Repo Rate Cut Expected to Boost Housing Demand
Realtors' apex bodies CREDAI and Naredco anticipate a 25 basis points reduction in repo rate by the RBI, which is expected to significantly boost housing demand and improve sales.
Repo RateHousing DemandReal EstateRbiMonetary PolicyReal Estate NewsJun 05, 2025
New Delhi, Jun 5 (PTI) - The RBI's rate-setting panel began its three-day monetary policy meeting on Wednesday, with Governor Sanjay Malhotra set to announce the decision on Friday morning. CREDAI National President Shekhar Patel expressed his expectations, stating, “We are expecting a 50 basis point reduction in repo rate. This will boost housing demand to a great extent.”
Patel emphasized that a minimum of a 25 basis points cut is necessary. He noted that housing demand has been sluggish over the past three months, and the rate cut would provide a much-needed boost to sales. The RBI has already reduced the key interest rate (repo) by 25 basis points each in February and April, bringing it to 6 percent.
Naredco's National President G Hari Babu highlighted the importance of the RBI's monetary policy on the real estate sector. “In the current economic environment, where inflation is largely under control and macroeconomic indicators are stable, a reduction in the repo rate would be a timely and positive move. It would provide much-needed relief to both homebuyers and developers by lowering borrowing costs and easing liquidity.”
Hari Babu further explained that the real estate sector is a vital driver of the economy, with linkages to over 200 sectors, including cement, steel, furniture, and furnishings. “Therefore, a cut in the repo rate will not only boost housing demand but also spur overall economic growth and generate large-scale employment,” he added.
According to an assessment by the RBI, in response to the 50-basis points cut in the repo rate since February 2025, most banks have reduced their repo-linked external benchmark-based lending rates (EBLRs) and marginal cost of funds-based lending rate (MCLR). Housing loan outstanding has increased to Rs 30 lakh crore as of April 18, 2025, from Rs 27.41 lakh crore year-on-year, according to the latest RBI data.
Sterling Developers CMD Ramani Sastri echoed the sentiment, stating that the real estate sector is hopeful for a further rate cut, which would be highly encouraging for homebuyers and developers alike. Dhruv Agarwala, Group CEO of Housing.com, emphasized the strong case for a 25 basis points rate cut. “Lower home loan rates would enhance affordability and sustain demand, particularly critical at a time when we are witnessing early signs of demand tapering and developers pulling back from the affordable housing segment due to rising input costs,” Agarwala said.
Bengaluru-based realty firm Sanjeevini Group Chairman and Founder, Umesh Gowda H A, noted that home loan interest rates have dropped below 8 percent in some banks, which is a positive sign of the timely transmission of the two repo rate cuts by the RBI. “We expect another 25 basis points cut in the repo rate and hope that more banks quickly pass on the benefit to borrowers,” he said. This would provide much-needed relief to existing homebuyers in the form of reduced EMIs and encourage those who have been postponing their decision to buy a home.
Ashok Kapur, Chairman of Krishna Group and Krisumi Corporation, commented, “The RBI had adopted an accommodative stance in its previous policy review meeting, and it is expected that we will again see a cut, giving further relief to the various sectors of the economy.” Garvit Tiwari, Director & Co-Founder of InfraMantra, stated that a cut in interest rates will spur housing demand and encourage new entrants to make real estate purchases. Realty firm Sikka Group MD Harvinder Sikka expects the rate cut to boost consumer sentiment and drive the market forward.
Frequently Asked Questions
What is the repo rate and why is it important?
The repo rate is the interest rate at which the central bank (RBI) lends money to commercial banks. A reduction in the repo rate can lead to lower borrowing costs for consumers and businesses, thereby boosting demand and economic activity.
How does a repo rate cut impact the housing market?
A repo rate cut typically leads to lower home loan interest rates, making home purchases more affordable. This can increase demand for residential properties and benefit both homebuyers and developers.
Who are CREDAI and Naredco?
CREDAI (Confederation of Real Estate Developers' Associations of India) and Naredco (National Real Estate Development Council) are the apex bodies representing real estate developers in India. They advocate for policies that support the growth and development of the real estate sector.
What are the expected outcomes of the RBI's monetary policy meeting?
The RBI's monetary policy meeting is expected to result in a 25 basis points reduction in the repo rate. This decision is anticipated to boost housing demand, improve liquidity, and support overall economic growth.
How does the real estate sector contribute to the economy?
The real estate sector is a significant driver of the economy, with linkages to over 200 sectors including construction, cement, steel, furniture, and more. It generates large-scale employment and contributes to economic growth through increased demand and investment.
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