Repo rate cut may revive tepid housing demand, boost affordability

Business Standard

06-06-2025

Real estate industry stakeholders are expecting the 50-basis-point repo rate cut by the Reserve Bank of India (RBI) to boost housing demand across India, which has been moderating over the last few quarters.
The move comes at a crucial time when housing sales across top Indian cities in Q1 CY25 dipped by 28 per cent year-on-year due to skyrocketing residential prices and geopolitical headwinds, according to Anarock.
Industry experts believe that the overall 1 per cent rate cut so far this year may result in a lower cost of borrowing and eventually lower equated monthly instalments (EMIs) for homebuyers.
Shekhar Patel, President, Credai, believes that reduced EMIs are expected to significantly improve buyer sentiment and encourage first-time homebuyers to enter the market. 'For aspiring homebuyers, especially first-time buyers, this is a golden window to act,' said Ankit Shah, COO and CMO, Grahm Realty.
The apex bank's move is likely to benefit the demand for interest-sensitive, affordable and mid-segment housing the most. In the last few years, affordable housing has been suffering amid declining sales and launches.
According to Shishir Baijal, Chairman and Managing Director, Knight Frank India, over the last few years, the strong housing market momentum was increasingly concentrating in the premium end, even as there were signals of weakening in the lower segments.
According to Anarock, affordable housing's sales share plummeted from 38 per cent in 2019 to 18 per cent in 2024, while its supply share dropped from 40 per cent to 16 per cent in the same period.
'This effectively lowers the cost of borrowing, making home loan EMIs easier on the pocket and thereby directly improving affordability for buyers. This can potentially boost demand in the Indian real estate sector, especially in affordable and mid-income segments,' said Anuj Puri, Chairman, Anarock.
Further, a 100-basis-point cut to reduce the cash reserve ratio (CRR) to 3 per cent is also expected to help developers access more capital and achieve timely completions of their projects. 'The reduction in CRR is expected to infuse significant liquidity in the banking system, which will prompt banks to lend even more,' said Pradeep Aggarwal, Founder and Chairman, Signature Global (India).
Anshul Jain, Chief Executive, India, SEA and APAC Tenant Representation, Cushman & Wakefield, is expecting the lower borrowing costs to significantly improve the viability of capital-intensive developments, particularly in high-growth sectors such as global capability centres, data centres, and the industrial and logistics segment.
Meanwhile, Dr Samantak Das, Chief Economist and Head – Research and REIS, India, JLL, is anticipating a more profound impact on the financial markets, potentially attracting a fresh wave of institutional capital into real estate debt and equity. 'This could unlock financing mechanisms for developers, accelerating project execution and fostering a more competitive and dynamic supply landscape.'
However, Anarock's Puri believes that the positive impacts may be partially dampened by the ongoing global trade tensions and tariffs imposed by the Trump administration, which have increased the cost of imported construction materials and created economic uncertainty. 'We may see some impact on the demand for luxury and commercial projects, and developer margins may be squeezed.'