Real Estate Sector Grapples with Tariffs and Slowdown as RBI Maintains Repo Rate
India’s real estate sector faces challenges from US tariffs and a slowdown, with the RBI maintaining its repo rate at 5.5% in the latest MPC meeting.
Real EstateRbiRepo RateTariffsEconomic SlowdownReal EstateAug 06, 2025
Real Estate:NEW DELHI: India’s real estate sector is grappling with a dual challenge of a slowdown and the impact of US President Donald Trump’s new 25% tariffs on Indian goods. The Reserve Bank of India (RBI) maintained the policy repo rate at 5.5% in its latest Monetary Policy Committee (MPC) meeting, citing inflation stability and geopolitical uncertainty. This decision follows a cumulative 100 basis points rate cut earlier this year and comes as the former US President threatens a 25% tariff on Indian exports, a move that could impact nearly $100 billion in outbound trade and shave 30 basis points off FY26 GDP growth.
Anuj Puri, Chairman of ANAROCK Group, highlighted the unrelenting turbulence in the Indian real estate sector. The sentiment is pressured by Trump’s new 25% tariffs and a notable 20% plunge in housing sales across top metros, as per the latest ANAROCK data. In Q2 2025 alone, just 96,285 homes were sold, a steep fall from 120,335 a year ago, indicating increasing buyer hesitancy and market uncertainty.
“A rate cut leading to a lower interest rate environment would have particularly boosted the affordable housing segment, which has been under considerable pressure in recent years,” added Puri. ANAROCK data shows that average residential prices across the top 7 cities combined have increased by 39% in the last two years alone – from INR 6,470 per sq. ft. as of Q2 2023 to INR 8,990 per sq. ft. as of Q2 2025. “The affordable housing segment’s fate may be further dampened by the ongoing global trade tensions and tariffs imposed by the Trump administration. This is largely because of its impact on the MSMEs – the key target audience of the affordable segment,” stated Puri.
Samir Jasuja, Founder & CEO of PropEquity, noted that the ongoing trade war, geopolitical tensions, and volatility in the global financial market, along with tech sector layoffs in India, may have some repercussions on India’s economic growth, including sectors like exports and real estate.
“Housing sales have also come down from their highs. While the RBI has cut repo rate by 100 basis points in 2025 to 5.5%, it was, however, pertinent that the apex bank continued its easing stance in its announcement today to provide support to India’s growth amidst falling inflation and a good monsoon,” added Jasuja.
G. Hari Babu, National President of NAREDCO, believes that to further strengthen the real estate sector, the repo rate should be brought down below 5.5%, and the RBI should consider reducing the repo rate in the next MPC. “The real estate market needs a boost right now. A reduction in the repo rate will encourage developers to start new projects and home buyers to buy homes during the festive season. This move will increase confidence among home buyers due to low interest rates, which will increase housing demand, and especially the affordable housing segment can benefit from it,” stated Babu.
Industry experts and realtors shared their views on the RBI’s decision. Piyush Bothra, Co-Founder and CFO of Square Yards, stated, “The decision to maintain the repo rate at its current level reflects a 'watchful waiting' approach amidst a mixed economic landscape. Domestically, India's growth remains resilient, and recent inflation figures have been benign, staying below the RBI's target range. However, the global economic environment presents uncertainties, including volatile commodity prices and the monetary policy stances of major central banks, which could have spill-over effects on our economy. For the residential sector, a further cut would have been a welcome festive bonus for homebuyers. This stability ensures that borrowing costs remain manageable and avoids any sudden shocks to the market. The onus now squarely falls on the banks to enhance the transmission of previous rate cuts, ensuring that the benefits of lower interest rates are fully passed on to homebuyers.”
Shishir Baijal, Chairman and Managing Director of Knight Frank India, added, “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 understandably 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. Notably, some banks have already reduced consumer home loan rates - a move that supports housing demand, especially in the mid-income and low-income segment – and more transmission in interest rates is underway. This policy continuity, coupled with easing credit conditions and steady economic growth, can provide a boost to the affordable housing categories.”
Anshuman Magazine, Chairman & CEO of CBRE for India, South-East Asia, Middle East & Africa, commented, “With a cumulative 100 basis points cut since February 2025, the focus is now on improved credit flow and broader economic momentum. The announcement reflects ongoing demand recovery and a steady growth outlook, which reinforces market confidence for sectors including real estate, manufacturing, and infrastructure. For the real estate sector specifically, this signals stability and offers long-term predictability to developers and homebuyers. The upcoming festive season and range-bound inflation are expected to boost the market momentum further.”
Yateesh Wahaal, Director of M3M India, noted, “For the real estate sector, stable interest rates will strengthen end-user confidence and attract fresh investments across key regions. It also reflects the RBI’s commitment to sustaining economic momentum and encouraging long-term capital flows.”
