As the Reserve Bank of India (RBI) concludes its three-day policy meeting, real estate industry leaders are anticipating a potential reduction in the repo rate, which could significantly impact housing demand. Realtors’ apex bodies, CREDAI and Naredco, are hopeful for at least a 25 basis points cut, with expectations for a 50 basis point reduction. This move could lower borrowing costs, stimulate housing demand, and boost the overall economy. With housing loans already rising and inflation under control, a rate cut is expected to spur demand, particularly in the affordable housing sector.
RBI's Expected Rate Cut: A Key Driver for Housing Demand
India’s real estate industry is closely watching the Reserve Bank of India’s (RBI) upcoming monetary policy decision, with hopes of a significant reduction in the benchmark repo rate. The rate-setting panel began its deliberations on Wednesday, and the announcement by Governor Sanjay Malhotra is expected on Friday morning.
Realtor organizations CREDAI and Naredco have both expressed optimism that the RBI will reduce the repo rate by at least 25 basis points, with some industry figures like Shekhar Patel, the National President of CREDAI, pushing for a more substantial 50 basis point cut.
"Housing demand in the last three months has been a bit slow. A rate cut will help immensely in improving sales," Patel stated. The last reduction occurred in April 2025, when the RBI lowered the rate by 25 basis points to 6%, and the expectation is that this trend will continue, giving much-needed relief to the housing market.
The Link Between Repo Rate Cuts and Housing Demand
A reduction in the repo rate has a direct and indirect impact on housing demand. According to G Hari Babu, National President of Naredco, a lower repo rate typically leads to reduced borrowing costs for both homebuyers and developers, easing liquidity constraints. He also emphasized the macro-economic stability currently prevailing in India, especially in terms of inflation control, which makes a rate cut timely and beneficial.
The housing sector’s ability to stimulate demand is pivotal, as it is intrinsically linked to over 200 industries, from cement and steel to furniture and furnishings. A rate cut is expected to generate broader economic activity, fueling job creation and contributing to overall economic growth.
Impact on Home Loan Borrowing and Housing Sector Performance
As the RBI reduced its repo rate by 50 basis points earlier in 2025, banks responded by lowering their repo-linked external benchmark-based lending rates (EBLRs) and marginal cost of funds-based lending rates (MCLR). The latest data from the RBI indicates that housing loan outstanding has risen to Rs 30 lakh crore as of April 2025, up from Rs 27.41 lakh crore in the previous year. This reflects growing demand for housing loans and a positive response from the financial sector.
Realtors believe that a further reduction in the repo rate will encourage homebuyers to act on their buying decisions, particularly in the affordable housing segment, where interest rates are increasingly becoming a decisive factor.
Ramani Sastri, the Chairman & Managing Director of Sterling Developers, reiterated that lower home loan rates would be a boost for both homebuyers and developers, fueling continued growth in the sector.
Industry Leaders Optimistic for a Rate Cut to Boost Consumer Sentiment
Other realty figures have also weighed in on the potential benefits of a repo rate reduction. Dhruv Agarwala, Group CEO of Housing.com, made a strong case for a 25 basis point cut, pointing out that lower home loan rates would enhance affordability for potential buyers, especially in the context of demand tapering and rising input costs that developers are facing.
Umesh Gowda H A, Chairman of Sanjeevini Group, highlighted that home loan interest rates have already dropped below 8% at some banks, a positive signal of the timely transmission of previous repo rate cuts. He emphasized that a further reduction would benefit not only existing homebuyers, who would enjoy reduced EMIs, but also those who have been hesitant to buy a home due to economic uncertainty.
Meanwhile, Ashok Kapur, Chairman of Krishna Group, expects a continued accommodative stance from the RBI, which could lead to further cuts to provide relief to various sectors of the economy. Harvinder Sikka, MD of Sikka Group, added that such a rate reduction would boost consumer sentiment, crucial for driving real estate sales.
Conclusion: Repo Rate Cuts as a Catalyst for Economic Recovery
As realtors and industry leaders eagerly await the RBI’s decision on the repo rate, there is widespread consensus that any reduction will provide significant relief to the real estate sector. By lowering borrowing costs and improving liquidity, a rate cut will not only stimulate housing demand but also spur economic growth, particularly in affordable housing.
With the current macroeconomic environment being favorable for such policy moves, industry experts believe that the housing sector is poised to benefit from the RBI’s accommodative stance. As interest rates decrease, consumers and developers alike will find new opportunities for growth, with the housing market remaining a key contributor to India’s economic recovery.
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