Mumbai : The Reserve Bank of India’s decision to raise the repo rate by 25 basis points to 5.50% signals a calibrated approach to managing emerging economic and inflationary pressures, while the resilient growth outlook is expected to provide continued support to the real estate sector, according to Mr. Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India.
Commenting on the RBI Monetary Policy Committee’s decision, Mr. Shishir Baijal said, “The RBI’s 25 bps repo rate hike to 5.50% is broadly in line with our expectations, given the challenges posed by weak monsoons, the potential impact of El Niño, heightened geopolitical conditions and global trade and inflationary pressures.”
He noted that the RBI’s shift towards a ‘calibrated tightening’ stance indicates that any further rate action is likely to remain dependent on incoming economic data.
According to Mr. Baijal, higher borrowing costs could lead to some affordability pressures in the real estate market, particularly across interest-rate-sensitive and lower-priced segments. However, he does not expect the rate hike to materially disrupt the broader trajectory of the sector in the near term.
“The economy has remained resilient,” Mr. Baijal said, pointing to the upward revision of FY27 GDP growth from 6.7% to 7.1% as an indication of the underlying strength of the economy.
Mr. Baijal further highlighted the importance of private consumption and housing demand in sustaining economic momentum. “We expect key aspects like private consumption and housing demand to sustain and provide a strong foundation for continued growth,” he said. The RBI’s calibrated policy approach, combined with the improved GDP growth outlook, is expected to create a mixed environment for real estate, with financing costs remaining a consideration for buyers while underlying economic resilience and housing demand continue to support the sector.