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Following the RBI's recent repo rate cut from 6% to 5.5%, major Indian banks have swiftly reduced lending rates to stimulate sectors like housing and MSMEs. HDFC Bank, Canara Bank, and Bank of Baroda have slashed MCLRs, offering immediate EMI relief to home loan borrowers. SBI also trimmed its repo-linked lending rate to 7.75% and EBLR to 8.15%. Real estate experts say the move is timely, likely spurring demand- especially in affordable and mid-income housing. Developers foresee increased buyer interest, quicker sales, and improved affordability. With rate cuts aligning with positive market sentiment, a broader housing market recovery is now in sight.
India's leading commercial banks have acted swiftly in response to the Reserve Bank of India's decision earlier this month to cut the repo rate from 6% to 5.5%, aimed at stimulating economic activity by reducing borrowing costs in key growth sectors such as housing and MSMEs. Unlike previous instances, this time banks have promptly passed on the benefit to borrowers. Advertisement
Major lenders including HDFC Bank, Canara Bank, and Bank of Baroda have revised their marginal cost of funds-based lending rates (MCLRs), providing direct relief to home loan customers. Meanwhile, some banks like Punjab National Bank and SBI maintained a more cautious approach initially by holding their MCLR steady.
Despite this, SBI - the country's largest lender - did implement significant rate reductions. Its lending rates were cut by 50 basis points, bringing the repo-linked lending rate (RLLR) down to 7.75% and the external benchmark-based lending rate (EBLR) to 8.15% from 8.65%. These revisions took effect this past week and are expected to ease repayment pressure for both existing and prospective borrowers.
This collective rate adjustment is likely to reduce monthly EMIs for new homebuyers and offer moderate relief for existing floating-rate loan holders. Experts in the real estate industry foresee a boost in home-buying activity, especially in the affordable and mid-income housing segments, where borrowing costs are a key consideration.
Prashant Sharma, President of NAREDCO Maharashtra, noted that the interest rate correction had come at a vital time for the housing market. He expressed that lower EMIs would not only encourage hesitant buyers to act but also increase demand from genuine end-users, especially in metro areas such as Mumbai and Pune.
Nishant Deshmukh, Founder and Managing Partner at Sugee Group, observed that reduced lending rates provide timely financial relief for many aspiring homebuyers. He pointed out that lower EMIs ease monthly cash flows, making homeownership more viable and accessible, while also contributing to a positive market outlook that spurs quicker buying decisions.
Echoing this sentiment, Shraddha Kedia-Agarwal, Director at Transcon Developers, remarked that first-time homebuyers would be better positioned to reassess their budgets and opt for homes with superior amenities. She believed this shift could lead to increased enquiries and faster deal closures from the developer's perspective.
With lending rates now on a downward trend and broader macroeconomic indicators showing signs of stability, analysts expect the real estate sector to enter a phase of more inclusive and sustainable recovery. Many agree this policy environment strikes a needed balance between affordability and aspiration, which is essential to propel India's housing sector forward through 2025 and beyond.
With developers ready to meet demand and buyer sentiment turning optimistic, the stage is set for a more robust housing cycle. If accompanied by supportive government measures and consistent rate transmission, this renewed affordability could prove instrumental in driving long-term transformation in India's real estate landscape.
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