RBI's 25-bps repo rate cut may revive housing demand as EMIs ease

The Reserve Bank of India’s (RBI’s) 25 basis points (bps) repo rate cut on Friday, the latest in a series of easing moves this year, is expected to revive housing demand by improving affordability and nudging fence-sitters into the market, said sector experts.

 

According to Anuj Puri, chairperson, Anarock Group, currently, the average home loan interest rate (repo-linked) in India is around 7.9 per cent per annum.

 

Once the latest rate cut benefits are passed on by the banks, the rate will hover around 7.65 per cent per annum, a key factor that can attract homebuyers. 

 

Samantak Das, chief economist and head – research and REIS, India, JLL, said, “This move is the catalyst needed to revive purchasing power and activate the crucial segment of first-time affordable and mid-market homebuyers. They have been waiting on the sidelines, transforming fence-sitters into active buyers.”

 

The rate cut comes at a time when housing sales across the top Indian cities are moderating, with affordability concerns being one of the key factors behind the plateauing.

 

Housing sales fell 20 per cent across the top seven Indian cities during the first nine months of 2025 compared with the same period last year, according to Anarock Research. 

 

Puri said, “Demand for affordable and mid-segment homes remains strong in the country, but is hamstrung by high prices impacting affordability. This rate cut can potentially bring at least some fence-sitters to the market.”

 

Home prices have risen by around 10 per cent this year so far. The affordable housing segment has been struggling. According to Anarock, the share of affordable housing sales in the overall sales plummeted from 38 per cent in 2019 to 18 per cent in nine months of 2025.

 

Supplies dropped from 40 per cent to 13 per cent. The supply-to-demand ratio for affordable housing across India’s top eight cities dropped sharply to 0.36 in the first half of 2025, from 1.05 in 2019. This signals a severe undersupply in the segment, according to a report by Knight Frank India and Naredco.

 

Das is observing price resistance in the affordable and mid-segment housing categories, with estimates projecting residential sales in 2025 to be 8-9 per cent down from last year's robust 300,000+ units (in the top seven markets of India).

 

The latest rate cut, apart from the 100 bps rate cuts announced by the apex bank since February 2025, reforms in goods and services tax (GST) on key construction materials like cement, and new income tax provisions announced in Budget 2026, are expected to ease affordability pressures. They would particularly boost affordable (<₹40 lakh) and mid-income (₹40-80 lakh) segments, which are considered sensitive to interest rate fluctuations.

 

Shishir Baijal, international partner, chairperson & managing director (MD), India Knight Frank, said, “The reduction in borrowing costs should offer timely relief to the real estate sector, where lower home loan rates can help sustain momentum in end-user demand and improve developers’ cost structures. We hope this will be instrumental in boosting affordable and mid-income housing sales, which have been witnessing a sequential decline over the past few quarters.”

 

According to Adhil Shetty, chief executive officer (CEO) & co-founder, BankBazaar, home loan borrowers will see modest but meaningful relief as lending rates adjust. For a ₹50 lakh loan over 20 years, the fall in rates (by 125 bps so far) can reduce lifetime interest outgo through equated monthly instalments (EMIs) by about ₹9 lakh.

 

According to Ashish Agarwal, founder & MD, PropertyPistol, the 25-bps reduction can lower the EMI on a ₹50 lakh home loan by around ₹750–800 per month over 20 years, providing the psychological nudge many salaried buyers need. 

 

Pradeep Aggarwal, founder & chairperson, Signature Global (India), said, “This latest rate cut is expected to further strengthen market sentiment, enhance purchasing power, and support continued growth in housing demand across key segments, keeping real estate a preferred long-term asset class.”

 

Industry executives believe that the cut comes at a decisive moment, offering both sentiment boost and financial relief. Anshuman Magazine, chairperson & CEO, India and South-East Asia, MEA at CBRE, believes that easing EMIs would strengthen demand across segments. “We expect market momentum to accelerate further in the coming weeks,” he said.

 

For developers, the rate cut lowers the cost of capital, helping the efficient execution of projects. Khiroda Jena, chief financial & risk officer, Bombay Dyeing (Bombay Realty), said, “Lower rates ease developers’ borrowing costs, improve liquidity cycles, and support more efficient capital deployment — critical at a time when project pipelines are expanding.”

 

Reeza Sebastian Karimpanal, chief revenue officer, residential, Embassy Developments, believes that improved financing conditions and stronger liquidity sentiment are encouraging. 

 

Additionally, the industry experts believe that the rate cut may boost execution in commercial real estate as well as the investor momentum across the overall sector. However, Puri cautioned that the real impact hinges on the effective transmission of these benefits.