Rate cut to spur residential demand, lower home loan rates: Industry

New Delhi: The real estate industry on Friday welcomed the much-awaited benchmark rate cut of 25bps by the Reserve Bank of India (RBI), saying lowered interest rates will further nudge homebuyers to buy an ownership home with an upgraded lifestyle.

The Central Bank’s Monetary Policy Committee (MPC) cut the repo rate by 25 basis points to 6.25 per cent. RBI Governor Sanjay Malhotra said the MPC has also unanimously decided to continue with a neutral stance and will focus on inflation while supporting growth.

According to Boman Irani, President, CREDAI National, the decision supplements recent announcements in the Union Budget aimed at boosting spending and spur economic growth.

This supportive monetary policy was imperative, especially after the recent 50-basis-point reduction in the Cash Reserve Ratio (CRR), which has already injected significant liquidity into the banking system, he mentioned.

“While the current cut may have a limited direct impact, we anticipate that a further rate cut in the next MPC meeting will provide stronger impetus to overall demand, accelerating housing sales, particularly in the mid-income and affordable segments,” said Irani.

Dr Niranjan Hiranandani, Chairman, National Real Estate Development Council (NAREDCO), said after a period of steadiness in the repo rate, this long-awaited and strategic move comes at a crucial time.

“As inflation is now under control, the fiscal deficit remains moderate, and economic growth is expected to accelerate steadily, the reduction in the repo rate signals a renewed sense of resilience,” he noted.

Additionally, it assures us that despite external geopolitical uncertainties, our domestic economic climate keeps markets efficient and demand robust.

“Combined with the tax benefits announced in the FY26 budget for the middle class, this policy change will boost sales velocity,” said Hiranandani.

According to Shishir Baijal, Chairman and Managing Director, Knight Frank India, for the real estate market, lower borrowing costs are expected to boost demand for home loans, making housing more affordable and stimulating sector growth.

“We hope interest rate cuts will be passed on to consumer and the home loan rates become more attractive which combined with the earlier announced tax incentives spur residential demand across the different price brackets, but especially in the below Rs 50 Lakh category, which has seen continued weakening of demand,” he stressed.

This rate cut, the first one since May 2020, is likely to boost consumption and investment. Increased liquidity in the banking system will help address market constraints, benefiting sectors like infrastructure and housing.

—IANS