The Reserve Bank of India (RBI) cut the policy repo rate by 25 basis points this month and set it to 6.25 per cent from its current level of 6.5 per cent and is said to mark a significant step towards improving liquidity in the market. This is the first rate cut in five years and when coupledwith the government’s recent tax slab revisions, enhanced TDS limits on rental income, and increased home loan interest deductions, will increase disposable income for homebuyers.
On behalf of Confederation of Real Estate Developers’ Associations of India (CREDAI), Boman Irani, President, CREDAI National said, “The RBI’s decision to reduce the repo rate by 25 basis points to 6.25% supplements recent announcements in the budget aimed at boosting spending and spur economic growth. This supportive monetary policy was imperative, especially after the recent 50-basis-point reduction in the Cash Reserve Ratio (CRR), which has already injected significant liquidity into the banking system. As inflations continues to remain a notch higher than the medium-term target of 4%, the central bank has its task cut out - Contain inflation, inject liquidity into banking system and cut repo rates in the coming quarter too. While the current cut may have a limited direct impact, we anticipate that a further rate cut in the next MPC meeting will provide stronger impetus to overall demand, accelerating housing sales, particularly in the mid-income and affordable segments.”
Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd sharing positive sentiments said, “The RBI’s repo rate cut to 6.25%, its first in nearly five years— provides a significant boost to India’s real estate market. Lower borrowing costs are set to enhance home affordability and fuel buyer confidence, particularly in the mid-income and premium segments. With our sector already making a substantial economic impact this move paves the way for accelerated growth, increased project funding, and a thriving ecosystem that supports sustainable urban development.”
With expectation of further cuts in forthcoming MPC meetings, Ashish Puravankara, Managing Director, Puravankara Limited expressed, “The Reserve Bank of India’s decision to reduce the repo rate while continuing its neutral stance is a welcome move that will significantly boost the economy. The Monetary Policy Committee’s unanimous decision reflects its focus on maintaining a durable alignment of inflation with the target while supporting growth. It complements the government’s fiscal policy, tax reliefs, and investmentdriven measures announced in the recent Union Budget. This decision will also have a large impact on housing demand in the country. With control of inflation, we expect more cuts in the upcoming meetings, further boosting demand, especially in mid-segment housing.”
Manoj Gaur CMD Gaurs Group and Chairman CREDAI National was of the view that, coming at the heels of a people’s friendly budget, the repo rate cut of 25 bps announced by RBI will definitely infuse positive sentiments in the economy. “Coupled with the income tax rebate, and tax concessions on second home and rental income, it will not only infuse liquidity in the market but also leverage the real estate sector’s investment potential. Real estate nationally has seen some good investment nationally in the past year and this trend is bound to continue in the coming quarter with this announcement.”
According to Vice Chairperson of Nahar Group and Senior Vice President of NAREDCOMaharashtra, Manju Yagnik the lower home loan interest rates will provide much-needed relief to homebuyers, making property purchases more affordable by reducing EMIs. “This move is expected to drive demand for housing, boosting market activity and encouraging more people to invest in realestate. It also enhances confidence among both buyers and developers, leading to a stronger and more dynamic sector. Developers will benefit from easier access to funds, helping them complete projects faster and meet the rising demand. This rate cut is a much-needed push that will help both homebuyers and developers while driving positive momentum in real estate,” she said.
As per Prashant Sharma, President, NAREDCO Maharashtra the rate cut will provide much-needed relief to existing and prospective homebuyers, boosting housing demand and enhancing affordability. He said, “We expect banks to ensure swift transmission of the reduced rates to borrowers, allowing a direct impact on home loan interest rates. The real estate sector has been a key driver of economic growth, and lower borrowing costs will contribute positively to the overall industry sentiment.”
HOUSING SECTOR GROWTH STIMULANT
As a result of the 25 basis points cut in the repo rate by the RBI’s Monetary Policy Committee, the reduced rate from 6.50% to 6.25%, will result in reduction of interest rates for both individuals and business borrowers. As per finance experts, individuals can expect a reduction in EMIs on home loans as well as personal loans. Businesses will benefit from lower borrowing costs, which can lead to increased investment in expansion and new projects.
