Real estate sector cheers RBI's rate cut, says the move will drive overall growth

In what can be called a double bonanza for the common man after much-anticipated income tax relief, the Reserve Bank of India (RBI), led by newly appointed Sanjay Malhotra as governor, has finally hit the brakes on borrowing costs as the Monetary Policy Committee (MPC) slashed the key lending repo rate by 25 basis points to 6.25%, a first in the past five years. The repo rate cut has brought cheers to the real estate sector, with the lower lending rates expected to lead to lower home loan EMIs for homebuyers and encourage prospective buyers to buy homes. The move is expected to lead to a stronger demand, improved cash flows, and greater investment activity, reinforcing real estate’s role as a key driver of economic growth.

Amid the development, the major realty stocks have shown mixed reactions, with some companies like Lodha, Phoenix, Oberoi Realty and Signature trading higher up to 3.08%. However, some of the major companies in the sector, including DLF, Prestige, Brigade, Godrej, and Sobha are trading in the red. The BSE realty index is trading 0.67% up at ₹7,177.71 on the BSE.

Other rate-sensitive sectors like auto and banking also showed mixed reactions as the cut was widely in line with Street expectations, a logical progression following the shift to a neutral policy stance in October 2024 and the Cash Reserve Ratio (CRR) reduction in December 2024.

'Strong tailwinds for Sector': Industry Reacts to RBI's Rate Cut

Sanjay Dutt, MD and CEO at TATA Realty said the reduction of 25 basis points in the repo rate will immensely benefit the "affordable housing segment", especially in Tier 2 and 3 cities, aligning with the government's vision of inclusive growth and urban development. "Coupled with the government’s progressive budget measures, including tax benefits and infrastructure investments, this will further accelerate consumption-led growth for the industry."

The relief from the RBI is also expected to further enhance liquidity in the banking system, enabling developers to manage raw materials while also gaining easy access to financing for their ongoing projects and plan new ventures.

The housing demand had begun to stabilise after witnessing record sales in the last 2-3 years. The rate cut will further boost the sentiments of homebuyers. Apart from income tax relief, other Budget initiatives like the Urban Challenge Fund and SWAMIH II fund will play a crucial role in spurring the demand. "The rate cut along with the recent budgetary announcements related to the creation of Urban Challenge Fund and tax reliefs under the new regime, are likely to stimulate urban growth and enhance domestic consumption. Higher disposable income and lowering of financing costs stand to benefit homebuyers and developers alike," says Vimal Nadar, Head of Research at Colliers India.

Piyush Bothra, Co-Founder and CFO of real estate platform Square Yards, describes the RBI move, along with other government measures, as "Achhe Din (good days)" for the thriving sector. "Combined with recent tax reforms, stable inflation projections, and sustained economic growth, it will act as strong tailwinds for the residential real estate sector."

Prominent developers are also cheerful about the RBI move. Santosh Agarwal, CFO & Executive Director at Alphacorp says the latest relief will stimulate both residential and commercial investments, as businesses gain easier access to financing for expansion. "From a financial perspective, a stable and supportive interest rate environment strengthens market confidence, ensuring sustained momentum in the sector."

Boman Irani, Chairman and MD of Rustomjee Group, says the positive ripple effect will energise allied industries like construction, steel, and cement, contributing to broader economic growth. "This step aligns perfectly with the government’s vision of inclusive development and is highly appreciated by all stakeholders in the sector,” he adds.

According to Nitin Bavisi, CFO, Ajmera Realty & Infra India, with the RBI's latest decision to initiate its first rate cut after five years, the stage is set for a lower rate environment. While the rate cut signals a shift, the policy stance remains neutral, leaving room for further action based on evolving economic conditions. "This reduction, combined with tax slab cuts, enhanced TDS limits on rent, and home loan interest deduction has enhanced affordability and increased disposable income, particularly benefiting the housing sector."

Deepak Ramaraju, Senior Fund Manager at Shriram AMC, hails the move, saying it has been timed appropriately. India’s GDP is expected to grow from 6.3% to 6.6% for FY 26, and the monetary policy committee expects inflation to moderate to 4.26% for FY 26. As the government cut taxes for the middle class and now the RBI is bringing down the cost of borrowing, it augurs well for strong consumption-led growth."

Manish Jaiswal, Group COO, Eldeco Group says lower borrowing costs will encourage homebuyers and investors, driving growth across residential and commercial segments. "This move aligns with industry expectations and will further strengthen market sentiment. As affordability improves, we anticipate increased sales momentum and higher participation from end-users and investors alike. The real estate sector remains optimistic about sustained growth, backed by policy support and financial stability."

'Much-awaited Move': Real Estate Consultancies

Anshuman Magazine, Chairman & CEO for India at real estate consultancy CBRE says the much-awaited move by the RBI is poised to significantly boost the housing segment by stimulating demand, particularly among first-time homebuyers. "It also offers an opportunity for developers to launch new projects, as this decision will also bring relief from cost pressures on construction costs. Overall, the rate cut will pave the way for expanded opportunities for buyers as well as developers,” says Magazine.

Shishir Baijal, Chairman and Managing Director of Knight Frank India says the government's recent budget has played a crucial role in managing inflation by focusing on fiscal discipline and targeted spending, which also enabled the RBI to manoeuvre a rate cut. "We hope interest rate cuts will be passed on to consumers and the home loan rates become more attractive which combined with the earlier announced tax incentives spur residential demand across the different price brackets, but especially in the below ₹50 lakh category, which has seen a continued weakening of demand."

Anshul Jain, India Chief Executive at Cushman & Wakefield, says with CPI inflation easing and Q2-FY25 GDP growth slowing, this was an opportune moment for the RBI to initiate rate cuts. "This move is going to help revive growth in consumption, and it will also help reduce borrowing cost for the interest rate-sensitive housing sector, particularly in the affordable and mid-income category homes."

The lower repo rate -- the interest rate at which RBI lends money to banks -- often leads to increased discretionary spending. "It lightens EMIs, boosts investments, and signals a pro-growth stance. Coupled with income tax breaks for incomes up to ₹12 lakh in the Union Budget, it widens the path to homeownership for many aspiring buyers," says Amit Goyal, Managing Direct at India Sotheby's International Realty. Apart from the real estate, the rate could lead to a boost to automotive and discretionary segments such as jewellery, durables and white goods. Travel and tourism, quick service restaurants could also see the demand remaining buoyant.