RBI's rate cut will boost mid-segment housing affordability in top cities, say real estate executives

The policy rates massively impact the sale of the real estate infrastructure, as lowering of rates means lower interest rates from banks for the home buyers and cheaper EMIs.

The policy rate cuts have a massive impact on the real estate sector. This effectively lowers the cost of borrowing, making home loan EMIs easier on the pocket and thereby directly improving affordability for buyers.

RBI's MPC, after the meeting today, decided to reduce the policy repo rate under the Liquidity Adjustment Facility by 50 basis points to 5.5 per cent.

This larger-than-expected cut in the repo rate was accompanied by a 100 bps cut in the Cash Reserve Ratio (CRR), now reduced to 3 per cent, aimed at enhancing liquidity by Rs 2.5 lakh crore.

"The cumulative 100 basis point reduction over the last six months is a welcome and strategic move. We are particularly optimistic about its impact on the affordable housing sector, which has been under pressure on both the demand and supply sides. Lower interest rates will increase homebuyer affordability and improve the financial viability of affordable housing projects," said Shekhar G Patel, President of the real estate industry body CREDAI.

"Not only will it make homeownership affordable and boost buyers' sentiments but it will also add new vigour to the economy, which in turn will augur well for both residential and commercial realty," said Manoj Gaur, CMD, Gaurs Group.

Anshul Jain, Chief Executive, India, SEA & APAC Tenant Representation, Cushman & Wakefield, in his analysis, said that RBI has today delivered a boost to consumer/household sentiment with a 50 bps cut, seen as positive for the real estate sector, particularly housing.

"With this, the cumulative cut for this year of 1 per cent is indeed going to help translate into lower EMIs and relatively better affordability, thereby helping the mid-segment housing across top-tier cities," Jain added.

Anuj Puri, Chairman of ANAROCK Group, shared similar views and added, "This can potentially boost demand in the Indian real estate sector, especially in affordable and mid-income segments."

Commenting on the impact of the decision on the luxury segment, Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd, said, "The demand for mid- and premium-segment homes has already been on the rise following previous rate cuts, and this larger reduction will further accelerate interest from both homebuyers and investors."

"This move could spur refinancing activity and strengthen investment interest in branded properties known for their attractive returns, particularly among Grade A developers," said Niranjan Hiranandani, Chairman, NAREDCO & Hiranandani Group.

Umang Jindal, CEO at Homeland Group, said, "More than numbers, it also paints a picture of a growing economy and a confident future."

Real estate sector has an important role to play. As per the government data, the real estate sector contributed around 7 per cent to India's GDP in 2018-19 and its share is expected to grow to around 13 per cent of India's GDP in 2025. (ANI)