Quote from Lata Pillai, Senior Managing Director and Head - Capital Markets, India, JLL

"RBI continues to retain its stance on inflationary concerns, though Q1 GDP and other macroeconomic numbers position India well amid the current landscape. Continuing elevated energy costs and a watchful eye on monsoon amid strong domestic demand keep the central bank on vigil.

The RBI retained the status quo on the policy rate, keeping it at 5.25%, the fourth successive instance of the same action, with the stance remaining neutral as well. While inflation came in higher but not being broad-based, it gave some headroom, but the growth-inflation dynamics are one to watch.  With the higher energy prices amid the continuing geopolitical crisis and El Niño effect likely to weaken the monsoon season and cause an impact on rural consumption, there are offsets as well. Strong macroeconomic indicators including Manufacturing and Services PMI as well as other indicators give hope for growth momentum being maintained.

While Q1 FY27 GDP came in stronger at 7.0%, and the next three quarters’ growth has been moderated, the full year FY 2027 GDP is projected to be higher compared to the last MPC at 6.7% The inflation outlook has been revised downwards by 10 bps as well to 5.0%, though the impact of the volatile oil prices and food inflation are likely to felt for the next couple of quarters as well. The strengthening rupee has also provided some relief and liquidity remains healthy.

While a flexible inflation target provides headroom to monitor the impact of supply chain shocks as well as recent fuel price hikes, the RBI is expected to remain nimble footed to tackle rising inflationary concerns later in the year. 

Growth forecast moderation and rising inflation forecasts are an indicator of the wider concerns amid the lingering energy crisis and the spillover effects of the geopolitical conflict, with evolving ground realities around the global macroeconomic situation likely to impact the next course of action.

With H1 2026 residential sales coming in stronger sequentially as well as y-o-y, for the time being, the status quo on interest rates is positive for the real estate market, with certainty on lending rates for both developers and homebuyers expected to keep stakeholders relatively unfazed. However, the impact of rising construction costs being likely to be passed on to buyers, may adversely impact affordability, though the attractive lending rates continue to provide buoyancy to the overall market. The shrinking share of affordable housing as well as pricing pressures on the mid-segment buyer however remain areas of concern. A general return of certainty to economy is likely to support the residential market performance for the remainder of the year."