Jayant B Manmadkar, CFO, Brigade Group said, “The reduced rate from 6.50% to 6.25%, will result in reduction of interest rates for both individuals and business borrowers, and stimulate economic growth. Individuals can expect a reduction in EMIs on home loans as well as personal loans. Businesses will benefit from lower borrowing costs, which can lead to increased investment in expansion and new projects. With the GDP growth projected at 6.7% and retail inflation at 4.2% for the fiscal year 2025-26, the rate cut can be seen as a balanced approach to boost economic stability and growth.”
Sharing her views on the impact of RBI policy rate cut on housing loans & macros by Kanika Singh Chief Risk Officer– IMGC (India Mortgage Guarantee Corporations) said, “The Reserve Bank of India has cut the repo rate by 25 basis points, to support economic growth while balancing the macro and geopolitical factors. Retail inflation has moderated, and the RBI had recently announced liquidity support of Rs 1.5 lakh crore, this could well support its decision to start the monetary easing cycle. Additionally, the recently announced tax relief and benefits in the Union Budget are expected to positively impact the economy by boosting consumption and investment. As a result, loans will become more affordable, providing much-needed relief to individuals. Timely transmission of the rates will be key to make loans affordable.”
Rishi Anand, MD & CEO, Aadhar Housing Finance Limited stated, “The rate cut by 25 basis points after a gap of nearly five years is much in line with our expectations and set to provide an overall support as well as be a catalyst to growth enablers outlined in the recent union budget. The benefits of this rate cut will begin to accrue on an immediate basis and expected to be fully realized in next 3 to 6 months, benefiting customers. This step is in the right direction aligning with the sustained central bank assurance of proactive liquidity support and allay concerns of liquidity crunch, thereby accelerating growth.”
RBI’s dovish stance follows most global major central banks that have also cut rates or have shown an indication to do so as per Viram Shah, Founder & CEO, Vested Finance expressed, “The rate cut will likely further narrow the US-India bond yield spread that is already at 20-year low, making the US bonds more attractive for foreign investors. This may lead to more outflows in coming months leading to investments into US bonds and stock markets. A weak rupee also makes a case for investing in US markets as investors will benefit from strong dollar. At the time Indian market has been struggling, investors should consider investing in global equities, especially US-listed, as they may not just provide alpha but also help diversify their portfolio. Domestic focused stocks in the US, such as utilities, steelmakers, etc. look attractive,” he said.
Anshuman Magazine, Chairman & CEO, India, Southeast Asia, Middle East & Africa, CBRE also believes that the RBI’s decision to cut the repo rate by 25 bps will allow more liquidity to flow in and further stimulate growth while simultaneously bringing relief for borrowers. “This much-awaited move by the RBI is poised to significantly boost the housing segment by stimulating demand, particularly among first-time homebuyers. It also offers an opportunity for developers to launch new projects, as this decision will also bring relief from cost pressures on construction costs. Overall, the rate cut will pave the way for expanded opportunities for buyers as well as developers,” he stated.
WHY THE RATE CUT
Repo rate (Repurchase Agreement Rate) is the interest rate at which commercial banks borrow money from the central bank. It helps banks meet short-term liquidity needs by borrowing funds. Higher repo rate means higher interest rates for consumers & businesses translating into slower borrowing & spending. Whereas, Lower repo rate means lower interest rates for borrowers translating into increased borrowing & spending.
The Repo Rate Cut will lower borrowing costs making it easier for businesses to invest, leading to higher production and job creation. It makes loans cheaper, lowering EMIs, and boosting borrowing
and spending. On the other end, banks may reduce interest rates on savings accounts and fixed deposits, making savings less attractive, driving consumers toward investing in stocks, mutual funds, or real estate.
The declining Inflation with Consumer Price Index (CPI) easing to 5.22% in December 2024, a fourmonth low, down from 5.48% in November provided room for monetary easing. Furthermore, RBI had recently introduced measures to improve liquidity in the banking system by injecting Rs 1.5 trillion. Liquidity injection eased tight credit markets, and the repo rate cut will ensure liquidity and lower rates to boost growth.
In times of global economic uncertainty, recent US tariffs on Canada, Mexico, and China sparking trade war fears and weakening of the rupee to 87.29 per dollar, raising inflation risks, a repo rate cut could help cushion the impact of external shocks and support domestic growth.
In addition, after the Union Budget 2025-26 reduced personal income tax to spur consumption, the RBI’s repo rate cut supports the government’s tax reductions by lowering borrowing costs and sustaining demand.
Experts opine, RBI’s repo rate will help boost economic growth by lowering borrowing costs, but may lead to inflationary pressures making the 4% target set by RBI MPC quite challenging.
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