RBI rate cut to ease demand-supply gap in affordable housing, boost sector

The NAREDCO president is also hopeful that the commercial real estate segment will benefit as well, as lower borrowing costs will make it more attractive for businesses to invest in office spaces and other commercial properties

New Delhi: The 25 basis points repo rate cut to 6.25%, the first in nearly five years, announced by the Reserve Bank of India (RBI) on Friday morning, has the potential to alleviate the demand-supply gap in affordable housing at a time when the sector is experiencing unprecedented premiumisation.

The 25 basis points repo rate cut to 6.25%, the first in nearly five years, was announced by the Reserve Bank of India (RBI) on Friday morning (Bloomberg)

“This move will have a positive impact on the affordable housing segment, which is a priority for the government. With lower interest rates, more homebuyers will be able to afford homes, leading to increased sales and improved liquidity for developers,” said G Hari Babu, national president of the National Real Estate Development Council (NAREDCO).

“This rate cut will have a positive impact on the overall sector, making home loans more affordable and increasing demand for housing. This will in turn encourage developers to launch more affordable housing projects,” he added.

The NAREDCO president is also hopeful that the commercial real estate segment will benefit as well, as lower borrowing costs will make it more attractive for businesses to invest in office spaces and other commercial properties.

“RBI’s move will 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,” said Anshuman Magazine, chairman and CEO of Global Commercial Real Estate Services (CBRE).

Amit Goyal, managing director of India Sotheby’s International Realty, said, “The RBI’s move coupled with income tax breaks for incomes up to ₹12 lakh in the Union budget will widen the path to homeownership for many aspiring buyers.”

An expert, requesting anonymity, however, said the majority of Indian urban poor families cannot meet the eligibility criteria for institutional credit, meaning this change would not make any necessary difference to them, at least directly.

While there is a huge shortage of low-income housing, sales of high-end properties have soared in the past year.

In December 2024, a shortfall of 10.1 million affordable housing units was estimated by a Confederation of Indian Industry and Knight Frank study. Luxury homes, priced at ₹4 crore and above, rose by more than 50% across the top seven cities in India, according to CBRE.

Officials from the union ministry of housing and urban affairs and HUDCO did not respond to requests for comment.