NAREDCO urges 6% home loan rates to revive housing market amid sales slump

The National Real Estate Development Council (NAREDCO) has urged financial institutions to lower home loan interest rates to approximately 6% in a bid to rejuvenate the struggling housing market. This call comes amid declining sales in the top seven cities during the first half of the year, attributed to various economic factors.

G Hari Babu, President of NAREDCO, highlighted that a significant reduction in home loan interest rates is essential to revitalise demand. He remarked, "Interest rates on home loans should come down to around 6 per cent to boost demand," underscoring the urgency of the situation. Current rates are around 7.5-8% following the Reserve Bank of India's (RBI) recent reduction of the repo rate by 100 basis points since February.

One of the primary challenges facing the housing sector is the mismatch between property prices and income growth. Babu noted that "housing prices have increased significantly in the last three years, affecting the affordability of prospective customers." This disparity has been further exacerbated by stagnant salary increments, rendering homeownership out of reach for many.

Compounding the issue is the oversupply in various markets, including Hyderabad, which has not matched the decreased demand. The NAREDCO president pointed out that global political and economic uncertainties have dampened consumer sentiment, further stalling the market.

Market data supports these claims. PropEquity reported a 19% drop in sales during the April-June period, following a 23% decline in the previous quarter across nine major cities. Anarock, a property consultancy, has also estimated a 20% sales fall in the top seven cities in the latest quarter. These trends indicate a severe contraction in the housing market.

In addition to price inflation, the post-COVID-19 economy has seen a sharp rise in land costs. Babu mentioned, "Land cost has gone up sharply post-COVID pandemic," which complicates developers' efforts to provide affordable housing. The NAREDCO president also advocated for new policies to facilitate slum redevelopment, potentially increasing land availability for new housing projects.

Despite the RBI's efforts to alleviate financial burdens through rate cuts, NAREDCO's appeal for further reductions highlights the ongoing challenges facing the sector. The current economic climate necessitates robust measures to restore market balance and encourage homeownership.

The data indicates a clear downward trend, with PropEquity projecting a decline to 94,864 housing units sold in the second quarter, compared to 116,432 units in the same period last year. Without decisive intervention, the market could continue to stagnate, adversely affecting both developers and potential buyers.

Anarock data showed housing prices in India’s top seven cities rose 11% annually during April-June 2025, even as sales fell 20% to 96,285 units from 1,20,335 a year ago.

Anuj Puri, Chairman of Anarock, attributed the slowdown to geopolitical tensions that kept buyers cautious, alongside high property costs. However, he noted that easing tensions and the RBI’s rate cut are reviving sentiment.

Delhi-NCR saw the steepest price rise at 27%, followed by Bengaluru at 12% and Hyderabad at 11%.

Sales dropped 14% in Delhi-NCR, 25% in MMR, 8% in Bengaluru, 27% in Pune, 27% in Hyderabad, and 23% in Kolkata, while Chennai alone saw demand rise.

Addressing these issues, NAREDCO's proposal aims to create favourable conditions for both buyers and developers, fostering growth in the housing sector. However, achieving the desired impact will require coordinated efforts from industry stakeholders and policymakers to address the underlying economic challenges. The need for a strategic approach is crucial to navigate the complexities of the current market landscape.

(With PTI inputs)

Current home loan rates

Source: Bankbazaar