The Reserve Bank of India’s (RBI’s) decision to reduce the repo rate by 25 basis points to 6 per cent has brought optimism to Mumbai’s real estate market. This marks the second consecutive rate cut in recent months, following a similar 25 bps reduction in February, bringing the rate down from 6.50 per cent to 6.25 per cent earlier.
With rates currently at their lowest since 2022, home loan consumers in Mumbai, one of India’s priciest housing markets, are likely to gain through reduced EMIs and better loan eligibility. Banks are set to cut their lending rates, which will have a direct impact on monthly outgo for homebuyers.
For example, a Rs 50 lakh home loan for 25 years at a rate of interest of 8.25 percent as compared to 8.75 percent would reduce the EMI by around Rs 1,600, helping borrowers save about Rs 20,000 every year.
Industry experts indicate the decision will especially benefit the mid-income and first-time buyer segments. “The RBI decision…comes as a welcome move for the real estate sector. A lower interest rate environment generally improves home loan affordability, which is likely to boost buyer sentiment, especially in a price-sensitive market like Mumbai,” Kaushal Agarwal, chairman, The Guardians Real Estate Advisory, said.
Developers would also gain from lower finance costs, which would, in turn, trickle down into more affordable housing prices. Nitin Bavisi, CFO, Ajmera Realty and Infra India Ltd, noted, “The central bank has provided relief on the rate front for the second consecutive time. The rate cut is complemented well by the change in policy stance from neutral to accommodative. The change in stance indicates the readiness of the central bank to act as per the prevailing situation.”
While experts pointed out that the shift in stance shows the willingness of the central bank to act according to the situation, other accommodative steps, including securitisation of stressed assets, extensions of co-lending, and stable inflation outlook, are likely to fuel credit availability and housing demand.
Together with the tax-saving incentives announced in the Union Budget earlier this year, the latest policy move is being seen as a timely boost for Mumbai’s housing sector, making homeownership a more realistic goal for many Mumbaikars.