Real Estate Sector Awaits RBI Rate Cut for Boost
The real estate sector is poised for a significant boost as investors and developers alike anticipate a potential 25bps cut in the repo rate by the Reserve Bank of India (RBI). This move is expected to alleviate the financial burden on homebuyers and developers, thereby stimulating demand in the market.
Real EstateRbiRepo RateHome LoansInvestmentReal Estate NewsMay 30, 2025
Sanjeevini Group's founder also highlighted the benefits for developers. Reduced interest rates will lower financing expenses, improving project viability and making working capital cheaper. This could lead to more robust and sustainable development projects.
Mr. Garvit Tiwari, Director & Co-Founder of InfraMantra, a Gurugram-based property consulting firm, shares a similar view. The RBI has initiated two interest rate cuts in 2025, driven by record-low inflation and stable economic growth. Another 25-bps cut is anticipated, as the central bank aims to stimulate growth by making lending more affordable for both businesses and consumers. The real estate market has seen some caution, with three consecutive quarters of sub-1 lakh unit launches in the top 9 cities and a 19% decline in sales in Q1. A cut in interest rates could spur housing demand and attract new entrants to the market.
Mr. Ankur Jalan, CEO of Golden Growth Fund (GGF), a category II Real Estate-focused Alternative Investment Fund (AIF), points out a shift in investor behavior. Interest on fixed deposits by banks has been declining due to the RBI's repo rate cuts, making traditional investment options less attractive. Investors are drifting from the stock market and traditional real estate investments due to rising volatility and property prices. In this scenario, alternative investments like AIFs, which are regulated by SEBI, offer diversification across properties and geographies, professional management, relatively smaller investment requirements, and tax advantages. These factors make AIFs an attractive option for those looking to earn good returns while maintaining a real estate portfolio.
The real estate sector's outlook remains positive, with the potential for a repo rate cut to catalyze growth and investment. Developers and homebuyers alike are hopeful that the RBI's monetary policy will provide the necessary impetus to drive the market forward.
Frequently Asked Questions
What is the current home loan interest rate?
Home loan interest rates have dropped below 8% in some banks, thanks to the recent repo rate cuts by the RBI.
Why is the RBI expected to cut the repo rate again?
The RBI is expected to cut the repo rate to stimulate economic growth by making lending more affordable for businesses and consumers, especially given the record-low inflation and stable economic growth.
How will a cut in the repo rate benefit homebuyers?
A cut in the repo rate will reduce the interest rates on home loans, leading to lower EMIs for existing homebuyers and making home purchases more affordable for potential buyers.
What is the impact of lower interest rates on real estate developers?
Lower interest rates will reduce financing expenses for developers, improving project viability and making working capital cheaper, which can lead to more robust and sustainable development projects.
What are AIFs and how are they beneficial for real estate investors?
AIFs (Alternative Investment Funds) are regulated by SEBI and offer diversification across properties and geographies, professional management, relatively smaller investment requirements, and tax advantages, making them an attractive option for investors looking for good returns in real estate.
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