RBI's 25bps rate cut may have limited direct impact, more needed to boost housing demand: CREDAI

Realtors' apex body CREDAI on Friday said the RBI's decision to cut the benchmark lending rate by 25 basis points might have a "limited direct impact" and sought a further reduction in the next monetary policy meet for "stronger impetus" to housing demand.

Reduction in repo rate may lead to lowering of interest rates on home loans provided banks decide to pass on the benefits.

Commenting on the monetary policy announcement, CREDAI National President Boman Irani said, "The RBI's decision to reduce the repo rate by 25 basis points to 6.25% supplements recent announcements in the Budget aimed at boosting spending and spurring economic growth."

This supportive monetary policy was "imperative", especially after the recent 50 basis points reduction in Cash Reserve Ratio (CRR), which has already injected significant liquidity into the banking system, he added.

"While the current cut may have a limited direct impact, we anticipate that a further rate cut in the next MPC meeting will provide stronger impetus to overall demand, accelerating housing sales, particularly in the mid-income and affordable segments," Irani observed.

According to data analytics firm PropEquity, housing sales across nine major cities dropped 9% to nearly 4.71 lakh units in 2024 on lower demand as well as a fall in fresh supply. Sales were driven mainly by premium, luxury and ultra-luxury segments.

Realtors' body Naredco Chairman Niranjan Hiranandani 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."

The real estate industry has been seeking a reduction in interest rates on home loans to boost demand for affordable and mid-income housing.

As inflation continues to remain a notch higher than the medium-term target, CREDAI president Irani said the central bank has its task cut out: contain inflation, inject liquidity into the banking system and cut repo rate in the coming quarter too.

The RBI under new Governor Sanjay Malhotra on Friday cut the interest rate for the first time in nearly five years as the central bank pivoted the policy stance to support a shuttering economy.

The 25 basis points rate cut to 6.25% comes after the last rate reduction in May 2020.

The last revision of rates happened in February 2023 when the policy rate was hiked by 25 basis points to 6.5%.