Festive Season Boosts Indian Real Estate with Stable Interest Rates and GST Rationalisation

Strategic Insights -

The festive season in India has brought a surge in momentum to the real estate market, with stable interest rates and selective rate cuts by banks contributing to buyer confidence. Market conditions are shifting in favour of buyers as developers roll out festive offers, and the recent GST rationalisation is expected to ease construction costs. This combination of factors has created a festive bonanza for home seekers, making it an ideal time to invest in property.

Key Takeaways:

  • The reduction in GST rates on construction materials such as cement, marble, granite, and bricks is expected to lower costs by 3-5 per cent, offering developers relief in cash flows and margins.
  • The simplified GST structure, now streamlined to just two primary slabs of 5 per cent and 18 per cent (besides 40 per cent on luxury items), brings greater pricing clarity, encouraging first-time buyers and fence-sitters to take the plunge into homeownership.
  • The RBI's decision to keep repo rate unchanged provides stability for home loan borrowers, with earlier reductions still filtering through the system and current interest rates remaining attractive and supportive of housing demand.
  • Shishir Baijal, CMD, Knight Frank India, expects the continuation of stable policy rates and surplus liquidity conditions to preserve affordability for homebuyers, supporting demand in the mid- and low-income segments.
  • Amol Soman, realty finance consultant, advises home loan borrowers to opt for long tenures but also prepay as much as possible to reduce interest burden and repayment period, with no penalty on prepayment for floating rate loans.

Statistics:

  • 3-5 per cent reduction in GST rates on construction materials is expected to lower costs for developers.
  • 5 per cent and 18 per cent are the two primary slabs of the simplified GST structure, besides 40 per cent on luxury items.
  • Current interest rates on home loans remain attractive and supportive of housing demand.
  • Q2 2025 represents a turning point for the real estate sector, with recovery in sentiment scores reflecting resilience and adaptability.
  • Rs 40 lakh loan at 8.5 per cent for 25 years can save around Rs 19.5 lakh in interest and shorten the tenure by over 7 years by prepaying Rs 50,000 annually from the second year.
  • Rs 40 lakh loan at 8.5 per cent for 25 years can shorten the tenure to 14 years and save nearly Rs 28.5 lakh by prepaying Rs 1 lakh annually.

Sources:

  • Anuj Puri, Chairman Ñ ANAROCK Group
  • Shishir Baijal, CMD, Knight Frank India
  • Amol Soman, realty finance consultant
  • Times of India
  • RBI's decision to keep repo rate unchanged