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The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points to 6.25%, marking the first rate cut since December 2022. This move is expected to positively impact the real estate sector by making home loans more affordable and increasing housing demand. Industry experts believe the lower interest rates will encourage homebuyers, ease liquidity concerns, and reduce unsold inventory. Developers are optimistic that the rate cut, combined with tax incentives, will stimulate investment and accelerate project launches. Additionally, the commercial real estate sector is likely to benefit from lower borrowing costs, attracting further investment in office spaces and retail properties.
The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points to 6.25%, marking the first cut since May 2020. This decision, taken by the six-member Monetary Policy Committee (MPC), is expected to provide a significant boost to the real estate sector by making home loans more affordable and improving overall market sentiment. Advertisement
Real estate experts anticipate that this rate cut will enhance housing affordability and increase demand. G Hari Babu, National President of NAREDCO, stated that lower interest rates would likely lead to increased sales, improved liquidity, and a reduction in unsold housing inventory. He further mentioned that this would encourage developers to launch new projects, creating additional opportunities for both homebuyers and investors. The commercial real estate sector is also expected to benefit, as reduced borrowing costs will make it more attractive for businesses to invest in office spaces and other commercial properties.
Manoj Gaur, Chairman of CREDAI National, and Pradeep Aggarwal, Founder & Chairman of Signature Global (India), expressed that, when coupled with tax rebates and incentives on second homes and rental income, the rate cut would not only infuse liquidity into the market but also strengthen the real estate sector's investment potential. Additionally, improved credit access will help developers secure funding for project execution, ensuring a steady supply and timely deliveries.
Boman Irani, President of CREDAI National, highlighted that while inflation remains slightly above the medium-term target of 4%, the central bank must balance inflation control with liquidity injection. He anticipated that another rate cut in the upcoming quarter would further stimulate demand, particularly in the mid-income and affordable housing segments.
Ramesh Menon, Founder Director of Delhi Consortiums, and Rohit Gera, MD of Gera Developments, noted that individuals with floating-rate loans would benefit directly, as both new and existing borrowers will experience a decline in monthly payments, enhancing housing affordability and demand, particularly in the mid-income and affordable housing segments.
Developers believe this move will significantly support the affordable housing segment. Venkatesh Gopalakrishnan, Director of Group Promoter's Office and MD of Shapoorji Pallonji Real Estate (SPRE), along with Amit Bhagat, Co-founder and CEO of ASK Property Fund, stated that the development is particularly beneficial for affordable and lower mid-income housing, where demand has been steadily rising. They stressed that the rate cut was essential to uplift sentiment and provide a clear direction for the market.
Shishir Baijal, Chairman and MD of Knight Frank India, and Domnic Romell, President of CREDAI-MCHI, expressed optimism that banks would pass on the benefits to consumers, making home loans more attractive. They anticipated that, along with previously announced tax incentives, the rate cut would drive demand, particularly for homes priced below INR 50 lakh, where demand had been weakening.
Anshul Jain of Cushman & Wakefield and Niranjan Hiranandani of NAREDCO highlighted that this move would support consumption growth and stimulate demand in the interest rate-sensitive housing sector. They stressed that the RBI's policy change, combined with recent fiscal measures, would provide much-needed momentum to the residential market.
Domnic Romell, President, CREDAI-MCHI said that "..this combined with the Union Budget 2025's pro-middle-class policies-such as the increase in the income tax exemption limit to ?12 lakh, higher TDS limits on rent, and enhanced home loan interest deductions-creates an environment that encourages consumer spending and homeownership. Additionally, continued support for liquidity through initiatives like SWAMIH Fund 2 will ensure the completion of stalled projects and drive sustained momentum in the sector. The government's fiscal discipline and focus on economic growth further reinforce confidence in India's real estate sector."
Anuj Puri, Chairman of ANAROCK Group, mentioned that lower home loan rates would encourage first-time homebuyers to enter the market, provided banks transmit the rate benefits to customers.
Prashant Sharma, President of NAREDCO Maharashtra, and Manik Malik, CFO of BPTP, reiterated that the rate cut would provide relief to homebuyers while urging banks to ensure swift transmission of lower rates. They also emphasised that the real estate sector remains a crucial driver of economic growth, and reduced borrowing costs will bolster overall industry sentiment.
Girish Kousgi, MD & CEO of PNB Housing Finance, and M. Murali, CMD of Shriram Properties, stated that lower borrowing rates would improve project execution and enhance affordability for homebuyers. They expect this move to reignite buyer sentiment and drive demand in both residential and commercial segments.
Harshavardhan Neotia, Chairman of Ambuja Neotia Group, pointed out that the rate cut, in combination with tax incentives, would encourage investment in luxury hospitality and premium real estate projects.
Reeza Sebastian Karimpanal, Executive President of Residential Business at Embassy Group, added that lower interest rates would support the completion of ongoing projects and facilitate new launches, particularly in the premium, mid-income, and affordable housing segments.
Thus, overall, the RBI's decision to cut the repo rate is expected to encourage homebuyers, particularly first-time buyers, to take advantage of lower interest rates. Additionally, developers will benefit from improved liquidity, enabling them to complete ongoing projects and launch new ones. While the impact will largely depend on how swiftly banks pass on the benefits to borrowers, this policy change sets the stage for sustained growth in the housing sector, particularly in the mid-income and affordable categories.
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