Expert Opinions Suggest Additional RBI Interest Rate reduction Triggers Growth in Budget-friendly Housing Market
Revised Article:
In the heart of India, New Delhi, excitement is brewing as the Reserve Bank of India (RBI) gears up for its monetary policy committee (MPC) meeting this week. Industry pundits chimed in on Tuesday, stressing the importance of rate cuts translating into lower borrowing costs to sustain momentum in the residential real estate sector, specifically the affordable housing segment – vulnerable to interest rate fluctuations.
With a benign inflation scene and the impressive 6.5% GDP growth recorded in FY2025, the RBI is poised for a 25-bps repo rate cut this coming Friday (June 6).
Shishir Baijal, Chairman and Managing Director of Knight Frank India, emphasizes, "The case for a rate cut is solidified by the revival of surplus liquidity (Rs 3.6 lakh crore) and the softening of G-sec yields, telegraphing bond market confidence in the RBI's inflation and liquidity management. This strengthens the argument for monetary accommodation."
This rate cut would mark a 75-bps reduction in this cycle. However, the spotlight has now shifted to the speed and extent of transmission.
Baijal further elaborates, "Though some commercial banks have taken initial steps to lower their MCLR and base rates, the adjustments have been incremental. With liquidity stabilizing, there's scope for commercial banks to quicken the pass-through of policy easing, essential for jumpstarting consumer demand and private investment, which are key players in the growth equation."
Analysts predict another 50 basis points repo rate cut by the Central Bank during FY26, following the previous 50 bps reduction prior to April 2025. According to a recent Crisil note, this banking rate relaxation should bolster domestic demand.
Experts argue that as EMIs constitute a substantial share of monthly income in the affordable category, even minor reductions in lending rates could sway purchasing decisions, fostering momentum for this price-sensitive market segment.
The expected rate cut could have far-reaching impacts, stimulating economic growth, and making borrowing more accessible for consumers and businesses. This could lead to increased spending and investment, paving the way for economic expansion, particularly during testing times. Additionally, by keeping inflation under control, the RBI can implement accommodative monetary policies without the fear of unmanageable price hikes. Lastly, a substantial rate cut could rejuvenate the credit cycle, prompting more lending and borrowing across various sectors, beyond mere housing.
Financing opportunities in the real-estate sector, particularly affordable housing, could potentially expand due to the expected rate cut by the Reserve Bank of India (RBI). This is because lower borrowing costs, resulting from the rate cut, could entice more consumers to invest in property, thereby fostering growth in the real-estate market.
The anticipated rate cut could also stimulate private investments across various sectors, not just housing, as easier access to credit might encourage businesses to invest and boost economic expansion, especially during challenging times.
