Another RBI rate cut to spark affordable real estate momentum — Experts
As the Reserve Bank of India (RBI) prepares for its monetary policy committee (MPC) meeting this week, industry experts said on Tuesday
- NEW DELHI — As the Reserve Bank of India (RBI) prepares for its monetary
policy committee (MPC) meeting this week, industry experts said on Tuesday that
the transmission of rate cuts into lower borrowing costs is vital to sustain
residential real estate demand — particularly in the affordable housing
segment, which is sensitive to interest rate movements.
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- 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).
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- “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.
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- With the anticipated rate cut, the cumulative reduction
in the policy rate in this cycle would be 75 bps.
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- However, the focus must now shift to the pace and breadth
of transmission.
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- “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.
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- 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.
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- Experts said that with EMIs constituting a significant
share of monthly income in affordable category, even a modest reduction in
lending rates can influence buying decisions, providing the necessary momentum
to support this price-sensitive demand segment.
