RBI Retains Optimistic Outlook; Reduces Repo Rate By 25 Basis Points

To borrow the catch line of a popular cola advertisement from the eighties, ‘Happy Days Are Here Again!’ Earlier this month, the Reserve Bank of India (RBI) once again opted to reduce the repo rate by 25 basis points, bringing it down to 6%. This second successive cut by the central bank comes right after a similar 25 bps reduction during February 2025.

Home seekers are jubilant, with the caveat being that the banks and lending institutions pass on the benefits in the form of reduced interest rates on home loans down the line as well.

Developers too are optimistic and the association heads shared their feedback to the RBI announcement. G Hari Babu, National President, NAREDCO, opined, “RBI’s 25 basis point reduction in the repo rate is an accommodative stance that will give a boost to the real estate sector. Lower interest rates will make home loans affordable, which may boost housing demand across categories. This will result in increased residential sales, better liquidity in the market, and a gradual depletion of unsold inventory.”

According to him, this will also encourage developers to launch new projects, especially in affordable housing. With the reduction in borrowing costs, more aspiring homeowners may enter the market, which will help bridge the demand-supply gap in the sector. Commercial real estate will also benefit, as easier financing may encourage businesses to expand and invest in office and retail spaces. Overall, RBI’s decision reflects a strong growth outlook and gives a much-needed boost to real estate sentiment.

Prashant Sharma, President, NAREDCO Maharashtra, emphasised that the RBI’s decision to reduce the repo rate by 25 basis points to 6% comes as a welcome and timely move for the Indian economy. “At a time when global headwinds and tariff concerns loom large, the accommodative stance by the MPC will serve as a much-needed catalyst to revive consumption and investment cycles. For the real estate sector, this signals increased affordability for homebuyers and improved liquidity conditions for developers. It will directly impact housing demand, particularly in the affordable and mid-income segments, and will boost sentiments in the real estate sector. This policy stance will further encourage transparency and trust, essential for sustainable sectoral growth.”

Providing a research-based analysis, Anuj Puri, Chairman, ANAROCK Group, pointed out that RBI’s decision to reduce the repo rates by 25 bps (to 6%) second time this year was expected to the backdrop of moderating inflation. Home loan borrowers may not see much meaningful or immediate interest rate relief. Banks have not transmitted earlier MPC rate cuts to borrowers because of higher funding costs, pressure on net interest margins, higher NPAs, and a cautious lending climate.

If banks do pass on the benefits of the last two rate cuts, it will be a boost to homebuyers, particularly for those eyeing affordable housing. Many first-time homebuyers who had been hesitating to take the plunge may make their move if home loan rates reduce, he said.

Housing prices have risen across the top 7 cities in the last one year. As per ANAROCK Research, Q1 2025 saw average housing prices rise by anywhere between 10-34% in the top 7 cities, with NCR and Bengaluru recording the highest 34% and 20% jump, respectively. The average prices in top 7 cities collectively stood at approx. INR 7,550 per sq. ft. in Q1 2024-end, while in Q1 2025-end it increased to approx. INR 8,835 per sq. ft. – a collective increase of 17% annually.

According to the ANAROCK Group Chairman, home loan borrowers whose lenders don’t pass on the rate cut could consider negotiating a lower rate or a balance transfer. They should keep their expectations realistic as there may be only partial relief, if any. Any potential EMI reduction should be used to prepay home loans or invest for higher returns instead of on mere consumption.

So the eyes of home seekers are now on the lending institutions with immense hopes for good news in the form of more affordable home loans soon.

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