The Reserve Bank of India’s 25 bps rate cut, coupled with recent taxation benefits announced in the Union Budget, offers significant relief to homebuyers, particularly in the affordable housing segment, according to Anuj Puri, Chairman of ANAROCK Group. He emphasized that first-time homebuyers are likely to enter the market now that home loan rates are set to decline—assuming banks pass on the benefits.
Impact on Housing Sector
This policy decision complements the ongoing housing market momentum, which has seen robust growth. Puri highlighted that housing prices across the top 7 cities rose by 13-30% in 2024, with the National Capital Region (NCR) witnessing the highest annual growth of 30%. The average housing prices in these cities rose from INR 7,080 per sq. ft. in 2023 to INR 8,590 per sq. ft. by the end of 2024, representing a 21% collective increase.
Commercial Real Estate and REITs
Commercial real estate, especially office spaces, stands to gain from lower borrowing costs, which could support business expansion. Additionally, REITs (Real Estate Investment Trusts) are expected to become more attractive as investors seek stable returns in a low-interest environment.
Challenges
Puri noted that rising property prices and persistent inflation could offset some of the benefits of the rate cut. He also stressed that banks need to pass on the full benefit of the rate cut in a timely manner to ensure widespread impact. Without this, the housing market may not realize the full potential of this policy move.
In summary, the housing market is well-positioned for further growth, but effective implementation and inflation control remain key factors to monitor.
