RBI Maintains Repo Rate Amid Tariff Pressures; Festive Season May Boost Home Loan Demand
The Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 5.5%, amid economic pressures such as US President Donald Trump’s new tariffs and a decline in housing sales. Real estate experts are optimistic about the festive season boosting home loan demand.
RbiRepo RateHome LoansReal EstateFestive SeasonReal Estate MumbaiAug 06, 2025
In this uncertain environment, the central bank’s decision to hold the repo rate is viewed as a balanced approach to manage inflation and support economic growth. Many real estate experts had hoped for a rate cut to boost the affordable housing segment by lowering borrowing costs. However, the RBI opted for a status quo, citing tariff-related concerns and broader economic risks.
Despite the hold, experts remain optimistic that retail credit demand, especially for home loans, will gain momentum in the coming months. This optimism is driven by improving consumer sentiment and the onset of the festive season, which traditionally sees an uptick in property transactions and home loan applications.
Anuj Puri, chairman of ANAROCK Group, noted that the Indian real estate market is facing significant turbulence, exacerbated by Trump’s new tariffs and a 20% decline in housing sales across top metros. According to ANAROCK data, just 96,285 homes were sold in Q2 2025, a steep fall from 120,335 a year ago. This indicates growing buyer hesitancy and market uncertainty. The central bank’s policy choices are crucial to initiate a turnaround and arrest further market deterioration.
The RBI’s decision to keep the repo rate unchanged at 5.5% reflects a measured approach amidst evolving macroeconomic conditions. Anshuman Magazine, chairman and CEO of CBRE for India, South-East Asia, Middle East, and Africa, stated that the focus is now on improved credit flow and broader economic momentum. The cumulative 100 basis points cut since February 2025 has already had a positive impact, and the current decision signals stability and long-term predictability for developers and homebuyers.
Shishir Baijal, chairman and managing director of Knight Frank India, emphasized that the RBI’s decision to hold rates steady underscores its calibrated approach amidst a complex economic backdrop. While inflation has moderated, it remains uneven, and the central bank is cautious given the persistent risks from global commodity prices, geopolitical tensions, and volatile capital flows.
For the real estate sector, the continuation of stable policy rates and surplus liquidity conditions provides much-needed predictability and helps preserve affordability for homebuyers. Some banks have already reduced consumer home loan rates, a move that supports housing demand, especially in the mid-income and low-income segments. This policy continuity, coupled with easing credit conditions and steady economic growth, can provide a boost to the affordable housing categories.
Manju Yagnik, vice chairperson of Nahar Group and senior vice president of NAREDCO, Maharashtra, stated that maintaining the repo rate at 5.5% signals a continued focus on balancing growth and inflation. With retail inflation cooling to a six-year low of 2.1% in June and price pressures under control, the decision appears prudent and timely.
Umang Jindal, CEO of Homeland Group, noted that the RBI’s decision to keep the repo rate at 5.5% reflects a cautious approach amid evolving economic conditions. Maintaining the current rate means borrowing costs remain stable, which may support ongoing housing demand but also means developers and homebuyers won’t get any additional financial relief for now. The unchanged rate also reflects a balancing act, managing inflation without disrupting growth momentum.
Raoul Kapoor, co-CEO of Andromeda Sales and Distribution Pvt Ltd, stated that as anticipated, the RBI has kept the repo rate unchanged, despite a good monsoon and inflation remaining well below the comfort level. The decision appears to be guided by ongoing geopolitical uncertainties and unresolved global tariff concerns. The cumulative 100 basis points cut over the last three Monetary Policy Committee (MPC) meetings has already reduced borrowing costs significantly. As noted by the RBI Governor, the full impact of these rate cuts is still unfolding, and retail credit demand, particularly for home and personal loans, is expected to gain further momentum in the coming months, driven by the upcoming festive season.
Frequently Asked Questions
What is the current repo rate set by the RBI?
The current repo rate set by the RBI is 5.5%.
Why did the RBI decide to maintain the repo rate at 5.5%?
The RBI decided to maintain the repo rate at 5.5% to manage inflation and support economic growth, amid global economic uncertainties such as US tariffs and geopolitical tensions.
How might the festive season impact home loan demand?
The festive season is expected to boost home loan demand due to improved consumer sentiment and various offers and flexible payment plans provided by developers.
What are the key factors affecting the real estate market currently?
Key factors affecting the real estate market include US tariffs, a decline in housing sales, economic pressures, and global economic uncertainties.
What is the cumulative impact of the RBI's previous rate cuts?
The cumulative 100 basis points cut over the last three Monetary Policy Committee (MPC) meetings has significantly reduced borrowing costs, which is expected to support housing demand, especially in the mid-income and low-income segments.
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