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Realty Sector Urges Interest Rate Cut to Boost Housing Demand

NAREDCO Calls for a 25-30 Basis Points Reduction in Repo Rate

The real estate sector is advocating for a reduction in the repo rate to stimulate housing demand and promote economic growth. The National Real Estate Development Council (NAREDCO) has requested the Reserve Bank of India (RBI) to lower the repo rate by 25-30 basis points in the upcoming monetary policy review.

According to NAREDCO President G Hari Babu, while the real estate market is witnessing strong growth and positive sentiment, a lower repo rate will further accelerate this momentum. A marginal cut would indicate RBI’s supportive stance, benefiting not only the real estate industry but also allied sectors like construction, cement, and steel.

Lower Interest Rates to Encourage Homebuyers and Developers

A reduction in the repo rate will have a dual impact on the real estate market:

  • Boost Homebuyer Sentiment: Lower interest rates translate to cheaper home loans, making property purchases more affordable.
  • Support Developers: Improved liquidity will allow developers to complete ongoing projects faster and launch new developments.

“The affordable housing segment, especially in tier-2 and tier-3 cities, will benefit significantly, aligning with the government’s vision of inclusive growth and urban expansion,” said Hari Babu.

Experts Support Interest Rate Cut for Real Estate Growth

Industry leaders and financial experts have expressed their support for a rate cut, emphasizing its potential to enhance market stability.

Greater Affordability and Consumer Confidence

Shishir Baijal, CMD of Knight Frank India, highlighted that reduced borrowing costs will particularly benefit lower and mid-income groups, reinstating consumer confidence in the housing sector.

Increased Liquidity for Real Estate Projects

Lower interest rates could inject more liquidity into the banking system, making it easier for developers to secure funding for new and ongoing projects.

Driving Consumption-Led Growth

Angad Bedi, CMD of BCD Group, believes that RBI’s monetary policy should align with the finance ministry’s efforts to promote consumption-led growth. Lowering interest rates would encourage spending, thereby boosting the real estate sector and the overall economy.

Affordable Housing Stands to Gain the Most

While premium and luxury housing continue to see strong demand, the affordable housing segment has lagged behind. A repo rate cut could provide much-needed relief by reducing home loan EMIs and making budget-friendly homes more accessible.

Ankur Jalan, CEO of AIF Golden Growth Fund (GGF), pointed out that with economic growth slowing down, this is the right time for RBI to lower interest rates. Combined with the recent income tax exemption on earnings up to ₹12 lakh, a rate cut could significantly boost demand in the housing sector.

RBI’s Monetary Policy and Market Expectations

On February 5, the RBI began discussions on its monetary policy, with speculation of a 25 basis-point rate cut. While inflation remains within the central bank’s comfort zone, concerns over a weakening rupee persist.

A Strategic Move for Economic Growth

A repo rate cut would serve as a catalyst for real estate growth, benefiting homebuyers, developers, and allied industries. By making housing loans more affordable and increasing liquidity, this move could accelerate India’s housing market and contribute significantly to economic stability.

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