The Reserve Bank of India’s decision to cut the cash reserve ratio (CRR) is seen as a potential game-changer for developers and homebuyers, promising relief amid rising borrowing costs.
On Friday, the RBI’s Monetary Policy Committee (MPC) maintained the key repo rate at 6.5% to manage inflation. They revised their GDP growth prediction for FY25 down to 6.6% from the previous 7.2%.
By reducing the CRR to 4%, banks must keep fewer reserves with the central bank, freeing up an additional ₹1.16 trillion to stimulate lending. A move expected to ease liquidity pressure as tax outflows and rising currency circulation tighten the system.
While the CRR cut aims to inject liquidity into the banking system, high borrowing costs and soaring property prices continue to challenge affordability, particularly in the affordable housing sector.
Housing loan interest rates remain steep, with HDFC Bank offering rates between 9.4% and 9.95% and the State Bank of India ranging from 8.5% to 9.65%. ICICI Bank’s rates are slightly higher, reaching up to 10.05%.
The RBI governor, Shaktikanta Das, mentioned that the CRR reduction will provide ₹1.16 trillion to the banking system.
Home sales went down from July to September as prices increased. According to Anarock Research, residential sales dropped by 11% compared to last year, and new launches fell by 19%. In the affordable segment, which includes homes priced under ₹50 lakh, sales decreased by 14%, totalling 20,769 units in the third quarter of 2024, down from 23,026 units a year earlier, according to Knight Frank Research.
The demand for real estate has decreased due to the high rates of home loans and the post-pandemic era. On the other hand, the luxury housing market, properties priced above ₹1 crore, has reversed this trend, with sales up approximately 41 per cent to 40,328 units during Q3. This growth emphasises the further division of demand on account of high-net-worth individuals who seem less affected by the increased interest rates.
IMGC is a joint effort that includes the International Finance Corporation, ADB Bank, Genworth USA, Sagen, which Brookfield owns, and the National Housing Bank.
“The general expectation was for a rate cut of at least 25 basis points,” said Piyush Bothra, co-founder and CFO of Square Yards, an integrated platform for real estate and mortgages. “However, the decision to reduce the credit reserve ratio by 50 basis points is expected to help increase liquidity in the banking system and boost overall credit disbursements.”
As developers and homebuyers anticipate further rate cuts, the real estate market’s next chapter depends on sustained liquidity and innovative financial solutions.
Read more through the links below to uncover the key trends and market leaders driving this growth:
The Financial Express – https://bit.ly/41rQfB0
Business News – https://bit.ly/3OSNQHX
APN News – https://bit.ly/4g4skMB
Mint – https://bit.ly/4gnB3sW
Published Date: 6 Dec, 2024
