They say all good things come to those who wait and when the Reserve Bank of India (RBI) announced its sixth bi-monthly monetary policy for FY25 on February 7, 2025, real estate sector stakeholders across

the spectrum agreed that the news was definitely worth the wait. The Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, in his first monetary policy review, announced a 25-basis point rate cut to bring down the benchmark repo rate to 6.25%; a first in five years. He also maintained the monetary policy stance as ‘Neutral’. Needless to say, there was much rejoicing while real estate association heads and analysts shared perspectives on the key implications of this decision.

Welcome move

Dr Niranjan Hiranandani, Chairman, NAREDCO, declared, “It is a welcome move by the Reserve Bank of India to reduce its repo rate by 0.25 basis points. 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. 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. Thus, lowered interest rates will further nudge home buyers to buy an ownership home with an upgraded lifestyle.”

Positive impact

G Hari Babu, National President, NAREDCO, concurred, "This rate cut will have a positive impact on the overall sector, making home loans more affordable and increasing demand

for housing. With lower interest rates, we expect to see increased sales, improved liquidity, and a reduction in the inventory of unsold homes. This, in turn, will encourage developers to launch new projects, creating new opportunities for home buyers and investors,” he said.

Affordable housing

“In addition, I believe that this move will have a positive impact on the affordable housing segment, which is a priority area for the government. With lower interest rates, more home buyers will be able to afford homes, leading to increased sales and improved liquidity for developers. This, in turn, will encourage developers to launch more affordable housing projects, addressing the huge demand-supply gap in this segment. The rate cut will also benefit the commercial real estate segment, as lower borrowing costs will make it more attractive for businesses to invest in office spaces and other commercial properties. Overall, this move is a positive step for the real estate industry, and we hope that it will be followed by further reforms to boost the sector's growth."

Direct impact

Prashant Sharma, President, NAREDCO Maharashtra, also opined, "This rate cut will provide much-needed relief to existing and prospective home buyers, boosting housing demand, and enhancing affordability. Additionally, we expect banks to ensure swift transmission of the reduced rates to borrowers, allowing a direct impact on home loan interest rates. The real estate sector has been a key driver of economic growth, and lower borrowing costs will contribute positively to the overall industry sentiment."

Cascading effect

Presenting a location focused perspective, Jitendra Mehta, President, CREDAI-MCHI Thane, emphasised, “It was important, given that home buyers have been feeling the pinch of rising EMIs, particularly in the high-interest rate environment. The RBI’s decision to lower the repo rate is a significant boost for home buyers and developers alike; it will encourage more buyers in Thane to buy their homes, especially in the affordable and mid-income housing segments. Reduction in home loan EMIs will create positive sentiment, enhance affordability and encourage more aspiring home owners to shift from fence sitters to actual buyers. We hope that the HFCs and banks will pass on the full benefit to consumers. A stable and accommodative monetary policy will be key to sustaining this positive trajectory in Thane’s real estate sector. I hope this rate cut will have a cascading effect on the sector, leading to sustained momentum in residential sales.”

Major boost

Anuj Puri, Chairman, ANAROCK Group, explained, “In terms of the impact on the housing sector of the RBI's decision to reduce the repo rates by 25 bps, this piggybacks on the recent taxation benefits announced in the Union Budget. As such, it is undeniably a major boost to the home buyers, particularly for affordable housing buyers. Many first-time home buyers who had been hesitating to take the plunge are likely to make their move now as home loan rates will reduce - as long as banks pass on the key benefits to buyers.”

Strong momentum

He added, “This, dovetails well with recent trends in the housing market, which continues to see strong momentum. Reduced home loan rates can help the overall positive consumer sentiment.”

So now, the ball is in the lending bank’s court and much depends upon how soon and how much they pass on the benefits to home seekers.