RBI Repo Rate Cut: How It Makes Home Loans Cheaper and Boosts Real Estate
The Reserve Bank of India (RBI) has cut the repo rate by 50 basis points and the Cash Reserve Ratio (CRR) by 100 basis points, which is expected to lower home loan rates and boost the real estate market, particularly in the affordable housing segment.
Repo RateHome LoanReal EstateAffordable HousingRbiReal Estate NewsJun 06, 2025
The cut in repo rate, the third consecutive reduction this year, directly lowers the cost of borrowing for banks. With banks likely to pass on this benefit, home loan interest rates are set to fall, bringing down EMIs and making homes more affordable for buyers across segments.
Lower EMIs, Higher Affordability
The biggest takeaway for homebuyers is that their monthly home loan EMIs are likely to fall. Anuj Puri, Chairman of ANAROCK Group, noted that the move “effectively lowers the cost of borrowing, making home loan EMIs easier on the pocket and thereby directly improving affordability for buyers.” He added that this could potentially boost demand in the affordable and mid-income housing segments, which were hit hardest during the pandemic.
Developers Also Set to Benefit
The CRR cut will inject more liquidity into the banking system, which means banks will have more funds to lend to both buyers and developers. This is expected to ease access to capital and support faster project completions. “Developers will be able to access more capital for their projects, and this can positively impact project completion timelines,” Puri added.
Mr. Pradeep Aggarwal, Chairman of Signature Global (India) Ltd., echoed this sentiment, saying, “The reduction in CRR is expected to infuse significant liquidity in the banking system, which will prompt banks to lend even more.”
Positive Sentiment Across the Sector
Jash Panchamia, Executive Director at Jaypee Infratech Ltd., said the RBI’s move is aimed at “fueling consumption and accelerating investment.” He emphasized that “lower lending rates will further boost demand for real estate,” especially at a time when several banks are already offering sub-8% home loans.
Mr. Ashok Kapur, Chairman of Krishna Group and Krisumi Corporation, called it a “strong and timely measure” to support real estate. He believes the dual rate cuts will “encourage homebuyers to make property investment decisions” and create a ripple effect across housing segments in the coming months.
“RBI's decision to reduce the repo rate by 50 bps will add new vigour to the country's real estate sector. With this the total quantum of reduction, since the beginning of this year, reaches 100 bps, translating into a massive 1% decrease,” said Manoj Gaur, CMD, Gaurs Group.
A Timely Push for Affordable Housing
While the premium housing market has seen strong momentum, experts believe this rate cut will especially benefit the affordable housing space. ANAROCK data shows that affordable housing’s share in total sales has dropped significantly—from 38% in 2019 to just 18% in 2024. However, a recent 19% dip in unsold stock indicates end-user demand is still present and can be reignited through lower EMIs.
Frequently Asked Questions
What is the repo rate and why is it important?
The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks. A lower repo rate reduces the cost of borrowing for banks, which they often pass on to consumers in the form of lower interest rates on loans, including home loans.
How does the CRR cut benefit the real estate sector?
The Cash Reserve Ratio (CRR) cut increases liquidity in the banking system by allowing banks to lend more money. This additional liquidity can help developers access more capital for their projects and support faster project completions, ultimately benefiting the real estate sector.
What impact will the repo rate cut have on home loan EMIs?
The repo rate cut is expected to lower home loan interest rates, which will reduce the monthly EMIs for home loan borrowers. This makes home ownership more affordable and can boost demand in the housing market.
Why is affordable housing particularly set to benefit from this move?
Affordable housing has seen a decline in sales in recent years, but the repo rate cut can make home loans cheaper and more accessible. This is expected to reignite demand in the affordable housing segment, especially as unsold stock has decreased, indicating a potential for growth.
What is the overall sentiment in the real estate sector following these rate cuts?
The sentiment in the real estate sector is largely positive. Industry experts and developers believe that the rate cuts will boost demand, improve project completion timelines, and encourage more homebuyers to make property investment decisions.
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