RBI's Rate Cut Breathes Life Into Housing Market: What It Means For Homebuyers

In a move that could tilt the scales in favour of homebuyers, the Reserve Bank of India (RBI) on June 6 slashed the policy repo rate by 50 basis points to 5.5 per cent, its third cut since February. With this, the central bank has lowered rates by a full percentage point in less than five months, even as it shifted its stance from "accommodative" to "neutral," suggesting it may be nearing the end of its easing cycle.

For those eyeing a home purchase or developers banking on stronger demand, this is a timely boost.

The immediate relief comes in the home loan segment; given the 50 bps cut, they are likely to head south, making EMIs lighter and mortgages more accessible, particularly for buyers in the mid-income and affordable housing segments.

Let's understand what this means for you

When you hear RBI rate cut news or somebody tells you that a reduction in repo rate cut is good for you (as a homebuyer or someone who has a home loan), this is what it means:

When the RBI cuts the repo rate, the rate at which it lends to banks, your home loan rates tend to come down, too. That is because banks often pass on the benefit to consumers in the form of reduced lending rates.

"The RBI's decision... is a timely move that will provide a major boost to the real estate sector," says Kaushal Agarwal, Chairman of The Guardians Real Estate Advisory. He expects improved housing loan affordability to trigger a revival in end-user demand, especially in cities like Mumbai, Pune, and Bengaluru.

With interest rates now likely to fall closer to 7.5 per cent (from around 8.25 per cent), EMIs on a Rs 1 crore loan could drop to somewhere between Rs 68,000 - Rs 70,000 per month, according to Ankit Shah of Grahm Realty. That's a significant dip for households already juggling inflation and other costs.

Homebuyers Get a Window of Opportunity

For first-time buyers, this could be a good time to act. Lower interest rates improve eligibility, reduce long-term interest burden, and can make that long-awaited upgrade or move-in possible. Developers, meanwhile, have more breathing room. Reduced borrowing costs and improved liquidity may help speed up stalled projects and launch new ones.

From a broader lens, this policy move feeds into the RBI's clear focus on reviving consumption.

"The repo rate cut, along with the CRR reduction, is a strong signal of support for both the real estate sector and broader economic activity," says Col Sanjeev Govila (retd), CEO, Hum Fauji Initiatives.

He further added that the Rs 2.5 lakh crore liquidity infusion could improve credit access for both consumers and businesses.

Beyond buyers, MPC's June 2025 repo rate cut will also have a sectoral impact on real estate.

The cut doesn't just benefit homebuyers. Developers, such as those who cater to affordable and mid-income housing also stand to gain from this reduction. Vimal Nadar of Colliers India called the move a "strong tailwind" for the sector, noting that it enhances affordability and confidence at both ends: buyers and builders.

However, experts also point to the flip side. With interest rates on fixed deposits falling further, conservative investors may find their post-tax returns shrinking. "This will likely prompt savers and high-net worth individuals to explore other higher-return alternatives such as real estate-focused AIFs," says Ankur Jalan of Golden Growth Fund.

Viineet Chellani, Founder and CEO, Asset Deals says, "This 50 basis points reduction will provide much-needed relief to homebuyers and significantly boost demand across the real estate market. Lower borrowing costs and improved liquidity will enable faster project execution and better financial planning. We believe this rate cut lays a solid foundation for a stronger recovery in real estate as well as the broader economy."

Adds Nayan Raheja, Director Better Choice Realtors, "With the Indian economy showing stability, this move will encourage borrowing, prompting more homebuyers to invest in property purchases and driving demand in the housing sector.

Are there any headwinds to watch out for?

While this rate cut is clearly a positive change, challenges persist. Global trade disruptions, rising construction costs, and currency volatility may potentially impact input costs, particularly for luxury and commercial real estate. Anuj Puri of ANAROCK noted that while affordable housing should get a lift, developer margins may still feel pressure due to imported material costs and geopolitical uncertainties.

Still, he remains optimistic: "It is sincerely hoped that banks pass on the benefits seamlessly to borrowers."

Dhavala Ajmera, Secretary, CREDAI-MCHI has also urged banks and lending institutions to swiftly transmit the benefit of the rate cut to consumers. "The current economic environment, low inflation, improved liquidity, and steady demand, creates a strong foundation for a real estate-led recovery. This is the ideal time for aspiring homebuyers to take the leap," Ajmers states.

Bottom Line

If you are a prospective homebuyer, this might be the break you have been waiting for. Reduced EMIs, improved loan eligibility, and greater affordability could make homeownership more feasible. But as always, the real impact will depend on how quickly banks act and whether the broader economic environment stays supportive in the months ahead.