Rate Reduction to Boost Residential Demand and Decrease Home Loan Rates: Industry Insights
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Synopsis
The real estate sector praises the RBI's 25bps rate cut, which is expected to encourage homebuyers towards ownership and enhance their lifestyle. This strategic move is anticipated to boost housing demand, especially in the affordable segment.
Key Takeaways
- RBI cuts repo rate by 25bps to 6.25%
- Lowered interest rates to stimulate homeownership
- Supportive monetary policy aligns with Union Budget initiatives
- Expected increase in demand for mid-income and affordable homes
- First rate cut since May 2020 likely to boost consumption
New Delhi, Feb 7 (NationPress) The real estate sector expressed its approval for the much-anticipated benchmark rate reduction of 25 basis points by the Reserve Bank of India (RBI) on Friday, highlighting that lower interest rates will further encourage homebuyers to acquire homes that enhance their lifestyle.
The Monetary Policy Committee (MPC) of the Central Bank has reduced the repo rate by 25 basis points to 6.25 percent. RBI Governor Sanjay Malhotra stated that the MPC has unanimously opted to maintain a neutral stance while concentrating on inflation and supporting growth.
Boman Irani, President of CREDAI National, remarked that this decision complements recent initiatives in the Union Budget aimed at increasing spending and stimulating economic growth.
This supportive monetary policy was crucial, particularly following the recent 50-basis-point reduction in the Cash Reserve Ratio (CRR), which has already injected substantial liquidity into the banking system, he added.
“Although the current cut may have a limited immediate effect, we project that a subsequent rate cut in the next MPC meeting will provide a stronger boost to overall demand, driving housing sales, especially in the mid-income and affordable segments,” noted Irani.
Dr. Niranjan Hiranandani, Chairman of the National Real Estate Development Council (NAREDCO), stated that after a period of stability in the repo rate, this strategic move arrives at a critical juncture.
“With inflation now under control, the fiscal deficit remaining manageable, and economic growth anticipated to steadily increase, this repo rate reduction signifies a renewed sense of resilience,” he observed.
Moreover, it reassures us that despite external geopolitical uncertainties, our domestic economic environment remains efficient and demand is strong.
“Coupled with the tax incentives announced in the FY26 budget for the middle class, this policy shift will enhance sales velocity,” added Hiranandani.
Shishir Baijal, Chairman and Managing Director of Knight Frank India, mentioned that lower borrowing costs are expected to stimulate demand for home loans in the real estate market, making homes more affordable and promoting sector growth.
“We anticipate that interest rate reductions will be passed on to consumers, making home loan rates more appealing, which, along with the previously announced tax incentives, will boost residential demand across various price ranges, particularly in the below Rs 50 Lakh category, where demand has been weakening,” he emphasized.
This rate cut, the first since May 2020, is likely to foster consumption and investment. Enhanced liquidity in the banking sector will help alleviate market constraints, benefiting sectors like infrastructure and housing.