Avneesh Sood, Director of Eros Group, added, “With global uncertainties, tariff risks, and uneven industrial growth, a neutral stance provides predictability and cushions sentiment. Rural consumption remains resilient, and public capex is driving infrastructure momentum. This combination, if sustained, can lay the groundwork for a stronger and broader-based real estate recovery in the coming quarters.”
Amit Jain, CMD of Arkade Developers, stated, “For the residential real estate sector, this signals welcome stability in home loan interest rates—an important factor for both first-time homebuyers and seasoned investors. With inflation now projected at 3.1% for FY26 and GDP growth maintained at 6.5%, the central bank’s balanced approach underscores that price stability and economic momentum can indeed coexist. This clarity is especially timely as we approach the festive season, a traditionally strong period for housing demand. Despite external headwinds like global tariff uncertainties, India’s housing market continues to demonstrate resilience, driven by a sustained demand for quality homes and consistent policy support. The outlook remains optimistic.”
Rohit Kishore, CEO of Hero Realty, mentioned, “Stable borrowing costs will benefit both homebuyers and developers. For buyers, it means continued lower EMIs and easier access to home loans, which can encourage more people to buy homes. For developers, the sustained interest rates will help manage costs and finish projects on time. This policy continuity will boost confidence in the market and maintain demand for homes and office spaces.”
Mayank Jain, CEO of KREEVA, added, “While a further rate cut could have served as a timely catalyst to boost market sentiment and accelerate economic revival, the central bank’s steady approach still sends a strong signal of macroeconomic stability. This consistency will help anchor buyer confidence and indirectly benefit the real estate sector. Developers are expected to remain active, particularly in emerging growth corridors, as the environment continues to support both demand and supply-side expansion. Overall, this decision contributes to a stable platform for continued momentum.”
Vikas Dua, Founder & Director of Chintamanis, stated, “We have high hopes that the government will sustain this momentum with supportive policies in the upcoming monetary policy announcement. While interest rates are just one factor, a further reduction would boost the confidence of buyers and will further induce their investment & consumption decision.”
Amit Goyal, MD of India Sotheby’s International Realty, concluded, “The RBI’s neutral policy stance, coupled with a 6.5% GDP growth outlook and a softer inflation trajectory, reflects a steady macroeconomic confidence. Strong consumption and stable urban demand are already supporting India's housing sentiment. With home loan rates easing with 3 previous repo rate cuts in 2025, we believe the momentum in home buying will remain cautiously positive—much like the RBI’s approach, balancing domestic resilience with global uncertainties.”
Anuj Puri, Chairman of ANAROCK Group, highlighted the unrelenting turbulence in the Indian real estate sector. The sentiment is pressured by Trump’s new 25% tariffs and a notable 20% plunge in housing sales across top metros, as per the latest ANAROCK data. In Q2 2025 alone, just 96,285 homes were sold, a steep fall from 120,335 a year ago, indicating increasing buyer hesitancy and market uncertainty.
“A rate cut leading to a lower interest rate environment would have particularly boosted the affordable housing segment, which has been under considerable pressure in recent years,” added Puri. ANAROCK data shows that average residential prices across the top 7 cities combined have increased by 39% in the last two years alone – from INR 6,470 per sq. ft. as of Q2 2023 to INR 8,990 per sq. ft. as of Q2 2025. “The affordable housing segment’s fate may be further dampened by the ongoing global trade tensions and tariffs imposed by the Trump administration. This is largely because of its impact on the MSMEs – the key target audience of the affordable segment,” stated Puri.
Samir Jasuja, Founder & CEO of PropEquity, noted that the ongoing trade war, geopolitical tensions, and volatility in the global financial market, along with tech sector layoffs in India, may have some repercussions on India’s economic growth, including sectors like exports and real estate.
“Housing sales have also come down from their highs. While the RBI has cut repo rate by 100 basis points in 2025 to 5.5%, it was, however, pertinent that the apex bank continued its easing stance in its announcement today to provide support to India’s growth amidst falling inflation and a good monsoon,” added Jasuja.
G. Hari Babu, National President of NAREDCO, believes that to further strengthen the real estate sector, the repo rate should be brought down below 5.5%, and the RBI should consider reducing the repo rate in the next MPC. “The real estate market needs a boost right now. A reduction in the repo rate will encourage developers to start new projects and home buyers to buy homes during the festive season. This move will increase confidence among home buyers due to low interest rates, which will increase housing demand, and especially the affordable housing segment can benefit from it,” stated Babu.
Industry experts and realtors shared their views on the RBI’s decision. Piyush Bothra, Co-Founder and CFO of Square Yards, stated, “The decision to maintain the repo rate at its current level reflects a 'watchful waiting' approach amidst a mixed economic landscape. Domestically, India's growth remains resilient, and recent inflation figures have been benign, staying below the RBI's target range. However, the global economic environment presents uncertainties, including volatile commodity prices and the monetary policy stances of major central banks, which could have spill-over effects on our economy. For the residential sector, a further cut would have been a welcome festive bonus for homebuyers. This stability ensures that borrowing costs remain manageable and avoids any sudden shocks to the market. The onus now squarely falls on the banks to enhance the transmission of previous rate cuts, ensuring that the benefits of lower interest rates are fully passed on to homebuyers.”
