RBI's Repo Rate Cut - Will it make Homes Affordable for First-time Buyers?

If banks pass on the benefit, the Reserve Bank of India's (RBI) decision to lower the repo rate by 25 basis points for the second time in a row is anticipated to increase demand, especially among first-time homebuyers and those seeking affordable property. By possibly reducing borrowing costs, the rate drop might provide relief across segments and help developers gradually remove unwanted inventory.

For the second time in a row, the RBI cut its benchmark interest rate by 25 basis points on April 9 to boost a faltering economy that was being hampered by reciprocal tariffs imposed by the US. The key policy rate lowered to 6% after the rate decrease.

The RBI reduced the repo rate by 25 basis points to 6.25% in its most recent policy, which was issued in February.

According to real estate specialists, if banks quickly pass the savings on to customers, the rate decrease could increase consumption.

The RBI's move to lower the repo rates by 25 basis points (to 6%) for the second time this year was anticipated given the moderate inflation, according to Anuj Puri, head of the ANAROCK Group. Borrowers of home loans could not experience much quick or significant interest rate relief. Due to increased funding costs, pressure on net interest margins, more non-performing assets, and a conservative lending environment, banks have not passed on previous MPC rate reductions to borrowers.

“If banks do pass on the benefits of the last two rates cuts, it will be a boost to homebuyers, particularly for those eyeing affordable housing. Many first-time homebuyers who had been hesitating to take the plunge may make their move if home loan rates reduce,” he said.

Borrowers of home loans whose lenders do not pass the rate drop on might think about transferring their balance or obtaining a lower rate. Since there might only be partial relief, if any, they should have reasonable expectations. Instead of being utilized for consumption, he suggested using any possible EMI decrease to invest for higher returns or pay off home loans.

 “The move is likely to improve home loan affordability, stimulate housing demand, and provide a strong impetus to the mid-income and affordable segments, where interest rate sensitivity remains high,” said Boman Rustom Irani, Chairman and Managing Director of Rustomjee Group.

The rate cut has the potential to increase affordability and rekindle homebuyer enthusiasm, especially in light of continually growing prices, according to Dhruv Agarwala, Group CEO of Housing.com and Proptiger.com. The actual impact, however, will depend on how quickly and efficiently banks and lending organizations implement this cut.

Samir Jasuja, Founder & CEO, PropEquity says, “Average housing prices have risen by approximately 50% post-Covid. At this juncture, the two consecutive cuts in repo rate, in February and April 2025, will provide a cushion to home loan borrowers as EMIs will come down. As home loan rates drop, fence-sitters will be encouraged to make housing purchases. Developers will benefit from reduction in borrowing cost thereby enabling them to expand and launch new projects. The change in stance to accommodative signals further rate cut, a welcome move for the housing sector”.

Sanjeevini Group Chairman and Founder, Umesh Gowda H.A states, “With inflation dropping within RBI’s comfort zone, the two consecutive rate cuts will give a fillip to the housing sector as rate cut transmission by banks will lead to home loan rate falling below 8% for most banks thereby benefiting a large section of new and existing borrowers. The rate cut will provide a momentum to India’s domestic demand and help sustain India’s economic growth in the wake of global uncertainties. RBI shifting to accommodative stance means the apex bank will further cut rates or maintain status quo”.

Ankur Jalan, CEO, Golden Growth Fund (GGF), a category II Real Estate focused Alternative Investment Fund (AIF), shares, “The two consecutive reductions (50bps) in repo rate are a welcome move by RBI to spur consumption demand and economic growth in view of the global uncertainties and decline in inflation”

However, with expectations of another 50bps cut in repo rate in FY26, the consequent decline in fixed deposit rate will disincentivize HNI/UHNI investors, prompting them to look for potentially high return asset class like AIFs which not just has regulatory oversight but also offers risk diversification and high returns.
Real Estate Sector's Reaction

Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd., said, “The Reserve Bank of India's decision to reduce the policy rate by 25 basis points to 6 percent comes at a crucial juncture when inflation is beginning to show signs of stability and the broader economic environment appears favorable for nurturing growth through lower interest rates. This proactive move is expected to significantly boost homebuyer sentiment, as reduced interest rates translate into improved affordability, thereby encouraging a larger number of people to consider investing in real estate. On the developer front, the lower cost of borrowing will offer a much-needed cushion, enabling them to fast-track project launches, expand their portfolios, and cater to the anticipated rise in housing demand. Overall, this policy rate cut is a timely and positive step that holds promise for stimulating activity across the entire real estate value chain, benefiting both end-users and industry stakeholders alike.”

Aman Sarin, Director & Chief Executive Officer, Anant Raj Limited, said, “The RBI’s second consecutive rate cut is a welcome move and is expected to provide a strong boost to real estate demand, especially by making home loans more affordable for buyers.

In its latest review, the Monetary Policy Committee not only reduced the repo rate by 25 basis points but also shifted its stance from 'neutral' to 'accommodative' — a clear signal that, going forward, the MPC is now considering only two possibilities: status quo or further rate cuts.

This change in stance is extremely encouraging, especially for the housing sector. We anticipate more rate cuts in the coming quarters, and the biggest beneficiaries will be home loan borrowers—particularly those taking large-ticket loans for mid and premium homes. Lower interest rates enhance both affordability and loan eligibility, helping many fence-sitting buyers finally make their purchase decisions.

We also expect renewed interest in the high-end and luxury segments as improved purchasing power, combined with softening rates, makes aspirational living more attainable for a wider audience.”

Ashok Kapur, Chairman, Krishna Group and Krisumi Corporation, said, “The two consecutive policy rate reductions by the RBI, of 25 basis points each, are expected to significantly benefit home buyers. Many prospective buyers who had been cautiously observing the market are now likely to take a decisive step towards purchasing their dream homes. Simultaneously, the reduction in rates will lower borrowing costs for developers, encouraging them to launch more projects in the coming quarters to meet anticipated demand. This dual impact is expected to stimulate both housing demand and supply, providing a positive momentum to the real estate sector.”

Udit Jain, Director, ONE Group Developers, said, “The RBI’s decision to cut the repo rate is along expected lines. In its previous MPC review, the Governor had already hinted at the possibility of further rate cuts, and we now have a cumulative 50 basis points cut so far. The encouraging development is the RBI’s decision to shift its policy stance from 'neutral' to 'accommodative'. This signals that, barring any major shocks, the MPC is likely to consider only two options going forward—status quo or further rate cuts.

This move bodes well for the broader real estate sector, especially when supported by improved liquidity and relatively stable property prices. If inflation continues on its current downward trajectory and macroeconomic indicators remain supportive, we may witness further monetary easing in the upcoming policy cycles—potentially driving even more momentum in housing demand.

Lower interest rates on home loans will benefit buyers across segments, from affordable housing to premium and luxury categories, making homeownership more accessible and attractive.”

Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution Pvt Ltd, said, “The Reserve Bank of India’s decision to cut the repo rate by 25 basis points for the second consecutive time—bringing the total cut to 50 basis points—comes as a welcome move for borrowers and the real estate sector alike. This back-to-back reduction is not only a sign of improving macroeconomic stability but also a strategic push to boost consumption and home ownership.

Lowering the repo rate effectively brings down cost of capital for banks and housing finance companies, translating into cheaper home loans for borrowers. This makes home ownership more affordable, especially for first-time buyers and middle-class households.”