RBI's rate pause seen supporting housing demand, project execution

Real estate developers and consultants said RBI's decision to keep rates unchanged will support housing demand, project execution and investor confidence despite rising cost pressures

Policy stability will help sustain housing demand and support project execution even as rising costs, geopolitical tensions, and inflationary pressures pose challenges, said real-estate developers and consultants on Friday.

 

They welcomed the Reserve Bank of India’s decision to keep the repo rate unchanged at 5.25 per cent.

 

Industry executives said the Monetary Policy Committee’s (MPC’s) decision provided predictability to homebuyers and developers at a time when global uncertainties are affecting input costs and investor sentiment.

 

Sanjay Dutt, managing director and chief executive officer, Tata Realty and Infrastructure, said: “Stable borrowing costs will continue to support housing demand, particularly in key urban centres where aspirations for homeownership remain strong.”

   

Anuj Puri, chairman, Anarock group, said: “The RBI’s decision is a key anchor for residential real estate. Stable borrowing costs ensure that the market is not simultaneously burdened by higher material costs and rising loan rates.”

 

Geopolitical tensions in West Asia have pushed up global oil prices and construction costs, while also prompting some overseas investors to delay residential investment in India, he said.

 

Through their earnings in the fourth quarter of FY26, top Indian developers have hinted at a 2-5 per cent increase in construction costs due to the conflict, with a limited but manageable impact on margins.

 

The decision comes at a time when housing supply is outpacing sales. The Anarock data showed sales declined by 4.43 per cent year-on-year (Y-o-Y) to 404,005 units in FY26, while new supply stood at 445,405 units, up by almost 11 per cent.

 

Inventories increased by 7.4 per cent to 601,210 units.

 

“At a time when residential sales, particularly in the mid-market and mass segments, have moderated, and developers continue to face elevated input costs, a stable rate is most needed. The current stance should help preserve borrowing affordability, provide visibility on financing costs, support disciplined project execution, and reinforce investor confidence across residential and commercial real estate,” said Anurag Mathur, CEO, Savills India.

 

Industry experts said a stable financing environment would be critical in absorbing the growing inventories.

 

Lata Pillai, senior managing director and head of capital markets, JLL India, said the central bank had sought to balance growth concerns with emerging inflationary risks arising from elevated energy prices and the prospect of a weak monsoon.

 

“While inflationary pressures are likely to rise, the inflation rate remains within the target band. The status quo on interest rates is positive for the real-estate market,” Pillai said.

 

She cautioned, however, that higher construction costs could be passed on to buyers, potentially affecting affordability, particularly in the mid-income housing segment, even as the share of affordable housing continued to shrink.

 

As of June 2026, home loan interest rates in India start at around 7.10 per cent per annum for borrowers with strong credit profiles. Housing finance companies typically offer loans at rates ranging from 8.25 per cent to 13.50 per cent.  

 

Developers said the unchanged rate environment would support long-term investment decisions and maintain momentum across both residential and commercial real estate.

 

Navin Makhija, managing director of The Wadhwa Group, said stable borrowing costs encouraged home purchases and facilitated disciplined capital allocation across the real-estate value chain.

 

“While elevated energy prices and geopolitical developments warrant caution, the underlying fundamentals of Indian real estate remain strong,” Makhija said, adding that demand for premium housing in Mumbai continued to be supported by infrastructure development and rising incomes.

 

“Overall construction costs are already on the rise, led by increasing material and labour costs, which may lead to workforce inadequacy and delayed project timelines. This rise in construction cost is likely to be ultimately passed on to homebuyers in the form of higher property prices, thus affecting affordable and middle-income housing segments,” said Vimal Nadar, National Director & Head, Research, Colliers India. 

Stakeholders in commercial real estate too were positive.

 

Manas Mehrotra, founder of flexible workspace operator 315Work Avenue, said stable interest rates would support leasing and long-term investment.

 

“As businesses increasingly adopt agile and cost-efficient workspace strategies, a supportive policy framework will further accelerate expansion and strengthen India’s evolving commercial real estate,” he said.

 

Consultants said the decision showed confidence in the resilience of the domestic economy despite external headwinds.

 

Shishir Baijal, chairman and managing director, Knight Frank India, said the central bank had adopted a calibrated approach amid geopolitical uncertainties and pressure on the rupee.

 

“For real estate, the decision provides much-needed stability and predictability. Stable borrowing costs are particularly important for sustaining residential demand, where affordability remains a key consideration,” Baijal said.

 

“India’s commercial real-estate market continues to benefit from strong occupier demand from global capability centres (GCCs), multinational corporations, and technology firms, supported by the country’s growing economic prominence, improving infrastructure, and deep talent pool,” Dutt added.

 

Developers also expect the pause to aid execution and investor confidence.

 

Pratik Tibrewala, senior vice-president and head of corporate finance, M3M India, said stable rates would keep the costs of home loans manageable, support project execution, and reinforce real estate’s appeal as a long-term asset class.