RBI Cuts Interest Rates by 25 Basis Points, Boosting Hopes for Homebuyers

RBI cuts repo rate by 25 bps, boosting homebuyer affordability and housing demand amid economic growth

The Reserve Bank of India (RBI) has cut the repo rate by 25 basis points to 6.25%, marking the first rate cut in nearly five years. This move, announced on February 7 under the leadership of new RBI Governor Sanjay Malhotra, is expected to make home loans cheaper, offering relief to homebuyers by reducing their monthly installments.

A Welcome Move for Homebuyers

The decision comes shortly after the government reduced personal tax rates in the 2025 Budget to encourage spending. Experts believe that lower interest rates will improve affordability, making it easier for more people to buy homes. Real estate industry leaders are optimistic that the rate cut will reignite housing demand, especially for mid-income buyers.

Samantak Das, Chief Economist at JLL India, called this a pivotal shift  in policy. “By making borrowing cheaper, the RBI is boosting consumer spending and investment. This will strengthen homebuyer sentiment and help sustain the housing market’s growth,” he said.

Vimal Nadar, Head of Research at Colliers India, echoed this sentiment, stating that after record-breaking home sales in the past few years, this rate cut comes at the perfect time to support the market’s momentum.

Will Banks Pass On the Benefit?

While the rate cut is a positive development, some experts caution that its full impact depends on whether banks pass on the benefit to borrowers. Rising property prices and high inflation could also limit its effectiveness.

Boman Irani, President of CREDAI National, believes that while this rate cut is helpful, another reduction in the next Monetary Policy Committee (MPC) meeting could provide an even stronger boost. “A further cut would accelerate housing sales, particularly in the affordable and mid-income segments,” he said.

Anuj Puri, Chairman of ANAROCK Group, noted that this move is especially beneficial for first-time homebuyers. “Many who were hesitating to buy may now feel encouraged, as lower interest rates reduce their financial burden,” he said.

Impact Beyond Housing

Lower interest rates can also benefit commercial real estate, particularly office spaces, as borrowing becomes more affordable for businesses. Additionally, Real Estate Investment Trusts (REITs) could become more attractive to investors seeking stable returns in a falling interest rate environment.

Sahil Agarwal, CEO of Nimbus Group, pointed out that cheaper loans will improve liquidity, boost purchasing power, and drive economic growth. “This is a big push for the real estate sector, making homeownership more accessible for both buyers and investors,” he said.

As the economy adjusts to these changes, all eyes are now on how banks respond and whether the RBI will introduce further rate cuts in the coming months.

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