In a strong push to revive housing demand and stimulate economic activity, the Reserve Bank of India (RBI) has announced a 50 basis points cut in the repo rate, bringing it down to 5.5%, alongside a staggered 100 bps reduction in the Cash Reserve Ratio (CRR).
This marks the third consecutive rate cut in 2025, signaling a strong commitment to making home loans more affordable and improving liquidity in the financial system.
The move is a welcome development for the Indian real estate sector, especially the affordable and mid-income housing segments, which have faced challenges in recent years. According to Anuj Puri, Chairman, ANAROCK Group, the repo rate cut is expected to reduce EMIs, ease access to credit, and encourage homebuyers – particularly first-time buyers – into the market.
“Affordable housing, which bore the brunt of the pandemic, can now see revival,” said Puri. “Its sales share fell from 38% in 2019 to 18% in 2024, but the 19% decline in unsold stock shows sustained end-user demand. Lower borrowing costs can act as a catalyst for recovery.”
The CRR cut is also projected to inject liquidity into the banking system, giving developers better access to project financing and reducing pressure on timelines for project completion. Additionally, banks may have more room to pass on interest rate reductions to borrowers, potentially revitalizing the housing finance market.
However, rising input costs and global trade tensions – including tariffs and disrupted supply chains – remain potential roadblocks. These could affect developer margins and increase housing prices, especially in the luxury and commercial segments.
Industry Leaders Applaud RBI’s Proactive Measures
Top industry voices echoed support for the RBI’s forward-looking policy.
- C S Setty, Chairman at SBI & IBA, called the policy “innovative and out-of-the-box,” noting that it fully leveraged the decline in domestic inflation to support long-term growth.
- Dr Anish Shah, CEO & MD, Mahindra Group, welcomed the move as a “positive catalyst” for consumption and investment, especially in interest-sensitive sectors like housing and MSMEs.
- Sadaf Sayeed, CEO of Muthoot Microfin, praised the balanced approach between inflation targeting and liquidity infusion.
- Kapil Gandhi, MD, Sigma One Universal, highlighted that a 0.5% rate reduction on a ₹75 lakh home loan can save buyers nearly ₹6 lakh over 20 years, stressing the multiplier effect this can have on the economy.
Repo Rate Cuts: Delays in Transmission Still a Concern
While the policy is seen as a major positive, stakeholders urged banks to promptly transmit the benefits of the repo rate cut to borrowers.
Delays in rate transmission and lack of borrower awareness about monetary policy changes continue to dampen the full impact of such initiatives.
With this latest repo rate cut and liquidity infusion, the RBI has provided a double-pronged stimulus to the real estate and financial sectors, aimed at fostering affordability, credit growth, and broader economic resilience amid global uncertainties.
