These measures come as retail inflation eased to a near six-year low of 3.16% in April, providing the central bank with room to support economic growth. RBI Governor Sanjay Malhotra highlighted that the subdued inflation environment justified the continued policy easing. Despite these cuts, the RBI shifted its monetary stance from 'accommodative' to 'neutral', indicating a cautious approach moving forward.
The real estate sector, particularly affordable housing, stands to benefit from these policy changes. Lower borrowing costs are anticipated to make home loans more accessible, potentially revitalizing demand in the affordable and mid-income housing segments. ANAROCK data indicates that the share of affordable housing in overall sales across India's top seven cities declined from 39% in 2020 to 20% in 2024. However, a 19% decrease in unsold stock suggests sustained end-user demand.
Developers are also expected to gain from reduced financing costs, which could accelerate project completions and encourage new launches. The CRR cut's infusion of liquidity may further support these developments by increasing banks' lending capacities.
Nonetheless, global trade tensions pose challenges. Tariffs imposed by the United States have increased the cost of imported construction materials, potentially impacting developer margins and project viability. The RBI's policy adjustments aim to mitigate these pressures by stimulating domestic demand and investment.
Market reactions have been cautiously optimistic. Following the RBI's announcement, the Nifty 50 index rose by 0.3%, and the BSE Sensex increased by 0.25%. Sectors such as real estate and financials experienced gains, reflecting investor confidence in the central bank's measures to bolster economic activity.