The Monetary Policy Committee of the Reserve Bank of India in its February 2025 meeting reduced the policy repo rate for the first time since February 2023 by 25bps showing greater confidence on the disinflation path. It followed it up with another 25bps cut in April 2025 to bring the repo rate to 6%.
Like the RBI, many central banks globally followed an easing cycle in 2024, however, faced with exacerbated trade related uncertainties, they remained guarded in their rate action in the first quarter of 2025, reducing rates either with caution or taking a pause.
According to economists’ poll, the RBI to support a weakened economy may initiate another rate cut in August, too. India’s GDP grew by 6.5% in FY 25, hitting a 4-year low while CPI dropped to 3.16% in April 2025, the lowest since July 2019. The transmission of policy repo rate changes to banks’ deposit and lending rates continued during 2024-25 albeit at a slower pace.
Bengaluru-based real estate developer Sanjeevini Group Chairman and Founder, Umesh Gowda H.A said home loan interest rates have dropped below 8% in some banks which is a good sign of timely transmission of two repo rate cuts by the RBI.
“We expect another 25bps cut in repo rate and hope that more banks quickly pass on the benefit to borrowers. This will provide a much-needed relief to not just existing homebuyers in the form of reduced EMI but also those who have been postponing their decision to buy a home. Real estate sales have been steady and a decline in interest rates will also benefit developers in the form of reduced financing expenses thereby translating into improvement in project viability and cheaper working capital.”
Garvit Tiwari, director and co-founder of property consulting firm InfraMantra said the RBI has initiated two interest rate cuts in 2025. With record low inflation and stable economic growth, another 25-bps cut is imminent as the apex bank will look to stimulate growth by making lending affordable for businesses and consumers.
“The three consecutive quarters of sub-1 lakh unit launches in top 9 cities and sales declining by 19% in Q1 point to some prevailing caution on the part of both developers and homebuyers. A cut in interest rate will give a spur to housing demand and encourage new entrants to make real estate purchases.”
Vijay Harsh Jha, founder and CEO, VS Realtors said India’s economy is poised for a strong growth in FY26.
“The need of the hour is a continued focus on keeping interest rates low in order to support the growth momentum. India’s housing sector, though, have shown some weaknesses for the past couple of quarters, the momentum must be maintained by making loans accessible and affordable in order to drive housing demand.”
While a low-interest rate regime benefits borrowers, savers have been bearing the brunt with deposit rates falling across banks. With housing market witnessing saturation due to slow sales, rising prices and demand-supply mismatch; and stock market exhibiting volatility, the avenue for parking money in return generating asset is diminishing. Moreover, having a traditional real estate in the portfolio has become equally difficult.
Ankur Jalan, CEO, Golden Growth Fund said investors can look at Alternative Investment Funds (AIFs) as a means to not just have real estate in their portfolio but also to earn handsome returns.
“In such a scenario, those looking to earn good returns, and have real estate in their portfolio can look at alternative investments like AIFs which are regulated by SEBI, provides diversification across properties and geographies, are professionally managed, require relatively smaller investment and have tax advantages.”
The RBI in its annual report FY25 said that going forward, domestic economic activity is expected to strengthen from the lows of H1:2024-25. Headline inflation is expected to ease and move further towards the target in 2025-26. “Monetary policy is committed towards achieving durable price stability, which is a necessary prerequisite for high growth on a sustained basis,” the apex bank said.
