RBI Monetary Policy: Experts Predict Rise In Affordable, Mid-Segment Housing Demand After 25-Bps Rate Cut

The Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday unanimously cut the repo rate by 25 basis points to 5.25% and retained a neutral policy stance. RBI Governor Sanjay Malhotra said that the current economic conditions, with inflation at a benign 2.2% and growth at 8% in the first half of the year, present a rare “Goldilocks period” while announcing the key decisions after the three-day MPC meeting.

The central bank also announced open market operations worth Rs 1 lakh crore in G-Secs and a three-year dollar-rupee buy-sell swap. The bank expects growth to moderate slightly, while inflation is projected to remain at or below 4% in the first half of FY27. 

The repo rate cut by the RBI is expected to positively impact several sectors, including the real estate sector. Lower interest rates will reduce EMIs for homebuyers, making property purchases more affordable. This move is likely to boost demand for residential and commercial properties.

Industry experts are of the view that cheaper credit will likely boost confidence among homebuyers. “Real estate is capital-intensive, and after years of elevated construction costs, lower rates offer meaningful relief,” Amit Goyal, Managing Director, India Sotheby’s International Realty, said on the move. He added that, besides homebuyers, institutional investors are also expected to drive demand, boost transactions and support price stability in the real estate market.

“With India posting 8.2% growth in Q2, the rate cut is a strong sail forward, reinforcing liquidity and sentiment in an already resilient economy,” Goyal added.

According to Vimal Nadar, National Director and Head, Research at Colliers India, the RBI’s move to reduce repo rate to 5.25% marks the lowest in over three years and reflects the “confidence in India’s economic resilience.”

“GDP growth rate projection for FY 2025-26 has been revised upwards from 6.8% to 7.3%. Meanwhile, consumer inflation is expected to remain benign at 2% during the ongoing fiscal year,” he explained, noting that the real estate market will benefit from further improved affordability and buyer sentiment.

“For the real estate sector, especially the residential segment, this rate cut builds on the momentum created during the recent festive season and GST rationalisation of key construction materials. Lower borrowing costs will further improve affordability and buyer sentiment, particularly in affordable & mid-income housing segments,” Nadar added.

Square Yards Co-Founder Piyush Bothra noted that despite the sliding rupee and other headwinds, this cut is a very strong signal by the RBI about the strength of the Indian economy.

“This cut offers a meaningful boost to the real estate sector, reinforcing affordability at a time when buyer activity is already strengthening. With inflation well-managed, growth projections improving, and reforms sustaining consumption, the rate reduction builds positively on the earlier easing undertaken this year,” he said.

For developers, the cut enhances credit conditions and lifts sentiment across the market, he said.

Expressing similar sentiments, Shrinivas Rao, FRICS, CEO, Vestian, commercial real estate, is set to benefit from the move significantly. “With borrowing costs declining, we expect project construction to accelerate and consumer demand to pick up significantly. For commercial real estate, lower funding costs and improved leasing activity are likely to fast-track occupier expansion and support new developments. This also brings better clarity for long-term investments and encourages broader credit expansion,” he said.

Anuj Puri, Chairman, ANAROCK Group, highlighted that the demand for affordable and mid-segment homes remains strong in the country, but is hamstrung by high prices impacting affordability. “This rate cut can potentially bring at least some fence-sitters to the market,” he said, noting that these segments are highly sensitive to interest rate fluctuations.

“With average housing prices across the top 7 cities having risen by notable double-digits (approx. 10%) in 2025 as per ANAROCK Research, this rate cut provides a critical cushion to affordability, potentially bringing home loan interest rates to more attractive levels. This can encourage aspiring homebuyers…,” Puri added.

Shishir Baijal, International Partner, Chairman and Managing Director, India Knight Frank, welcomed the RBI’s move to cut rates by 25 basis points. He said the decision will help maintain the real estate sector’s growth momentum.

“The reduction in borrowing costs should offer timely relief to the real estate sector….We hope this will be instrumental in boosting affordable and mid-income housing sales,” he said, noting that mid-income housing sales have been witnessing a sequential decline over the past few quarters.