Another Cut In Repo Rate Will Be Welcomed By Realtors And Homebuyers

Realty players across the country are hoping and expecting a further cut in repo rate in the April monetary policy review of the Reserve Bank of India (RBI). And if the central bank does that eventually, then housing demand is expected to get a significant push in FY 26. This is largely because a further cut in repo rate will make home loans more affordable and increase the purchasing power for buyers. It is common knowledge that home loans play a pivotal role in home buying, particularly for end-users, as a majority of them rely on raising finances to purchase their dream homes. A reduction in interest rates directly impacts affordability, making home ownership more accessible and boosts the demand across all segments of the housing market. In an interestingly development, in its last Monetary Policy Committee (MPC) review meeting, RBI reduced the repo rate by 25 basis points after maintaining status quo for eleven consecutive meetings. This marked the beginning of a much-anticipated rate cut cycle.

Given the situation, realty players across the country expect further reductions in the upcoming MPC meetings. One also has to keep in mind that in the last MPC meeting, RBI Governor Sanjay Malhotra had indicated that macroeconomic conditions are aligning favourably, paving the way for further measures to support economic growth. A repo rate cut is one such key intervention as it has the potential to significantly impact borrowing costs. Economists and market experts anticipate an additional reduction of 25 to 50 basis points in the upcoming monetary policy review, which, if implemented, will provide further stimulus to the housing market by enhancing affordability and improving loan eligibility for buyers. A sustained decline in interest rates is expected to act as a catalyst for the residential real estate sector in FY 2025-26. Lower home loan rates will not only reduce the overall cost of borrowing but also enhance loan eligibility, encouraging more buyers—both first-time homeowners and upgraders—to enter the market.

Additionally, with increasing urbanisation and strong demand for quality housing in metro and tier II cities, favourable lending conditions are bound to accelerate growth prospects of the housing sector in the coming year. It is pertinent to remember that real estate demand continues to remain robust, particularly in the high-end and luxury segments, driven by strong investor confidence and rising aspirations for premium living. The anticipated softening of home loan interest rates is expected to further fuel this momentum, making homeownership more attractive for both end-users and investors. A further rate cuts in the upcoming RBI monetary policy review in April is expected, given the continued decline in inflation and improved liquidity conditions. Lower interest rates reduce borrowing costs for consumers, thereby increasing their affordability and eligibility for loans. If the RBI proceeds with a 50-basis point rate cut in April, coupled with the previous 25-basis point cut in February, the cumulative reduction in repo rates will stand at 75 basis points (0.75 per cent). This will have a significant impact on home loan borrowers.