RBI's stance to support growth in sync with fiscal policy; Low mortgage rates to sustain housing demand

RBI's stance to support growth in sync with fiscal policy; Low mortgage rates to sustain housing demandDr. Samantak Das, Chief Economist and Head of Research, JLL India

RBIs decision of keeping the repo rates unchanged and maintaining an accommodative stance will provide the much needed support for the nascent recovery of the economy during 2021. The initial green shoots of recovery are already visible and is expected to gain strength in the coming quarters. This decision by the Central Bank is in sync with government's recent Union Budget which emphasised on augmenting capital expenditure while keeping the fiscal targets at bay in the short term.

The easing of retail inflation to 4.9% in December 2020 and expected benign outlook has provided the elbow room to maintain the policy rates and support a sustained recovery of the economy. RBI's expectation of GDP growth at 10.5% during FY 2021-22 indicates growth in jobs and incomes.

The status quo on the policy rates is a welcome step for the homebuyers as they can take advantage of the prevailing lowest mortgage rates. Banks and Housing finance companies are expected to increase mortgage lending due to stable interest rates and comfortable liquidity environment. The demand for housing, which has shown initial signs of recovery in the latter part of 2020, is expected to sustain if the favourable interest rates and price incentives by real estate developers are further supported by economic recovery and improved job scenario.

Source : Equity Bulls

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