RBI rate cut: Real estate firms expect mid-housing segments to thrive

Real estate industry leaders are expecting that the Reserve Bank of India’s (RBI’s) rate cut will boost housing demand, particularly in the mid-housing segment.

 

The realtors are banking on the rate cut along with the revised income tax slabs and ‘SWAMIH 2’ with a Rs 15,000 crore fund announced by the Union Finance Minister Nirmala Sitharaman, in the Union Budget on February 1.

 

The industry leaders believe that the rate cut, resulting in lower borrowing costs for buyers, enhancing demand, and lower financing costs for developers, leading to an acceleration in the construction of new projects, will benefit all the industry stakeholders.

   

“For the real estate sector, this development is a significant boost, particularly for affordable and mid-segment housing, where demand is steadily rising. Lower borrowing costs will further enhance home loan affordability, bringing the dream of homeownership closer for many aspiring buyers. Additionally, this move is likely to regenerate investments in the real estate sector, providing the much-needed motivation to sustain its growth,” said Venkatesh Gopalakrishnan, director of the group promoter’s office, managing director (MD), Shapoorji Pallonji Real Estate.

 

Niranjan Hiranandani, chairman of the National Real Estate Development Council and co-founder and managing director (MD) of Mumbai-based Hiranandani Group, said, “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 homebuyers to buy an ownership home with an upgraded lifestyle.”

 

Pradeep Aggarwal, founder and chairman of NCR-based Signature Global (India), said, “For real estate, a rate cut after such a long period is a significant boost. Historically, reduced interest rates have triggered an upswing in housing demand, benefiting both homebuyers and developers. Additionally, improved credit access will support developers in securing funding for project execution, ensuring steady supply and timely deliveries.”

 

Previously, the RBI had slashed the rate in March 2020 by 75 basis points to 4.40 per cent.

 

In its December 2024 monetary policy committee meeting, the country’s apex bank reduced the cash reserve ratio by 50 basis points to 4 per cent in an attempt to enhance liquidity.

 

Girish Kousgi, MD, and the chief executive officer (CEO) at PNB Housing Finance, said, “Lower interest rates directly enhance affordability, making home loans more accessible for aspiring homeowners and first-time buyers.”

 

However, the industry stakeholders also cautioned about the depreciating rupee, the lenders’ ability to pass on the benefits of the rate cut to the end users, and the rising property prices.

 

According to Anarock Research, 2024 saw average housing prices rise by anywhere between 13-30 per cent in the top seven Indian cities. The average prices stood at approximately Rs 8,590 per square foot-- a collective increase of 21 per cent annually.

 

Anuj Puri, chairman of ANAROCK Group, believes that the rate cut may be less effective by rising property prices if inflation remains as high as it is now.

 

“Also, it remains to be seen if banks pass on the full benefit to borrowers in a timely and seamless manner,” he added.

 

Shishir Baijal, chairman and MD, Knight Frank India, said, “Overall, the RBI’s rate cut is a balanced approach to supporting growth while managing inflation and liquidity concerns, though the central bank must remain vigilant about the impact of the depreciating rupee.”

 

The rupee hit a closing low of 87.58 against the United States dollar on Thursday (6 February).

 

Shrinivas Rao, FRICS, CEO of Vestian, said, “It (the rate cut) is likely to buoy the real estate sector with expectations of major banks trimming mortgage rates. However, it is also expected to exert downward pressure on rupee value in international markets, barring foreign investments.”

 

Additionally, the industry leaders are expecting more rate cuts in the upcoming meetings of RBI. Ashish Puravankara, managing director of Puravankara, a Bengaluru-headquartered realtor, said, “With control of inflation, we expect more cuts in the upcoming meetings, further boosting demand, especially in mid-segment housing.”

 

India’s inflation rate stood at 5.22 per cent in December 2024. The RBI has projected an inflation rate of 4.2 per cent for the financial year 2026.