DBT Bureau
Bengaluru, 7 February 2025
- India’s central bank, Reserve Bank of India (RBI) announced a rate cut after 5 years.
- RBI cuts repo rate by 25 basis points (0.25%) to bring it down to 6.25%.
- RBI pegs India’s GDP growth rate at 6.7% in FY26.
- RBI Governor, Sanjay Malhotra on inflation: The MPC noted that inflation has declined and it is expected to moderate in FY26.
- Policy stance of RBI remained neutral.
- Inflation projection for FY26 remained at 4.2% for FY26
- The food inflation is expected to come down in coming months after crop arrival: RBI
- A less restrictive monetary policy is more appropriate at this juncture: RBI Governor.
- RBI to introduce forward contracts in Government securities.
- Comprehensive review of trading and settlement timings across various market segments
- Reduced Repo Rates to Keep Residential Momentum Going: Anuj Puri, Chairman – ANAROCK Group
In terms of the impact on the housing sector of the RBI’s decision to reduce the repo rates by 25 bps, this piggybacks on the recent taxation benefits announced in the Union Budget. As such, it is undeniably a major boost to the homebuyers, particularly for affordable housing buyers. Many first-time homebuyers who had been hesitating to take the plunge are likely to make their move now as home loan rates will reduce – as long as banks pass on the key benefits to buyers.
This dovetails well with recent trends in the housing market, which continues to see strong momentum. Reduced home loan rates can help the overall positive consumer sentiment. Given that housing prices have risen across the top 7 cities in the last one year, this breather is welcome and timely. As per ANAROCK Research, 2024 saw average housing prices rise by anywhere between 13-30% in the top 7 cities, with NCR recording the highest 30% jump. The average prices in top 7 cities collectively stood at approx. INR 7,080 per sq. ft. in 2023-end, while in 2024-end it increased to approx. INR 8,590 per sq. ft. – a collective increase of 21% annually.
Commercial real estate, especially office spaces, can also benefit from lower borrowing costs for businesses, and lower rates also make REITs more appealing since investors look for stable returns in a falling interest rate environment.
That said, the rate cut may be less effective by rising property prices if inflation remains as high as it is now. Also, it remains to be seen if banks pass on the full benefit to borrowers in a timely and seamless manner.
- RBI Governor: India can achieve 7% plus GDP growth rate.
- “At present, we are focussing on growth because inflation is down and will continue to go down,” said Sanjay Malhotra, RBI Governor.
- RBI will provide adequate liquidity to the system: Governor, Malhotra.
- Banks to have new domain name to check cyber fraud: RBI
- RBI to take strict action against misselling: RBI Governor.
