RBI Rate Cut to Boost Affordable Real Estate Market: Industry Insights
As the Reserve Bank of India (RBI) prepares for its monetary policy committee meeting, industry experts anticipate a rate cut that could significantly boost the affordable housing segment.
RbiReal EstateAffordable HousingMonetary PolicyGdp GrowthReal EstateJun 03, 2025
Given the benign inflation environment and the GDP growth of 6.5 per cent recorded in FY2025, the Reserve Bank is likely to proceed with a 25-bps repo rate cut this Friday (June 6). This move is expected to provide a much-needed boost to the real estate market, especially in the affordable housing sector.
“The case for a rate cut is further supported by the revival in the liquidity conditions to a surplus of Rs 3.6 lakh crore, which enhances the effectiveness of monetary transmission. Additionally, the softening of G-sec yields reflects bond market confidence in the RBI’s inflation and liquidity management and strengthens the rationale for easing rates,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
With the anticipated rate cut, the cumulative reduction in the policy rate in this cycle would be 75 bps. However, the focus must now shift to the pace and breadth of transmission. While some commercial banks have begun to lower their MCLR and base rates, the adjustments have been modest. With liquidity conditions stabilising, there is now greater scope for commercial banks to accelerate the pass-through of policy easing to borrowers. This will be key to spurring consumer demand and private investment, ultimately supporting economic growth, Baijal noted.
The Central Bank is projected to cut the repo rate by another 50 basis points (bps) this fiscal (FY26), after the 50 bps cut until April this year. Bank lending rates have begun easing, which should support domestic demand, according to a latest Crisil note. Experts said that with EMIs constituting a significant share of monthly income in the affordable category, even a modest reduction in lending rates can influence buying decisions, providing the necessary momentum to support this price-sensitive demand segment.
The real estate market has been grappling with challenges such as high interest rates and reduced consumer confidence. The anticipated rate cut is seen as a positive step towards addressing these issues and reviving the market. Affordable housing, in particular, stands to benefit significantly from lower borrowing costs, as it directly impacts the affordability of homes for the middle and lower-income groups.
In conclusion, the RBI’s decision to cut rates is expected to have a ripple effect on the real estate sector, particularly in the affordable housing segment. This move, coupled with improved liquidity conditions and a stable economic outlook, could provide the necessary impetus to drive demand and investment in the real estate market.
Frequently Asked Questions
What is the expected repo rate cut by the RBI?
The Reserve Bank of India (RBI) is expected to cut the repo rate by 25 basis points (bps) this Friday (June 6).
How will the rate cut affect the real estate market?
The rate cut is expected to lower borrowing costs, which can boost demand in the real estate market, particularly in the affordable housing segment.
Why is the affordable housing segment sensitive to interest rate movements?
EMIs constitute a significant share of monthly income in the affordable category, so even a modest reduction in lending rates can influence buying decisions.
What is the projected repo rate cut for FY26?
The Central Bank is projected to cut the repo rate by another 50 basis points (bps) this fiscal (FY26).
How will the rate cut impact bank lending rates?
The rate cut is expected to lead to a reduction in bank lending rates, which should support domestic demand and private investment.
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