RBI MPC: CREDAI Says Repo Rate Cut Might Have 'Limited Direct Impact'; Here's Why

Irani added that this supportive monetary policy was "imperative," particularly following the recent 50 basis point reduction in the CRR, which has already infused significant liquidity

The Confederation of Real Estate Developers' Associations of India (CREDAI) on Friday stated that the RBI's decision to cut the benchmark lending rate by 25 basis points might have a "limited direct impact." The body urged for further rate cuts in the next monetary policy meeting to provide a "stronger impetus" to housing demand. CREDAI noted that while a reduction in the repo rate could potentially lower home loan interest rates, the actual impact would depend on whether banks pass on the benefits to consumers.

Commenting on the monetary policy announcement, CREDAI National President Boman Irani said, "The RBI's decision to reduce the repo rate by 25 basis points to 6.25 per cent supplements recent announcements in the Budget aimed at boosting spending and spur economic growth." 

He added that this supportive monetary policy was "imperative," particularly following the recent 50 basis point reduction in the Cash Reserve Ratio (CRR), which has already infused significant liquidity into the banking system.

"While the current cut may have a limited direct impact, we anticipate that a further rate cut in the next MPC meeting will provide stronger impetus to overall demand, accelerating housing sales, particularly in the mid-income and affordable segments," Irani noted.

Data analytics firm PropEquity reported a 9 per cent decline in housing sales across nine major cities, with sales of nearly 4.71 lakh units in 2024. This drop was attributed to reduced demand and a decrease in fresh supply. Sales were primarily driven by the premium, luxury, and ultra-luxury segments.

Naredco Chairman Niranjan Hiranandani stated, "Combined with the tax benefits announced in the FY26 Budget for the middle class, this policy change will boost sales velocity. Thus, lowered interest rates will further nudge homebuyers to buy an ownership home with an upgraded lifestyle." The real estate sector has been advocating for reduced home loan interest rates to stimulate demand for affordable and mid-income housing.

As inflation remains above the medium-term target, CREDAI President Irani stressed that the central bank faces a critical task—managing inflation, injecting liquidity into the banking system, and implementing further repo rate cuts in the upcoming quarter.

Under the leadership of new Governor Sanjay Malhotra, the RBI on Friday reduced interest rates for the first time in nearly five years, shifting its policy stance to support a slowing economy. The 25 basis points cut to 6.25 per cent marks the first rate reduction since May 2020. The last rate adjustment occurred in February 2023 when the policy rate was raised by 25 basis points to 6.5 per cent.