RBI's 50-bps repo cut to boost mid-income, affordable housing demand
The
Reserve Bank of India
's decision to cut the repo rate by 50 basis points to 5.5% is expected to help improve
housing affordability
and prop up demand for residential properties across the country, especially in the mid-income and
affordable housing
segments, experts said.
This is the third consecutive rate cut by the central bank so far in 2025 taking it to a cumulative 100 basis points. The rate cut comes amid signs of slowing momentum in housing sales in some markets, as sustained price increases begin to weigh on buyer sentiment.
'The rate cut is expected to bring down home loan interest rates, improving affordability and widening access to homeownership. This could provide a meaningful push for first-time buyers and households looking to upgrade, especially in price-sensitive urban and suburban markets. We expect this move to translate into increased enquiries and faster decision-making in the coming months,' said Deepak Goradia, CMD, Dosti Realty.
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With home loan rates likely to ease following this rate reduction, realty developers are optimistic about a fresh wave of end-user activity.
'For the real estate sector, this rate reduction is set to bolster credit lending, accelerate buying velocity, and enhance development momentum. Lower mortgage rates make home ownership more attainable, driving greater demand. Additionally, this move could spur refinancing and strengthen investment in branded properties known for their attractive returns, particularly among Grade A developers,' said Niranjan Hiranandani, Chairman, Hiranandani Group.
Lower borrowing costs could also unlock fence-sitter demand in tier II and III cities, where salaried buyers are highly rate-sensitive. The low-cost and affordable housing segment--a key pillar of the government's objective of Housing for All--is expected to benefit the most as loan instalments become more manageable.
The March quarter performance reflected continued stability in India's residential sector, with primary sales reaching 88,274 units, a 2% on-year increase, according to Knight Frank India. While overall sales remained steady, performance varied across markets, with the low-income and affordable segments lagging.
Commercial real estate may also see indirect benefits. Reduced funding costs are expected to improve project viability for office and retail developments, especially in under-construction assets that rely on institutional debt.
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