C SHIVAKUMAR @ CHENNAI
Ganpat Singh Meena has spent nearly a decade renting in Chennai. Now, with interest rates nudging lower, the 40-year-old central government employee believes the moment has come to make the leap from tenant to homeowner. “I’m looking for a 2BHK or 3BHK within 5km of Anna Nagar,” says Meena, who is prepared to pay an EMI of ₹45,000—almost double the ₹25,000 he currently pays in rent.
Meena is not alone. For a growing cohort of aspiring homeowners, particularly in urban India’s mid-income segments, the Reserve Bank of India’s recent 25-basis-point cut to the repo rate is being seen as a cue to act. In a market where home affordability is tightly linked to the cost of borrowing, even modest shifts in rates can recalibrate purchasing power.
“The rate reduction is a welcome development for the residential real estate market,” says Anshul Jain, India CEO at Cushman & Wakefield. “It will boost sentiment among mid-segment homebuyers, who constitute the bulk of the housing demand.”
Though incremental, the cut signals the RBI’s intent to maintain a pro-growth bias while keeping inflationary risks in check. For lenders, it reduces the cost of capital. For borrowers, it lowers equated monthly instalments (EMIs)—a direct incentive to take on or expand home loans. For developers, especially those battling input cost inflation and regulatory pressures, the move offers breathing room and potential demand-side traction.
In cities like Chennai, where demand remains robust but affordability remains tight, the impact could be meaningful. A ₹50 lakh home loan over 20 years, for instance, would see its monthly EMI fall from ₹44,986 to ₹43,391 if the interest rate drops from 9% to 8.5%. That ₹1,600 monthly saving aggregates to over ₹3.8 lakh over the life of the loan—a substantial gain in a value-conscious market.
Banks are already responding. Tamilnad Mercantile Bank CEO S. Nair described the rate adjustment as “a significant opportunity” for first-time buyers. “Lower EMIs make home ownership more attainable for young professionals and families with moderate incomes,” he said. “For a ₹25 lakh loan over 20 years, borrowers could save nearly ₹1 lakh in total payments.” Nair added that existing borrowers with floating-rate loans should contact their banks to understand how and when the changes would affect their EMIs.
From the supply side, developers sense an opening. “Reduced borrowing costs for developers will also help projects run more smoothly and may even speed up new construction,” said Ashish Bhutani, CEO of Bhutani Infra. He added that the rate cut arrives at a time when broader global factors could also steer capital into Indian property.
“Trade shifts like the United States’ 26% tariff on Indian goods could prompt NRIs to re-evaluate their investment strategies,” Bhutani said. “NRI investments have already surged in the luxury and commercial real estate segments. These tariffs may accelerate that trend, with real estate offering a stable and potentially rewarding asset class back home.”
Yet, the impact of the RBI’s move will not be uniform. Borrowers on loans linked to the external benchmark (such as the repo rate) may benefit within weeks, while those tied to the older MCLR framework may experience a lag as banks adjust internal rates—a process often criticized for its sluggishness.
Economists also caution that the central bank’s action should not be mistaken for the beginning of an aggressive easing cycle. Inflation remains sticky, and with global economic signals still mixed, the RBI is expected to proceed cautiously. Nevertheless, for a sector that has endured a decade of shocks—demonetisation, GST rollouts, the pandemic, and rising input costs—any directional support is welcome.
For Meena, the calculus has shifted. “It’s a good time,” he says. “It feels like the balance is finally shifting in our favour.” And for India’s real estate ecosystem—from banks to builders—the hope is that many more will reach the same conclusion.
Meena is not alone. For a growing cohort of aspiring homeowners, particularly in urban India’s mid-income segments, the Reserve Bank of India’s recent 25-basis-point cut to the repo rate is being seen as a cue to act. In a market where home affordability is tightly linked to the cost of borrowing, even modest shifts in rates can recalibrate purchasing power.
“The rate reduction is a welcome development for the residential real estate market,” says Anshul Jain, India CEO at Cushman & Wakefield. “It will boost sentiment among mid-segment homebuyers, who constitute the bulk of the housing demand.”
Though incremental, the cut signals the RBI’s intent to maintain a pro-growth bias while keeping inflationary risks in check. For lenders, it reduces the cost of capital. For borrowers, it lowers equated monthly instalments (EMIs)—a direct incentive to take on or expand home loans. For developers, especially those battling input cost inflation and regulatory pressures, the move offers breathing room and potential demand-side traction.
In cities like Chennai, where demand remains robust but affordability remains tight, the impact could be meaningful. A ₹50 lakh home loan over 20 years, for instance, would see its monthly EMI fall from ₹44,986 to ₹43,391 if the interest rate drops from 9% to 8.5%. That ₹1,600 monthly saving aggregates to over ₹3.8 lakh over the life of the loan—a substantial gain in a value-conscious market.
Banks are already responding. Tamilnad Mercantile Bank CEO S. Nair described the rate adjustment as “a significant opportunity” for first-time buyers. “Lower EMIs make home ownership more attainable for young professionals and families with moderate incomes,” he said. “For a ₹25 lakh loan over 20 years, borrowers could save nearly ₹1 lakh in total payments.” Nair added that existing borrowers with floating-rate loans should contact their banks to understand how and when the changes would affect their EMIs.
From the supply side, developers sense an opening. “Reduced borrowing costs for developers will also help projects run more smoothly and may even speed up new construction,” said Ashish Bhutani, CEO of Bhutani Infra. He added that the rate cut arrives at a time when broader global factors could also steer capital into Indian property.
“Trade shifts like the United States’ 26% tariff on Indian goods could prompt NRIs to re-evaluate their investment strategies,” Bhutani said. “NRI investments have already surged in the luxury and commercial real estate segments. These tariffs may accelerate that trend, with real estate offering a stable and potentially rewarding asset class back home.”
Yet, the impact of the RBI’s move will not be uniform. Borrowers on loans linked to the external benchmark (such as the repo rate) may benefit within weeks, while those tied to the older MCLR framework may experience a lag as banks adjust internal rates—a process often criticized for its sluggishness.
Economists also caution that the central bank’s action should not be mistaken for the beginning of an aggressive easing cycle. Inflation remains sticky, and with global economic signals still mixed, the RBI is expected to proceed cautiously. Nevertheless, for a sector that has endured a decade of shocks—demonetisation, GST rollouts, the pandemic, and rising input costs—any directional support is welcome.
For Meena, the calculus has shifted. “It’s a good time,” he says. “It feels like the balance is finally shifting in our favour.” And for India’s real estate ecosystem—from banks to builders—the hope is that many more will reach the same conclusion.
EOM
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