which would have taken a toll on home loans. 

As is, the affordable housing segment (units priced greater than Rs 40 lakh) saw its overall sales share dip between 2019 and 2022 and further in the first quarter of 2023. 

A report by an independent real estate firm indicates that back in 2019, out of the total sales of nearly 2,61,400 units across the top seven cities such as National Capital Region (NCR), Kolkata, Mumbai Metropolitan Region (MMR), Pune, Hyderabad, Chennai, and Bengaluru, nearly 38% sales were in the affordable segment.

The RBI’s MPC has revised the repo rate by 250 basis points (bps) in the past 11 months, from May 2022 onwards.

The repo rate relates to the key lending rate through which the central bank lends money to other commercial banks against government securities.

In the last MPC meeting on February 6-8, 2023, the RBI decided to raise the repo rate by 25 bps to 6.5%.