Experts from banking, finance, and real estate sectors weigh in on RBI’s latest policy shift and what it means for investors and homebuyers.
NEW DELHI (India CSR): The Reserve Bank of India’s recent decision to reduce the repo rate by 25 basis points, bringing it down to 6%, has sparked discussions across financial and real estate markets. While the move aims to support economic growth amid global uncertainty, it also sends a strong signal for both investors and borrowers to reassess their financial strategies.
Aman Gupta, Director of RPS Group, emphasizes a balanced and multi-pronged approach in this new rate environment.
Aman Gupta, Director of RPS Group said, the RBI’s reduction of the repo rate to 6% highlights the urgency for FD investors to reevaluate their non-actively managed strategies. While FDs offer capital protection, passive strategies heighten the need for a more balanced and multi-pronged approach, especially with returns dwindling. Start with banks and NBFCs that offer the best rates—small finance banks tend to pay 0.5–1% higher than the more orthodox banks. Further, assess tax efficiency:** Post FD returns after the tax slab (ordinary income taxation) are not inflation-indexed; tax saving FDs or Senior Citizen Savings Scheme (SCSS) outperform inflation post taxation and therefore are better alternatives. Moreover, a portion of the savings can be channeled towards hybrid instruments such as arbitrage or conservative hybrid funds which offer better stability than equities but tend to be volatile relative to bonds. Do not default to high risk assets immediately; rather sustain an ERFD (emergency cash fund) of 6–12 months of expenses while alternatives are explored. Lastly, do not stop paying attention: Follow policy trends and bank announcements to strategically time renewals. In declining rate environments, rapid response along with spreading risk across multiple targets are crucial in sustaining purchasing power without sacrificing safety.
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Echoing a similar concern, Siddharth Maurya, Founder and MD of Vibhavangal Anukulakara Pvt. Ltd., urges FD investors to lock in existing higher rates through long-tenure FDs and consider alternatives like corporate bonds or RBI floating rate bonds.
Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited
The RBI cutting the repo rate by 25 basis points to 6% shows that it intends to keep an accommodating policy to bolster economic growth, but simultaneously indicates reduced returns for Fixed Deposit (FD) holders in the short run. With the banks expected to lower FD rates further, investors are urged to take prudent steps to protect their returns. Consider locking-in longer tenure FDs now, so you can take advantage of the existing rates before they drop. For example, opting for 3-5 year FDs could yield better returns. Additionally, expand your investment portfolio beyond traditional FDs. Try out debt mutual funds, corporate bonds, or RBI floating rate savings bonds as they may yield superior returns after tax. Furthermore, employ FD laddering; divide your portfolio into several FDs with staggered maturities, for example, 1, 2 and 3 years. This approach offers liquidity and less reinvestment risk if rates continue to decline. Finally, go over your active month-to-month FDs. If you have shorter-term deposits, make sure to renew them reliably to bypass auto-renewal at devalued rates. With safety as the priority, active changes can enable FD holders to navigate this low-rate cycle efficiently.
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Shiv Garg of Forteasia Realty points out that lower loan rates will drive housing interest, particularly in the wake of renewed infrastructure investment and growth in key sectors.
Shiv Garg, Director, Forteasia Realty Pvt. Ltd. said, “The RBI aims to stimulate economic growth by cutting the repo rate to 6.00% because of the ongoing global uncertainty, which is why they cut it by 25 basis points. This is particularly good news for the real estate industry since it will lower the interest rates on home loans and consequently, make homebuying more affordable. In conjunction with the Government focus on infrastructure spending as well as the revived growth in the services and manufacturing industries, we expect to see an increase in housing demand, both in urban and rural regions. That said, we still need to be cautious of outside developments like international trade wars, which could shift the dynamics on the market. In any case, the renewed confidence the market received from this rate reduction will boost investments into the housing sector.”
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Anurag Goel of Goel Ganga Developments believes this policy shift will catalyze optimism among developers and first-time homebuyers, potentially leading to increased project launches and improved conversion rates in Tier 1 and 2
Anurag Goel, Director, Goel Ganga Developments said, The recently announced 25 bps cut in the repo rate by the RBI is a welcome development and strategically timed, particularly for EMI reliant home buyers. This shift not only improves the affordability of housing finance, but also restores optimism for primary purchasers and idle buyers who have been waiting for a more consumer friendly economic environment. The residential market will benefit greatly from the increased demand that comes with lower interest rates, especially in Tier 1 and 2 cities. For developers, this sentiment boost allows for greater optimism when planning new launches.” Optimism is a crucial component for smart business development. “Moreover, a declining rate of repos strengthens buyer confidence regarding the sustainability of the real estate industry. As the burden of home loan EMIs ease, we estimate higher inquiry-to-booking conversion rates which in turn will push the growth trajectory of the sector. This also aids in the government’s vision of ‘Housing for All’ as it will make homeownership easier for a larger population.
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LC Mittal, Director at Motia Group, also foresees stronger momentum in the mid-income and affordable housing segments.
LC Mittal, Director, Motia Group said, Adjusting the repo rate to 6% is an appropriate step taken by the RBI, helping both homebuyers and developers simultaneously.”A decrease in EMIs improves the affordability for potential homeowners, rejuvenating the market sentiment at the same time. This will likely lead to more traction towards ready-to-move-in and under construction properties. Developers will also gain from greater credit accessibility and heightened buyer enthusiasm. Furthermore, the central bank cutting rates is a strong indicator for an accommodating policy shift, which is essential for enduring revival across the sectors. Looking forward, we estimate this will reinvigorate activity in the mid-income and affordable housing segments, the backbone of growth in Indian real estate, as we move into FY 2025-26. The supportive stance of the RBI reinforces the rationale for housing with a controlled inflation outlook, this trend may continue to build housing sector strength and growth.
(India CSR)
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