The unanimous decision was made during the bi-monthly Monetary Policy Committee meeting chaired by RBI Governor Sanjay Malhotra
A19 per cent dip in unsold stock hints at sustained demand led by end-users. Representational Pic
The Reserve Bank of India (RBI) has reduced its key lending rate, known as the repo rate, by 50 basis points to 5.5 per cent. The unanimous decision was made during the bi-monthly Monetary Policy Committee meeting chaired by RBI Governor Sanjay Malhotra.
This move brings relief to borrowers, particularly home buyers, as it could lead to lower EMIs on long-term loans. Although the global economic outlook remains uncertain and trade forecasts have been downgraded, the Governor emphasised that India is poised to maintain its high growth trajectory.
"India's resilience is supported by the robust balance sheets of five key sectors. Our economy presents significant opportunities for both domestic and international investors. We are already on a strong growth path and aim to accelerate further," said Governor Malhotra.
Industry experts react:
"ANAROCK data shows that affordable housing sales share plummeted from 38 per cent in 2019 to 18 per cent in 2024, while its supply share dropped from 40 per cent to 16 per cent in the same period. 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. 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 again positively impact sentiment in the affordable and mid-income segments. Nevertheless, these positive impacts may be partially dampened by the ongoing global trade tensions and tariffs imposed by the Trump administration, which have increased the cost of imported construction materials and created economic uncertainty. We may see some impact on the demand for luxury and commercial projects, and developer margins may be squeezed. While the rate cut is a strong positive for real estate, especially for affordable housing, much now depends on how well it can adapt to higher input costs and ongoing global uncertainties. Continued policy support and a shift to domestic sources."
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