Home loans play a pivotal role in home buying, particularly for end-users, as the majority rely on financing to purchase their dream homes. A reduction in interest rates directly impacts affordability, making homeownership more accessible and boosting demand across all segments of the housing market.
In its last Monetary Policy Committee (MPC) review meeting, the Reserve Bank of India (RBI) reduced the repo rate by 25 basis points after maintaining a consecutive status quo for eleven meetings. This marked the beginning of a much-anticipated rate cut cycle, and we expect further reductions in the upcoming MPC meetings.
A sustained decline in interest rates is expected to act as a catalyst for the residential real estate sector in FY 2025-26. Lower home loan rates will not only reduce the overall cost of borrowing but also enhance loan eligibility, encouraging more buyers—both first-time homeowners and upgraders—to enter the market. Additionally, with increasing urbanization and strong demand for quality housing in metro and Tier II cities, favorable lending conditions will further accelerate the growth of the housing sector in the coming year.
