The Reserve Bank of India’s decision to reduce repo rates by 25 basis points is set to further fuel the positive momentum in India’s housing market, particularly benefiting affordable housing buyers, said Anuj Puri, Chairman of ANAROCK Group.
“This reduction, coupled with the recent taxation benefits announced in the Union Budget, is a significant boost for homebuyers,” Puri noted. “Lower home loan rates could encourage many first-time homebuyers who were previously hesitant to take the plunge, provided banks pass on the rate cut to customers.”
The housing market has been witnessing strong momentum, bolstered by rising consumer confidence. According to ANAROCK Research, average housing prices across the top seven cities in India saw an annual increase of 21% in 2024. The average price per square foot rose from INR 7,080 at the end of 2023 to INR 8,590 in 2024, with the National Capital Region (NCR) registering the highest jump at 30%.
Puri emphasized that reduced home loan rates would support affordability amid rising property prices, which have increased by 13-30% across major cities. “This rate cut is a timely breather for the sector,” he added.
The decision is also expected to impact the commercial real estate segment, particularly office spaces, by lowering borrowing costs for businesses. Additionally, real estate investment trusts (REITs) could become more attractive as investors seek stable returns in a lower interest rate environment.
However, Puri cautioned that the benefits of the rate cut could be tempered by high inflation and delayed transmission of lower rates by banks. “While the move is positive, its effectiveness depends on how seamlessly banks pass on the benefits to borrowers,” he said.
