RBI’s Surprise Rate Cut Sends Realty Stocks Tumbling: Is It Time to Reassess?
After rallying on the back of RBI’s sharper-than-expected rate reduction, real estate shares dip slightly as traders lock in recent gains.
Realty Index Retreats After Strong Two-Day Rally
India’s real estate sector, which had been on an upswing following the Reserve Bank of India’s unexpected policy move, witnessed a mild pullback in early trade on June 9. The Nifty Realty index, which had shown strong momentum in the previous sessions, edged down to hover around 1,038—breaking a two-day winning streak.
This downturn comes after a surge of nearly 4.7% in the previous trading session (June 6), sparked by the central bank’s announcement of a larger-than-anticipated 50 basis point cut to the benchmark repo rate, now set at 5.5%. The move exceeded most market expectations, which had anticipated a smaller 25 bps adjustment.
Investors Shift Focus to Profit-Taking as Market Momentum Eases
Following the sharp rise in realty stocks driven by easing interest rate expectations, investors appeared to be taking a breather, booking profits at higher valuations. This profit-taking behavior is a common pattern after sharp rallies, particularly when markets price in favorable policy shifts ahead of time.
Despite the minor correction, market sentiment for the sector remains cautiously optimistic in light of the potential benefits of lower borrowing costs. Many see the dip as a technical pullback rather than a reversal of trend.
Home Loan Easing and Developer Financing Get a Boost
The RBI’s aggressive monetary easing is seen as a positive trigger for the housing sector. A sharper repo rate cut directly impacts interest rates on home loans, which could significantly boost affordability, especially in the mid-income and affordable housing segments.
Falling lending rates ease the burden of monthly EMIs, which could attract a broader range of potential homeowners and stimulate greater activity in the real estate sector. Developers too stand to benefit, with reduced financing costs improving project viability and margins. Enhanced credit access may also accelerate construction timelines and drive supply growth.
Mixed Stock Performance Reflects Selective Sentiment
Real estate equities delivered a varied performance on June 9, with some gaining ground while others edged lower. Some counters experienced minor declines—Prestige Estates Projects and Brigade Enterprises dipped over 1%, while Oberoi Realty was down by around 0.8%. Other notable players like Macrotech Developers, DLF, and Godrej Properties also traded marginally lower.
Conversely, a few names bucked the trend. Shares of Anant Raj climbed approximately 2%, while Raymond, Sobha, and Phoenix Mills were slightly in the green, suggesting selective optimism among investors based on individual company fundamentals and growth outlooks.
Policy Impact Likely to Reignite Affordable Housing Demand
In recent years, elevated borrowing costs and pandemic-related disruptions have eroded demand in the lower segment of the housing market. From 61% of total sales in 2019, the affordable housing category’s share fell to just 33% in 2024.
However, with cumulative repo rate cuts totaling 100 basis points across three RBI policy meetings this year (February, April, and now June), affordability is expected to see a significant revival. A 1% reduction in home loan interest rates could lead to roughly a three-year reduction in loan tenures for a ₹1 crore, 20-year home loan—at the same EMI. Alternatively, borrowers’ loan eligibility could rise by around ₹15 lakh at the same tenure.
These dynamics could substantially improve affordability, especially for price-sensitive segments, potentially reversing the downtrend in lower-income housing sales.
Real Estate Demand Outlook Strengthens Across Segments
Eased monetary policy and enhanced liquidity conditions are anticipated to boost momentum in both mid-range and upscale residential segments. Lower EMIs will make homeownership more accessible for aspiring buyers in urban centers, fueling inquiries and accelerating sales conversions.
Developers, too, are expected to benefit from easier access to capital and improved sentiment across the supply chain. The availability of credit for construction finance and land acquisition is anticipated to improve, enabling smoother project execution and timely handovers.
Additionally, liquidity-enhancing measures such as the CRR reduction are seen as complementary to the rate cuts, further amplifying the positive impact on the real estate ecosystem.
Final Thoughts
Following a strong surge sparked by the RBI’s unexpected 50-basis-point rate reduction, India’s real estate segment saw a slight dip as traders moved to lock in profits. Despite the dip, the medium-term outlook for the sector remains upbeat, underpinned by stronger affordability, better financing options, and rising buyer sentiment.
The combination of reduced borrowing costs and improved credit availability is set to benefit both homebuyers and developers alike. While short-term volatility may persist as markets digest policy changes, the broader trend points toward renewed growth momentum in India’s real estate landscape—particularly in the affordable and mid-income segments.
As monetary conditions continue to ease, the stage appears set for a more vibrant and inclusive housing market in the months ahead.
:
The image added is for representation purposes only
