RBI Repo Rate Cut: Lower Home Loan EMIs, Reduction In Unsold Inventory, Say Experts

The Reserve Bank of India’s (RBI) monetary policy committee (MPC) on February 7, 2025, announced the first cut in repo rate after a hiatus of four years. The central bank cut the repo rate by 25 basis points (bps) to 6.25 per cent. The interest rates have remained stagnant over the past two years. The RBI had last increased the repo rate in February 2023 by 25 bps to 6.5 per cent.

The cut in repo rates announced today is expected to offer relief to existing as well as new homebuyers. According to real estate experts, the move is also expected to give a boost to the sector, as banks and lenders are likely to bring down lending rates, thus making home loans more affordable.

Making Houses Affordable

According to Sudhir Pai, CEO of Magicbricks, the announcement is likely to “lower borrowing cost for homebuyers and developers, and enhance affordability and stimulate housing demand”.

Venkatesh Gopalakrishnan, director, group promoter’s office, and managing director – Shapoorji

Pallonji Real Estate (SPRE) said that lower borrowing costs will increase home loan affordability, fulfilling the dream of homeownership costs for many aspiring buyers.

Reduction In EMI 

Sandeep Mangla, managing director Forteasia Realty said that the rate cut could lead to decrease in equated monthly instalments (EMIs) of hundreds of rupees on standard home loans depending on the loan amount term and tenure.  

Borrowers are likely to receive these benefits, which should help further stimulate the housing market, he added. 

Vimal Nadar, head of research, Colliers India said that the rate cut along with the recent budgetary announcements related to the creation of the Urban Challenge Fund and tax reliefs under the new regime, are likely to stimulate urban growth and enhance domestic consumption.

Liquidity In Banking System 

Piyush Bothra, co-founder and chief finance officer (CFO), Square Yards, said that the rate cut could enhance liquidity in the banking system and also ease access to financing for developers.  

 Combined with recent tax reforms, stable inflation projections and sustained economic growth, it will act as a strong tailwind for the residential real estate sector, he added. This could lead to the demand for more units coming up, thus giving a boost to increased supply to meet the growing demand. 

Reduction In Inventory 

G Hari Babu, national president, Naredco said that increased sales and improved liquidity as a result of the repo rate cut is likely to see a reduction in the inventory of unsold homes.  

 “This, in turn, will encourage developers to launch new projects, creating new opportunities for homebuyers and investors,” he added. 

Inflation A Likely Dampener 

However, some experts have opined that the rising cost of property and inflation could be a dampener. 

 L.C. Mittal, director, of Motia Builders Group said that the effectiveness of the rate cuts could be dampened by other conditions like inflation and increasing property value. 

 Shrinivas Rao, FRICS, CEO of Vestian, added: “It’s likely to buoy the real estate sector with expectations of major banks trimming mortgage rates. However, it is also expected to exert downward pressure on rupee value in international markets, barring foreign investments.

Silver Lining for Seniors Planning To Buy a Home

Anantharam Varayur, Co-founder, Manasum Senior Living said, that it becomes especially easier for retirees to achieve their dream home with low interest rates, increasing demand for senior housing.

Nitesh Kumar MD & CEO Emami Realty, said, "Lower borrowing costs following this rate cut will help businesses obtain capital and invest in expansion projects. For the real estate market, this drop in interest rates is extremely advantageous because demand for housing and commercial real estate increases."