The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on February 7 decided to reduce the repo rate by 25 basis points (bps) from 6.5 percent to 6.25 percent, a move, which real estate experts anticipate, will support the homebuyers’ sentiment and boost the housing demand as the home loan EMIs will be reduced.
This was the first time in the last five years when the RBI decided to slash the repo rate by 25 basis points.
Realty experts added that the reduced rates imply that borrowing costs for both developers and homebuyers will go down, thereby further encouraging investments in property.
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said that the 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 (affordable housing), which has seen continued weakening of demand,” Baijal said.
Market analysts said that the move to slash repo rate will enhance liquidity and also encourage consumption and purchasing power, eventually fuelling economic growth. Due to lower borrowing costs, home loan interest rates are set to go down, which will further benefit prospective homebuyers.
Boman Irani, President, CREDAI National, said that the central bank’s decision to reduce the repo rate by 25 basis points complements current announcements in the budget aimed at boosting spending and fueling 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…These measures signal a robust framework for sustainable growth, fostering confidence among homebuyers, developers, and investors alike,” he said.
It was in May 2020 when the RBI had last reduced the repo rate by 40 basis points to 4 percent. Repo rates were hiked to 6.50 percent in May 2023 and since then there has been no change in repo rates.
Manju Yagnik, Vice Chairperson of Nahar Group and Senior VP, NAREDCO, Maharashtra, said that the initiative is likely to drive demand for housing by encouraging more people to invest in real estate.
“Developers will have easier access to funds, which in turn help them in completing projects faster and meet the rising demand,” she said.
Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd, said that the move would make home loans more affordable, stimulating demand—especially in the mid and premium segments and improving housing affordability.
