According to JLL’s Home Purchase Affordability Index (HPAI), a reduction in repo rates in the next few months could increase the affordability of home purchases in most residential markets except Delhi-NCR and Bengaluru by 2025. It has expressed uncertainty about a rate cut before the end of 2024, but experts estimate that there will be a total reduction of 50 basis points in the next 12 months.
If RBI cuts the policy interest rates, then the purchasing power of the house may increase. The decision to cut the total interest rate by 50 basis points (bps) over time will provide relief to home buyers. This will address the challenges of buying a house due to stable interest rates and rising property prices from 2022.
According to JLL’s Home Purchase Affordability Index (HPAI), a reduction in the repo rate in the next few months may increase the purchasing power of the house in most residential markets except Delhi-NCR and Bengaluru by 2025. According to the report, the residential market is currently experiencing a steady boom. According to JLL, residential sales are expected to reach 3,05,000-3,10,000 units in 2024 and are expected to increase to 3,40,000-3,50,000 units in 2025.
The combination of healthy earnings growth, potential interest rate cuts and moderation in price growth is expected to improve affordability over the next 12 months, paving the way for sustained market activity and continued strong performance of India’s residential real estate sector over the medium term.
Shiv Krishnan, Senior Managing Director, JLL
When will interest rates be cut?
The JLL report expressed uncertainty about rate cuts before the end of 2024, but experts estimate a total reduction of 50 basis points over the next 12 months. This monetary easing is expected to reduce the cost of borrowing in the economy, benefiting both homebuyers and developers, the report said.
According to the report, considering 2011 as the base year, Hyderabad leads the price growth with a growth of 132 per cent. It is followed by Bengaluru at 116 per cent and Delhi-NCR at 98 per cent. On the income front, Mumbai has seen the highest growth of 189 per cent, while Pune and Hyderabad have increased by 173 per cent and 163 per cent respectively.
Union ministers also in favor of interest cut
In the last few days, several Union Ministers have advocated a cut in interest rates. This includes Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal. RBI Governor Shaktikanta Das was also present in the program in which Goyal suggested a cut in interest rates. On the question of cutting interest rates, he said that the decision will be
Taken in the December MPC.
The RBI Governor has made it clear on several occasions that the focus of the central bank is currently on reducing inflation. He says that if inflation becomes uncontrollable, then domestic industries and exports will be badly affected. This shows that RBI does not intend to cut interest rates at least in the December MPC.