The Reserve Bank of India (RBI) unveiled its fifth bi-monthly monetary policy for FY25 on 6 December 2024, maintaining the benchmark repo rate at 6.5% for the eleventh consecutive time. Led by Governor Shaktikanta Das, the Monetary Policy Committee (MPC) has adopted a neutral stance, carefully balancing inflation control with economic growth amid ongoing global uncertainties and domestic inflationary pressures. The decision reflects the central bank’s commitment to ensuring stability while fostering resilience in India’s macroeconomic framework.
The real estate sector reacted with mixed sentiments. For developers, stable borrowing costs offer some relief, enabling continued investments and operational stability. Homebuyers, however, remain constrained by elevated Equated Monthly Instalments (EMIs), dampening housing affordability and overall demand. Data indicates that housing affordability in major cities like Mumbai and Delhi has plateaued due to persistent loan costs, affecting the middle-income segment most significantly. In contrast, Tier-2 cities are witnessing a marginal uptick in demand, aided by evolving work trends and comparatively lower property costs.
From a civic standpoint, the repo rate pause indirectly affects urban infrastructure funding. Developers reliant on financial institutions may struggle to adopt large-scale sustainable initiatives, such as green construction technologies, due to high financing costs. This raises questions about India’s ability to achieve sustainable urbanisation goals without a policy framework incentivising green investments.
Sustainability remains an urgent priority. While real estate stakeholders acknowledge the potential of green building technologies and renewable energy integration, affordability remains a barrier. Financial institutions and policymakers must explore innovative funding mechanisms, such as green bonds or subsidised loans, to accelerate sustainability initiatives. By aligning monetary policy with sustainable development goals, India can strike a balance between urban growth and environmental preservation.
