Repo rate cut by RBI likely to support growth revival in affordable housing segment

Bengaluru, 6 June

Affordable housing is likely to get much needed boost from the repo rate cut by Reserve Bank of India on Friday.

According to experts, affordable and mid-income housing segments have seen a slump since last year owing to high interest rate and slowdown in urban consumption.

The repo rate cut by 50 basis points by RBI will definitely lead to lowering of housing loan rates, prompting more people to buy homes.

“As widely anticipated, the RBI decided to reduce the repo rates by 50 bps to the backdrop of moderating inflation in the country. This is the third consecutive time this year that the apex bank has cut the repo rates. 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,” Anuj Puri, Chairman of real estate consultancy firm, ANAROCK Group said.

According to the consultancy firm, affordable housing faced the sharpest pandemic fallout, with sales and new launches shrinking in the top seven cities. Share of affordable housing sales has plummeted from 38 per cent in 2019 to 18 per cent in 2024.

“However, a 19 per cent dip in unsold stock hints at sustained demand led by end-users. It will also lower developers’ borrowing costs. It is sincerely hoped that banks pass on the benefits of this move seamlessly to borrowers,” Puri added.

Meanwhile, cost of borrowing for real estate developers is likely to go down in the coming quarters on the back of planned cut in CRR (cash reserve ratio) by 100 basis points by the RBI in four tranches starting September.

“The reduction in the Cash Reserve Ratio (CRR) will help boost liquidity in the banking system, which means that banks have more funds to lend. Developers will be able to access more capital for their projects, and this can positively impact project completion timelines. It also gives banks the option to reduce home loan interest rates, which will have again positively impact sentiment in the affordable and mid-income segments,” Puri said.