RBI Monetary Policy: The festive season is here, and with Diwali just around the corner, many homebuyers were hoping for some relief. Unfortunately, the Reserve Bank of India‘s (RBI MPC) latest update on its monetary policy has brought no changes for those looking to save on home loans and EMIs. Let’s look at the key highlights of the RBI MPC changes and what it means for you if you’re planning to buy a home.
RBI Monetary Policy Update
On October 9, 2024, RBI MPC, led by Governor Shaktikanta Das, announced the fourth bi-monthly monetary policy for FY25. The most significant point? There is no change in the RBI repo rate, which stays at 6.5%. This marks the 10th consecutive time that the Reserve Bank of India has left the rate unchanged.
This decision brings no change for home loan borrowers. With the repo rate staying the same, there will be no reduction in EMIs, meaning no short-term relief on your monthly payments.
Key Highlights of RBI Monetary Policy
- Repo Rate: 6.5%
- Standing Deposit Facility (SDF) Rate: 6.25%
- Marginal Standing Facility (MSF) Rate and Bank Rate: 6.75%
The Reserve Bank of India’s (RBI) policy stance is now ‘neutral,’ reflecting stability in the Indian economy despite global recessionary trends. However, this stability means home loan EMIs will remain high for the time being.
Impact on Housing Market and Home Loans
The recent policy also comes at a time when the housing market is facing a slowdown. According to ANAROCK data, housing sales in Q3 2024 fell by 11% compared to the same period in 2023. New housing launches also saw a decline of 19% during this time.
The RBI’s monetary policy decision has a direct impact on homebuyers. With no change in home loan interest rates, many potential buyers might choose to postpone their decisions. Higher EMIs can make it more challenging for middle-income families to purchase homes, particularly during the festive season.
Why No Rate Cut in RBI’s Monetary Policy?
Even though it’s festival season, the RBI’s monetary policy meeting decided to maintain its current stance. Why? One reason is that the global economy is still shaky due to geopolitical conflicts and financial market fluctuations. Shaktikanta Das pointed out that while the Indian economy remains resilient, the Reserve Bank of India must be cautious.
“Domestic growth has sustained momentum, but global risks such as geopolitical conflicts and financial volatility persist,” Shaktikanta Das said in his monetary policy statement. The RBI MPC is ensuring that the Indian economy continues to grow without allowing inflation to spiral out of control.
Should You Wait to Buy a Home? – Home Loan and EMI Outlook
For homebuyers, the big question is whether to wait for a home loan rate cut or go ahead with the current rates. The Federal Reserve in the U.S. recently cut rates by 50 basis points, leading to several global banks reducing rates. But the RBI MPC has not followed this trend yet.
If the global situation stabilizes and GDP growth remains strong, there could be a chance that the Reserve Bank of India will cut the repo rate in the future. However, it’s uncertain when this could happen.
If you are not in a hurry to buy, it might be wise to wait for a possible home loan rate cut. However, if you’re ready to buy a home now and can manage the current EMI levels, waiting may not bring any immediate benefit.
RBI’s GDP and Inflation Projections
Looking ahead, the Reserve Bank of India has maintained its GDP projection for FY25 at 7.2%, reflecting a stable economy. Here’s how the projections break down:
- GDP Growth (Q2 FY25): 7.2%
- GDP Growth (Q3 FY25): Revised to 7.4%
- GDP Growth (Q4 FY25): Revised to 7.4%
The CPI inflation projections also show a mix of short-term rises and long-term declines:
- Q3 CPI inflation projection: 4.8%
- Q4 CPI inflation projection: 4.2%
- Q1 FY26 CPI projection: 4.3%
For homebuyers, the lack of a rate cut in the RBI MPC’s monetary policy means that home loan interest rates will remain high. While the Reserve Bank of India is keeping a neutral stance for now, there is potential for a rate cut in the future if inflation remains under control and GDP growth continues.
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