The Reserve Bank of India’s ongoing Monetary Policy Committee (MPC) meeting has drawn intense attention from policymakers, investors, and the real estate sector alike. Speculation about a potential repo rate cut of 25 to 50 basis points has fueled optimism, as stakeholders hope for measures that could stimulate economic growth, make homeownership more accessible, and address inflationary pressures strategically.

While RBI has long relied on high interest rates to curb inflation, experts argue that this approach has limited impact on food inflation, which is more influenced by supply-side constraints than demand dynamics. A rate cut would align monetary policy with India’s broader economic needs, enhancing affordability in the real estate sector and fostering sustainable growth.

The real estate sector, already buoyed by strong housing demand, low non-performing assets (NPAs), and record property registrations, stands to gain significantly. A reduction in interest rates would lower home loan costs, invigorate demand in affordable housing, particularly in tier 2 and tier 3 cities, and catalyze investments in both residential and commercial developments.

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Beyond real estate, the ripple effects of a repo rate cut could energize allied industries such as construction, cement, and steel, creating jobs and spurring economic activity. As the MPC deliberates, the outcome of this meeting is poised to set the tone for India’s economic trajectory and the future of its booming real estate market.

Dr Niranjan Hiranandani, Chairman, NAREDCO, says the anticipated repo rate cut by 0.50 bps by the RBI on December 6 monetary policy will be a critical decision to further stimulate India’s economic growth.

“The RBI’s assertion that high interest rates curb food inflation is a flawed understanding of the underlying factors driving food price increases. While monetary policy may influence demand-side pressures, it has a limited impact on supply-side constraints. In reality, supply-side constraints influence food inflation more than interest rate fluctuations. As a result, RBI can afford to lower interest rates to foster sustainable GDP growth and to effectively manage the food inflationary pressure through supply-side solutions,” he says.

A reduction in interest rates will make home loans more affordable, thereby boosting demand in the real estate sector, particularly in the affordable housing segment. This positive move, coupled with the prevailing macroeconomic conditions of tamed inflation, stable crude prices, and a strong domestic economy, is poised to further invigorate the real estate sector.

“The Indian real estate sector is already experiencing robust momentum, driven by factors such as increased exposure of banks and FIIs to retail home loans, record-high property registrations, and historically low NPAs. A rate cut will further amplify this positive trend, making homeownership more accessible for a larger segment of the population. This timely policy intervention will not only benefit the real estate sector but also contribute to overall economic growth, job creation, and social upliftment,” adds Hiranandani.

G Hari Babu, National President, NAREDCO, says while the realty sector is demonstrating robust growth and positive sentiment, a stable or marginally-reduced repo rate would further strengthen its trajectory.

“A reduction of 25 to 30 basis points could signal a supportive stance by the RBI, not only energising the real estate market but also benefiting allied industries such as construction, cement, and steel. This would act as a psychological and financial boost for developers and homebuyers alike, encouraging investments and making home loans more affordable. The affordable housing segment, particularly in tier 2 and 3 cities, stands to gain immensely, aligning with the government’s vision of inclusive growth and urban development. Such a move would also enhance liquidity, enabling developers to expedite ongoing projects and plan new ventures,” he adds.

Siddharth Maurya, Founder & MD of Vibhavangal Anukulakara Pvt Ltd, says, “The MPC meeting holds significant relevance for both retail investors and household financial management. With current home loan interest rates ranging from 8.5% to 9.5%, a slight reduction of 25 basis points could result in substantial savings for middle-class borrowers. Investors should pay close attention to the policy announcement, as it will influence adjustments in fixed deposit and mutual fund strategies, as well as assist in the development of investment portfolios. The committee’s stance on inflation and growth will directly affect personal investments and household financial decisions in the upcoming quarter.”

“The heightened anticipation surrounding the December RBI MPC meeting presents a timely opportunity for the real estate sector. With housing sales returning to pre-COVID levels and infrastructure investments on the rise, we are optimistic about further catalysts for the sector’s recovery. A significant reduction in borrowing costs, whether through a rate hold or a slight decrease, would enhance developers’ confidence, lower borrowing expenses, and initiate a new wave of investments in both residential and commercial properties across major urban areas,” says Anurag Goel, Director, Goel Ganga Developments.

LC Mittal, Director, Motia Group, says, “This MPC meeting is particularly crucial for institutional real estate investors. The monetary policy decisions made by the committee will have a profound impact on commercial real estate values, the performance of Real Estate Investment Trusts (REITs), and the overall liquidity within the sector. With current yields on commercial properties hovering around 7-8%, any policy signals aimed at improving the financial landscape could attract significant foreign institutional and domestic investments into Indian real estate infrastructure.”

Aman Gupta, Director, RPS Group, says in light of the current circumstances, the MPC meeting holds significant importance for the residential real estate sector. “With a sustained demand for housing loans and a rapid expansion in the affordable housing market, we are keenly observing for policy indications that could influence mortgage and construction loan interest rates. Specifically, a reduction in borrowing costs could revitalize housing demand in the mid-segment, particularly in the rapidly developing tier-2 and tier-3 cities.”

Manoj Goyal, Director, Forteasia Realty Pvt Ltd, says, “The current prices of construction materials and lending rates have created challenges for developers, and we anticipate policy guidance that may alleviate these financial pressures. Achieving a balance between sustaining liquidity and adjusting rates could significantly benefit large-scale infrastructure and residential development initiatives across various cities in the nation.”