RBI Repo Rate Cut: Boosting Home Loan Rates and Housing Demand

The Reserve Bank of India (RBI) has announced a 25 basis point cut in the repo rate, a move that is expected to lower home loan interest rates and stimulate housing demand. This is the first reduction in the key benchmark interest rate in six months and is aimed at supporting a robust economic environment amidst high US tariffs.

Real estate industry bodies, CREDAI and NAREDCO, have welcomed the decision, highlighting its potential to strengthen market sentiment and reduce borrowing costs. Shekhar Patel, President of CREDAI, stated, “This move will further strengthen positive market sentiment, lower borrowing costs, support credit growth, and stimulate demand across sectors—including real estate.” He added that the RBI’s intention is to bolster India’s economic growth at a time when inflation is at a decadal low.

CREDAI anticipates a strong close to the financial year and sustained momentum in housing demand across all segments. “As liquidity is no longer a key concern for the central bank, we expect a robust housing market in the coming months,” Patel noted.

NAREDCO President Parveen Jain echoed similar sentiments, describing the repo rate cut as an important step toward giving fresh momentum to the economy and the real estate sector. “This reduction will improve liquidity and encourage new investment across several sectors. For real estate, lower interest rates make home loans more affordable, which supports homebuyers and strengthens demand,” he explained.

The positive impact of the repo rate cut is expected to extend beyond the real estate sector, helping to generate more employment and support allied industries. Jain added, “The ripple effect of this decision will be felt across various sectors, contributing to overall economic growth.”

Housing sales have seen a significant surge in the last three years (2022-2024) due to pent-up demand following the slowdown caused by the COVID-19 pandemic. The luxury housing segment has been a key driver of this growth. However, sales of residential properties in volume terms have declined in the first nine months of the current year, primarily due to higher base effects and a sharp increase in prices post-pandemic.

Experts believe that the high economic growth in the first two quarters of the 2025-26 fiscal year, coupled with lower mortgage rates, could further boost housing demand in the coming months. This optimistic outlook is supported by the RBI’s proactive measures to ensure liquidity and stability in the financial system.

In conclusion, the RBI’s repo rate cut is a strategic move that is expected to have a multifaceted positive impact on the real estate sector and the broader economy. With reduced borrowing costs and improved market sentiment, the housing market is poised for a strong recovery and sustained growth.