Will RBI's Rate Cut Fuel a Real Estate Revival and Credit Growth?

The Reserve Bank of India (RBI) reduced the repo rate by 25 basis points to 6% and changed its policy stance to accommodative from neutral. With easing inflation (CPI dropped to 3.61% in February) and rural consumption beginning to revive, this twin action is being viewed as a bold move to give a boost to economic activity, particularly in real estate, banking, and NBFC sectors.

Real Estate Receives Boost

The interest rate cut is likely to reduce the cost of borrowing for both homebuyers and builders, reducing the cost of home loans and enhancing housing affordability.
NeoLiv Founder & CEO Mohit Malhotra appreciated the move by saying; "Reduced interest rates improve affordability, making home ownership more affordable. This rate cut is likely to increase buyer confidence and propel housing demand."

The first-time homebuyer and mid-income segments will stand to gain the most. Kaushal Agarwal, Chairman of The Guardians Real Estate Advisory, commented: "We expect stronger traction in mid-income and first-time homebuyer segments over the next two quarters."

Developers also look at this as a good sign. Rajat Mehta, Director, ElitePro Infra, also said: "The cut will make home loans and EMIs more affordable. Homebuyers can also opt for floating rate loans for lower-cost housing.

The RBI action is also complemented by its liquidity-enhancing measures — the bank rate and the marginal standing facility (MSF) have been set at 6.25%, and the standing deposit facility (SDF) stands at 5.75%. This should enhance the availability of funds to housing finance companies and stimulate real estate activity.

Also Read: RBI Rate Cut: A Quick Shot For India's Growth Amid Global Slowdown?

Are Banks and NBFCs Poised for Growth?

The rate cut and accommodative stance also represent a very positive change for the banking and NBFC industry, with hopes of better credit flow and reduced cost of capital.
 

SBI Mutual Fund's CIO at Fixed Income Rajeev Radhakrishnan described: "A move to accommodative stance… very clearly opens up the possibility of further rate cuts in this cycle."

The RBI has already provided durable liquidity worth ₹6.5 trillion with the help of initiatives such as CRR reductions, OMOs, and forex swaps, which boosted credit availability within the system.

NBFCs — especially those lending to MSMEs and rural borrowers stand to benefit. Mayur Modi, Co-founder of Moneyboxx Finance, said: “The RBI’s 25 bps cut in rates and a shift in stance to accommodative are welcome moves.

The reduced cost of funds enables more affordable credit offerings.” He added that RBI’s co-lending expansion and efforts on securitising stressed assets will help NBFCs maintain credit quality.

What's Next 

With lower cost of borrowing, sufficient liquidity, and a healthy policy environment, the financial and real estate sectors are poised to spur demand, increase lending, and propel India's economic growth in the face of global headwinds.