Shishir Baijal, Chairman and Managing Director of Knight Frank India, added, “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 understandably 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. Notably, some banks have already reduced consumer home loan rates - a move that supports housing demand, especially in the mid-income and low-income segment – and more transmission in interest rates is underway. This policy continuity, coupled with easing credit conditions and steady economic growth, can provide a boost to the affordable housing categories.”
Anshuman Magazine, Chairman & CEO of CBRE for India, South-East Asia, Middle East & Africa, commented, “With a cumulative 100 basis points cut since February 2025, the focus is now on improved credit flow and broader economic momentum. The announcement reflects ongoing demand recovery and a steady growth outlook, which reinforces market confidence for sectors including real estate, manufacturing, and infrastructure. For the real estate sector specifically, this signals stability and offers long-term predictability to developers and homebuyers. The upcoming festive season and range-bound inflation are expected to boost the market momentum further.”
Yateesh Wahaal, Director of M3M India, noted, “For the real estate sector, stable interest rates will strengthen end-user confidence and attract fresh investments across key regions. It also reflects the RBI’s commitment to sustaining economic momentum and encouraging long-term capital flows.”
Avneesh Sood, Director of Eros Group, added, “With global uncertainties, tariff risks, and uneven industrial growth, a neutral stance provides predictability and cushions sentiment. Rural consumption remains resilient, and public capex is driving infrastructure momentum. This combination, if sustained, can lay the groundwork for a stronger and broader-based real estate recovery in the coming quarters.”
Amit Jain, CMD of Arkade Developers, stated, “For the residential real estate sector, this signals welcome stability in home loan interest rates—an important factor for both first-time homebuyers and seasoned investors. With inflation now projected at 3.1% for FY26 and GDP growth maintained at 6.5%, the central bank’s balanced approach underscores that price stability and economic momentum can indeed coexist. This clarity is especially timely as we approach the festive season, a traditionally strong period for housing demand. Despite external headwinds like global tariff uncertainties, India’s housing market continues to demonstrate resilience, driven by a sustained demand for quality homes and consistent policy support. The outlook remains optimistic.”
Rohit Kishore, CEO of Hero Realty, mentioned, “Stable borrowing costs will benefit both homebuyers and developers. For buyers, it means continued lower EMIs and easier access to home loans, which can encourage more people to buy homes. For developers, the sustained interest rates will help manage costs and finish projects on time. This policy continuity will boost confidence in the market and maintain demand for homes and office spaces.”
Mayank Jain, CEO of KREEVA, added, “While a further rate cut could have served as a timely catalyst to boost market sentiment and accelerate economic revival, the central bank’s steady approach still sends a strong signal of macroeconomic stability. This consistency will help anchor buyer confidence and indirectly benefit the real estate sector. Developers are expected to remain active, particularly in emerging growth corridors, as the environment continues to support both demand and supply-side expansion. Overall, this decision contributes to a stable platform for continued momentum.”
Vikas Dua, Founder & Director of Chintamanis, stated, “We have high hopes that the government will sustain this momentum with supportive policies in the upcoming monetary policy announcement. While interest rates are just one factor, a further reduction would boost the confidence of buyers and will further induce their investment & consumption decision.”
Amit Goyal, MD of India Sotheby’s International Realty, concluded, “The RBI’s neutral policy stance, coupled with a 6.5% GDP growth outlook and a softer inflation trajectory, reflects a steady macroeconomic confidence. Strong consumption and stable urban demand are already supporting India's housing sentiment. With home loan rates easing with 3 previous repo rate cuts in 2025, we believe the momentum in home buying will remain cautiously positive—much like the RBI’s approach, balancing domestic resilience with global uncertainties.”
Frequently Asked Questions
What is the current repo rate set by the RBI?
The current repo rate set by the RBI is 5.5%.
How have housing sales been affected in the top metros?
Housing sales have seen a notable 20% decline in the top metros, with just 96,285 homes sold in Q2 2025, down from 120,335 a year ago.
What impact do the US tariffs have on the Indian real estate sector?
The US tariffs, particularly the 25% tariff on Indian goods, can impact nearly $100 billion in outbound trade and shave 30 basis points off FY26 GDP growth, affecting the real estate sector by reducing consumer confidence and investment.
Why is the affordable housing segment under pressure?
The affordable housing segment is under pressure due to increasing residential prices and the impact of global trade tensions and tariffs, which affect the MSMEs, a key target audience for this segment.
What is the RBI's stance on the repo rate and why?
The RBI has maintained a neutral stance on the repo rate, keeping it unchanged at 5.5%, citing inflation stability and geopolitical uncertainty.
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