Housing demand to get a fillip from RBI's second consecutive rate cut, observers say

Never said will tighten norms on loans against gold, says RBI Governor

Homebuyers and developers have welcomed the Reserve Bank of India's (RBI) announcement to cut its repo rate by 25 basis points on April 9 to 6 percent from  6.25 percent, with observers saying that a second consecutive cut in the policy rate will help drive more sales in the real estate market through lower equated monthly instalments (EMIs) on home loans, especially at a time when some concerns have emerged over slowing home sales in some markets.

While the 25-basis point cut to the repo rate in February helped ease some of the EMI burden that homeowners carried due to high interest rates, the continued high cost of funds for banks and financial institutions mitigated some of the relief. Real estate observers said that the affordable housing segment can be a key beneficiary of the rate cut, with the segment currently going through a period of sluggish sales due to low supply and struggles among entry-level homebuyers.

"Lower interest rates translate into more affordable home loans, which will likely spur housing demand across various categories. This move is expected to lead to higher residential sales, better liquidity in the market and a gradual clearing of unsold inventory—giving developers the confidence to launch new projects. Affordable housing, in particular, stands to gain significantly. With reduced borrowing costs, more aspiring homeowners can enter the market, helping address the pressing demand-supply gap in this segment," said G Hari Babu, national president, National Real Estate Development Council.

Developers can also benefit from the resulting cheaper sources of credit, said observers.

“We welcome the RBI’s decision to reduce the repo rate by 25 basis points to 6.00 percent. At a time of global economic volatility caused by increasing tariffs and geopolitical tensions , this move reflects a continued shift toward a pro-growth stance amid easing inflation and a stabilising macroeconomic outlook. With CPI (Consumer Price Index) inflation expected to moderate to 4.5 percent, the rate cut is well-timed to uplift consumer sentiment and enhance borrowing capacity, especially in the housing sector. It is likely to improve home loan affordability, stimulate housing demand and provide a strong impetus to the mid-income and affordable segments, where interest rate sensitivity remains high. The RBI’s continued policy easing highlights its commitment to sustaining growth while safeguarding macroeconomic stability,” said Boman Irani, managing director, Rustomjee Group, the promoter of listed Keystone Developers, and president of Confederation of Real Estate Developers Associations of India.

Observers also noted the central bank's change in its stance to "accommodative" from "neutral", in the face of a widening global trade war, which he added will help maintain domestic demand and mitigate adverse effects from blanket tariffs imposed by the US.

Others said that newer investment avenues in real estate may also be given a boost by the RBI's second consecutive rate cut.

"It (the rate cut) provides an encouraging signal for new-age fund and development companies to invest further, strengthening the sector and supporting broader economic growth," said Mohit Malhotra, co-founder and CEO of NeoLiv, a platform that supports fund management and project development.