Momentum builds despite global headwinds
Shekhar G Patel, President, CREDAI, says lower lending rates will directly enhance home loan affordability, particularly in interest-sensitive categories like mid-income and affordable housing. “Reduced EMIs are expected to significantly improve buyer sentiment and encourage first-time homebuyers to enter the market. Beyond real estate, the rate cut is likely to unlock demand across consumption-driven sectors, revive private investment, and reinforce India’s economic momentum through FY26. A promising monsoon outlook further strengthens this trajectory, boosting rural incomes, easing inflationary pressures, and supporting consumption across semi-urban and rural regions.”
Patel says his association is 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.”
Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE, says the RBI’s decision to cut the repo rate by 50 basis points is a significant move that will have a positive impact on the economy and various sectors, including real estate. “This reduction is expected to lead to lower borrowing costs, increased liquidity, and enhanced consumer spending power. For the real estate sector, this move is particularly beneficial as it will make home loans more affordable, stimulating demand and driving growth. The reduced interest rates will also encourage developers to take on new projects, boosting construction activity and creating employment opportunities.”
ANAROCK data shows that affordable housing sales share plummeted from 38% in 2019 to 18% in 2024, while its supply share dropped from 40% to 16% in the same period. However, a 19% 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,” says Anuj Puri, Chairman of real estate consultancy ANAROCK Group.
The reduction in the Cash Reserve Ratio (CRR) is also expected to 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 have a positive impact on sentiment in the affordable and mid-income segments,” says Puri.
The industry has welcomed the frontloading of policy rate reduction, but given the likely global growth slowdown and trade-related uncertainties, it is expected that the RBI may carry forward the momentum of the present interest rate reduction cycle at least until the policy rate reaches 5%. “Conditions are ripe for maintaining this downward thrust since CPI inflation remains below the RBI’s target of 4%. As private investment keeps improving, the ongoing rate reduction cycle could incentivize private investment and take India’s potential growth closer to 7% in the next few years,” says Vimal Nadar, National Director & Head, Research, Colliers India.
The 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.
