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Real estate bodies CREDAI and NAREDCO have urged the Reserve Bank of India to reduce the repo rate in its upcoming policy to stimulate residential demand, particularly in the affordable housing segment. They said banks must pass on earlier cuts to both new and existing borrowers. The RBI had kept the repo rate unchanged at 5.5 per cent this week, following a cumulative 100-basis-point reduction since February. The industry groups added that sales in the top seven cities have slowed due to price hikes and a higher base effect.
The Reserve Bank of India kept the key repo rate unchanged at 5.5 per cent this week, maintaining a cautious approach as it awaited clarity on the effect of earlier rate cuts, recent tax adjustments, and global factors such as U.S. tariffs. Since February, the repo rate has already been lowered by 100 basis points. Despite this, both CREDAI and NAREDCO pressed the need for further rate cuts in the next policy to encourage home purchases, especially in the affordable housing category, which remains most sensitive to borrowing costs. Advertisement
CREDAI's national president Shekhar Patel noted that the decision to hold the rate steady offers stability in uncertain times. He explained that predictable borrowing costs allow homebuyers to plan long-term and give developers better visibility for financing and projects. Patel also pointed out that the recent rationalisation of GST rates has lifted sentiment across industries and improved demand. He added that while markets had expected a 25-basis-point cut in the latest review, the sector remains hopeful that the RBI will deliver a total reduction of 50 basis points in two stages during this fiscal year. He stressed that the benefits of these cuts must reach both new and existing home loan borrowers to ensure that reforms translate into consistent housing demand through the festive season.
NAREDCO's national president G Hari Babu said that holding the repo rate at 5.5 per cent, in line with a projected real GDP growth of 6.8 per cent, is understandable. However, he urged the central bank to consider lowering the repo rate further in its next meeting. According to him, reduced borrowing costs would restore homebuyers' confidence, lift housing demand, and particularly support affordable housing. He also mentioned that allied industries such as steel, cement, electricals, piping, and interiors would benefit from an upswing in real estate activity if interest rates come down.
Both CREDAI and NAREDCO highlighted that housing sales have slowed in the first nine months of 2025 compared to the same period last year across the top seven cities. The fall was attributed to the higher base of the previous year and the sharp increase in residential property prices in primary markets. Industry reports also point to a decline of over 20 per cent in sales across these cities during the same period, with affordability pressures emerging as a key challenge. At the same time, rising home prices-expected to increase by more than 6 per cent this year and possibly 7 per cent next year?may further test demand, particularly in mid-income and affordable categories.
CREDAI and NAREDCO, which together represent more than 15,000 real estate developers, underlined that the sector's momentum is directly tied to policy support and interest rate decisions. Their appeal reflects an urgent call for measures that can stabilize the market and encourage buyers at a time when affordability has become a growing concern.
Source PTI
5th Jun, 2025
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