The Reserve Bank of India (RBI) on Friday announced a repo rate cut of 25 basis points (0.25%) to 6.25%, to spur consumption and economic growth, some two years after the last revision. This decision provides significant relief to the ordinary borrowers, mainly the home loan customers, as it will lead to lower borrowing cost from banks. The real estate sector has voiced optimism, with many hoping it will potentially lead to a real estate revival, especially in the lower to medium-cost housing segment. Banks typically take 2-3 months to implement repo rate cuts, resulting in lower EMIs for homeowners. Says L.C. Mittal, director of Motia Builders Group: “Mid-tier homebuyers, who were skeptical in the past, tend to show more interest. The impact is mostly higher in the middle-income sectors where the consumers are most value-sensitive towards EMI changes.” While lower interest rates benefit both builders and buyers – developers enjoy cheaper construction loans, while homebuyers face lower lending costs – the rising property prices and economic factors may offset these advantages, especially in tier-2 cities. Anurag Goel, director, Goel Ganga Developments, adds, “Low construction loan rates ease up on the borrowing cost, which helps manage project timetables. These benefits need to be evaluated against the backdrop of increasing property prices and overall economic conditions.” What’s in it for commercial real estate? Commercial real estate's relationship with interest rates extends beyond simple financing – it encompasses REIT returns, development opportunities, and broader market conditions. Aman Gupta, Director of RPS Group, says, “The Real Estate Investment Trusts (REITs) tend to become more appealing during lower interest rate cycles due to their more reliable returns. It encourages retail developments. Nevertheless, the overall influence of interest rates on commercial real estate is much more complex.” Rate cut benefits entire real estate ecosystem Lower interest rates benefit entire real estate ecosystem: buyers get cheaper loans, developers clear inventory and launch new projects, while commercial sector sees increased investment. Says G. Hari Babu, National President of National Real Estate Development Council (NAREDCO): “We expect increased sales, improved liquidity, and a reduction in the inventory of unsold homes. This, in turn, will encourage developers to launch new projects.” Depreciating rupee impact Says Shishir Baijal, chairman and managing director, Knight Frank India, “We hope the rate cuts will be passed on to consumer and the home loan rates become more attractive, which combined with the earlier announced tax incentives, spur residential demand, especially in the below ₹50 lakh category, which has seen continued weakening of demand. “Overall, the RBI's rate cut is a balanced approach to supporting growth while managing inflation and liquidity concerns, though the central bank must remain vigilant about the impact of the depreciating rupee.”Original Article