Hopes High for Repo Rate Cuts

Millions of Indians burdened by high-interest rates could get much-needed relief in 2025 as experts predict the Reserve Bank of India (RBI) may initiate cuts in the repo rate. If these predictions come true, the housing sector is set to witness a significant boost, improving affordability for prospective homebuyers.

Reports suggest a potential cumulative reduction of 50 basis points in the repo rate over time, which could provide relief to families who have been unable to buy homes due to rising property prices and stable but high interest rates since 2022.

Impact of Rate Cuts on Housing Markets

According to the Home Purchase Affordability Index (HPAI) by JLL:

A reduction in repo rates could enhance housing affordability in most residential markets, excluding Delhi-NCR and Bengaluru.

Home sales, which are expected to touch 310,000 units in 2024, could rise further to 350,000 units by 2025.

Experts Predict Positive Sentiments for Real Estate

Industry analysts believe a reduction in interest rates would not only boost consumer sentiment but also help revive the real estate sector, which has faced sluggish sales in recent months. Alongside rate cuts, rising incomes and softening property prices could further improve homebuying affordability in the coming year.

Challenges and Uncertainty Ahead

Despite the optimism, JLL’s report indicates uncertainty about rate cuts before the end of 2024. However, experts remain confident about a cumulative 50 basis point reduction over the next 12 months. This monetary easing could lower borrowing costs for both homebuyers and developers, potentially leading to increased housing demand.

Housing Affordability Trends

Using 2011 as a base year, data from JLL highlights significant price growth in key cities:

Hyderabad leads with a 132% increase in property prices.

Bengaluru follows with a 116% rise, while Delhi-NCR recorded a 98% increase.

On the income front, Mumbai has seen the highest growth, with a 189% surge, followed by Pune (173%) and Hyderabad (163%). These figures demonstrate evolving homebuying trends and shifting demand across various markets in India.

Government’s Role and Industry’s Expectations

Key government figures, including Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal, have advocated for interest rate cuts to stimulate the housing market. Recently, Goyal emphasized the need for lower rates in the presence of RBI Governor Shaktikanta Das.

However, Das has reiterated that controlling inflation remains the central bank’s primary focus. He hinted that the likelihood of a rate cut during the December Monetary Policy Committee (MPC) meeting is low, leaving stakeholders eagerly awaiting developments in February 2025.

A Ray of Hope for Homebuyers

If the RBI implements rate cuts, it could bring significant relief to homebuyers by making loans more affordable. Additionally, it may stimulate real estate sales, paving the way for sustained growth in the sector. For now, all eyes remain on the upcoming MPC meetings and their decisions on repo rates, which could shape the future of India’s housing market.