RBI Move To Cut Repo Rate Is A Major Boost For Homebuyers And Realtors

The latest move by the Reserve Bank of India (RBI) to reduce repo rate by 25 basis points to six per cent apart from changing its stance from neutral to accommodative signals a sharp shift to a more achievable economic growth. With inflation exhibiting signs of moderation even as food prices have exhibited some stickiness, the central bank appears comfortable enough to ease policy without compromising its inflation mandate. It is expected that liquidity measures will follow to enable easing in the banking system and help with credit growth on a sustained basis.

Though the GDP growth estimate has been reduced a modest 6.5 per cent due to headwinds from the rest of the world, including increases in tariffs, the domestic demand remains strong. This policy shift is likely to boost sentiment in the bond market, especially those of long-duration bonds, although there are apprehensions about prevalence of global trade tensions. The cut in rate can potentially put pressure on the rupee, particularly if global capital flows prefer higher-yielding instruments.

From a broader perspective, the RBI strategy is that of a tricky balancing act, speaking of threats to inflation yet preparing the economy for potential overseas shocks. Oil price fluctuations of crude oil, US Fed movement, and worldwide geopolitical trends will be the drivers for deciding India's monetary path going forward. The RBI adopting an accommodative stance indicates that it would be more open to cut rates in the future. It is anticipated that the suggested actions will increase the economy's money supply, boost consumer demand, increase liquidity, and encourage borrowing. Lower borrowing costs are likely to result from the expected move, which might boost credit demand and improve investment a number of industries.

The additional easing, alongside an uptick in macroeconomic indicators, may lay a stronger groundwork for sectoral recovery in the upcoming quarters. RBI reducing the repo rate, the growth path of the real estate sector and the property market will be duly enhanced. Investors are optimistic about decreased borrowing costs, which can stimulate demand for housing and automotive products, subsequently enhancing profitability for lenders, whether they are banks or non-banking financial institutions.

One also has to keep in mind that the global economy is facing uncertainties, thanks to the reciprocal tariff implementations. The central bank’s decision to cut the repo rate is a welcome move for the homebuyers. A likely drop in home loan rates could lift buyer sentiment, especially for those who have been waiting to make a decision. Even a small cut in EMIs will encourage people to go ahead with their dream purchases, which could lead to increased activity in the housing market. Lowering the repo rate effectively brings down cost of capital for banks and housing finance companies, which translate into cheaper home loans for borrowers.

This makes home ownership more affordable, especially for first-time buyers and middle-class households. The real impact of this 50 bps rate cut (in two phases) will result in significant savings as regards EMIs. These savings are not just financial but psychological too given that they will increase loan eligibility and reduce the long-term cost of home ownership. As interest rates soften, we expect more fence-sitting homebuyers to move forward with purchase decisions, particularly for NBFCs.