RBI Rate Cut to Boost Affordable Real Estate Market: Experts
As the Reserve Bank of India (RBI) gears up for its monetary policy committee (MPC) meeting, industry experts anticipate that a rate cut will significantly boost the affordable housing segment by reducing borrowing costs.
RbiReal EstateAffordable HousingRepo RateMonetary PolicyReal EstateJun 03, 2025
Given the prevailing benign inflation environment and the GDP growth of 6.5 per cent recorded in FY2025, the Reserve Bank is likely to proceed with a 25-bps repo rate cut this Friday (June 6).
“The case for a rate cut is further supported by the revival in the liquidity conditions to a surplus of Rs 3.6 lakh crore, which enhances the effectiveness of monetary transmission. Additionally, the softening of G-sec yields reflects bond market confidence in the RBI’s inflation and liquidity management and strengthens the rationale for easing rates,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
With the anticipated rate cut, the cumulative reduction in the policy rate in this cycle would be 75 bps.
However, the focus must now shift to the pace and breadth of transmission.
“While some commercial banks have begun to lower their MCLR and base rates, the adjustments have been modest. With liquidity conditions stabilising, there is now greater scope for commercial banks to accelerate the pass-through of policy easing to borrowers. This will be key to spurring consumer demand and private investment, ultimately supporting economic growth,” Baijal noted.
The Central Bank is projected to cut the repo rate by another 50 basis points (bps) this fiscal (FY26), after the 50 bps cut until April this year. Bank lending rates have begun easing, which should support domestic demand, according to a latest Crisil note.
Experts said that with EMIs constituting a significant share of monthly income in the affordable category, even a modest reduction in lending rates can influence buying decisions, providing the necessary momentum to support this price-sensitive demand segment.
—IANS
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Frequently Asked Questions
What is the expected repo rate cut by the RBI this week?
The Reserve Bank of India (RBI) is expected to cut the repo rate by 25 basis points (bps) this Friday (June 6).
How does a repo rate cut benefit the real estate market?
A repo rate cut reduces borrowing costs, making loans more affordable. This can significantly boost demand in the real estate market, especially in the affordable housing segment.
What is the current GDP growth rate in India?
The GDP growth rate in India for the fiscal year 2025 (FY2025) is 6.5 per cent.
Why is the transmission of rate cuts to borrowing costs important?
The transmission of rate cuts to borrowing costs is crucial because it ensures that the benefits of lower interest rates reach consumers and businesses, thereby stimulating economic activity and demand.
How do liquidity conditions affect the effectiveness of monetary policy?
Liquidity conditions, such as a surplus of Rs 3.6 lakh crore, enhance the effectiveness of monetary policy by facilitating smoother transmission of rate cuts to borrowing costs, thereby supporting economic growth.
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