Real estate experts say repo rate cut will enhance property investment, drive housing demand, and reduce home loan EMIs.

2025-02-07 01:43:41

RBI's Repo Rate Cut: A Boost for Property Investment and Housing Demand

RBI Cuts Repo Rate by 25 Basis Points

On February 7, the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) announced a repo rate reduction of 25 basis points (bps) from 6.5% to 6.25%, marking the first such move in five years.

Impact on Real Estate and Homebuyers

Real estate developers and experts believe that this rate cut will enhance homebuyers’ sentiment and fuel housing demand as home loan EMIs will decrease. Lower borrowing costs for both homebuyers and developers are expected to encourage property investments, making housing more affordable.

Market observers highlight that reduced rates not only improve liquidity but also drive consumption and purchasing power, ultimately stimulating economic growth. With lower home loan interest rates, the real estate sector is expected to gain significant momentum, attracting more prospective buyers.

Industry Leaders on the Repo Rate Cut

Anshul Jain, Chief Executive, India, SEA & APAC Tenant Representation, Cushman & Wakefield, called the rate cut a "well-timed and much-needed move," especially given the easing CPI inflation and slowing Q2-FY25 GDP growth. He emphasized that this policy shift will revive consumption growth and lower borrowing costs, particularly benefiting the affordable and mid-income housing segments.

Boman Irani, President, CREDAI National, stated that the RBI’s decision aligns with recent budget announcements aimed at increasing spending and spurring economic growth. He highlighted that the 50-basis-point reduction in the Cash Reserve Ratio (CRR) has already infused liquidity into the banking system, and the repo rate cut further strengthens the framework for sustainable growth, boosting confidence among homebuyers, developers, and investors.

Sahil Lakshmanan, Chief Business Officer, CarePal Money, emphasized that the move will offer relief to borrowers, making home, auto, and personal loans more affordable. "Lower EMIs will boost consumer spending, while businesses could benefit from reduced borrowing costs, driving investment and job creation," he said.

Historical Context and Economic Implications

The RBI last reduced the repo rate by 40 bps to 4% in May 2020 to support the economy during the COVID-19 crisis. However, in May 2022, rate hikes began due to global economic uncertainties, including the Russia-Ukraine war. For the past two years, repo rates remained unchanged at 6.50%.

Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd, highlighted that the repo rate cut will shape India's economic momentum and boost real estate affordability, especially in the mid and premium housing segments. He noted that this move could accelerate capital deployment in infrastructure and urban development, further strengthening real estate expansion.

Prateek Mittal, Executive Director, Sushma Group, emphasized that lower interest rates will enhance buyers’ purchasing power, making home loans more affordable and increasing demand, particularly in emerging markets.

Manju Yagnik, Vice Chairperson of Nahar Group and Senior VP, NAREDCO Maharashtra, echoed these sentiments, stating that the move will drive housing demand, encourage market activity, and make real estate investment more attractive. She added that developers will benefit from easier access to funds, expediting project completion to meet the rising demand.

Conclusion

The RBI's repo rate cut is expected to stimulate economic activity, improve housing affordability, and boost real estate investments. With reduced interest rates, increased liquidity, and a favorable policy environment, both homebuyers and developers stand to gain, fostering long-term growth in the sector.