Lower rates, higher hopes: Real estate sector hails RBI’s rate cut as 'timely boost' for housing demand

In line with expectations, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) today slashed the key lending repo rate by 25 basis points to 6% for the second consecutive time, while also changing its stance from 'neutral' to 'accommodative'. RBI Governor Sanjay Malhotra said in his second MPC meeting address that the global economy is going through a period of "exceptional uncertainties". With inflation easing and global uncertainties looming, India Inc., especially the real estate sector, views this as a "timely push" for consumption, liquidity, and housing demand. 

Much-needed boost for the economy 

Malhotra says the MPC noted that inflation is currently below the target, supported by a sharp fall in food inflation. There is a decisive improvement in the inflation outlook as well. "As per projections, there is now a greater confidence of a durable alignment of headline inflation with the target of 4 per cent over a 12-month horizon," he says. 

The industry stakeholders say the overall economy will see a significant boost with the RBI's measures. Anshuman Magazine, Chairman & CEO - India, Southeast Asia, Middle East & Africa, CBRE, says the RBI's decision to reduce the repo rate is significant for the economy amid ongoing tariff concerns and global headwinds. "This timely action aims to relieve liquidity constraints and boost business confidence. The rate cut is expected to boost investor sentiment, improve financing conditions, and accelerate momentum in demand.”

The 25-basis points reduction in repo rate to 6%, coupled with the change in stance to ‘accommodative’ from ‘neutral,’ signals a welcome transition. "This monetary easing creates a favorable lending environment that could potentially stimulate housing demand across key markets, particularly in the mid-premium segment,” says Sanjay Dutt, MD & CEO, Tata Realty and Infrastructure Ltd. 

The RBI governor has said that on the demand side, urban consumption is gradually picking up with an uptick in discretionary spending. This can be a boon for the real estate industry, which faced a temporary slowdown in the first quarter of 2025. Anshul Jain, Chief Executive - India, SEA & APAC Tenant Representation, Cushman & Wakefield, says these measures reinforce the possibility of further rate reductions. "The RBI’s shift in stance sends a strong signal of its intent to support growth and will definitely encourage homebuyers’ sentiment in the mid-segment housing market.”

Homebuyers’ sentiments set to go up

Skyrocketing residential prices coupled with geopolitical headwinds slowed the Indian housing market’s bull run in the first quarter of calendar year 2025, according to the Anarock data. The year's first quarter saw sales drop 28% across the top 7 cities against the same period in 2024. Around 93,280 units were sold in Q1 2025 in the top 7 cities, in sharp contrast to all-time high sales of over 1.30 lakh units in Q1 2024.

But the real estate sector stakeholders say the latest RBI move will boost homebuyers’ sentiments. Vimal Nadar, Head of Research, Colliers India, says the consecutive reduction in benchmark lending rates will improve housing demand in affordable and middle-income segments. "Developers also stand to benefit from lower financing costs. Overall demand and real estate growth are likely to be on the upswing amid a potential further easing in monetary policy.”

Shishir Baijal, Chairman and MD, Knight Frank India, says the benefits of this rate cut will be passed to the consumers, which will be crucial to boost consumption. "The downward revision in growth reflects caution over global trade tensions, though optimism remains for domestic recovery. With a cumulative 50 basis point cut in 2025, it is now vital for commercial banks to transmit the benefit to consumers. Lower borrowing costs can aid housing affordability, developer funding, and infrastructure growth.”

The RBI believes investment activity is expected to improve further on the back of sustained higher capacity utilisation, the government’s continued thrust on infrastructure spending, healthy balance sheets of banks and corporates, along with the easing of financial conditions. In line with this, Anuj Puri, Chairman, ANAROCK, says banks have not transmitted earlier MPC rate cuts to borrowers because of higher funding costs, pressure on net interest margins, higher NPAs, and a cautious lending climate. "If banks pass on the benefits of the rate cuts, it will be a boost to homebuyers, particularly for those eyeing affordable housing,” he emphasised.

Lower borrowing costs will not only improve homebuyer sentiment, but also ease the financial burden on developers. Mohit Goel, MD, Omaxe Ltd, says: "With inflation showing signs of easing and growth requiring a gentle push, this cut will act as a catalyst for demand revival—especially in interest rate-sensitive sectors like real estate."

The RBI decision also comes at a significant juncture when NRI interest in Indian real estate is gaining momentum, as with the rupee experiencing volatility, luxury real estate and holiday homes present a compelling hedge. "This move is expected to boost sentiment across the premium housing segment, particularly in emerging lifestyle destinations,” says Aditya Kushwaha, CEO & Director, Axis Ecorp. 

Top tier 2 players like Rajasthan-based Manglam Group think lower borrowing costs will spur housing demand, especially in the mid and affordable segments, particularly in Tier 2 and 3 cities. "At Manglam Group, we see this as a strong boost for Tier 2 and 3 cities, where infrastructure growth and rising aspirations are already driving real estate momentum. While global uncertainties like the U.S. tariffs pose challenges, domestic fundamentals remain strong, and we are well-positioned to leverage this opportunity across emerging markets," says Amrita Gupta, Director, Manglam Group.

Boost to consumption and easing of liquidity pressures

As stated by the RBI Governor, the system liquidity was in deficit in January 2025, but as a result of a slew of measures injecting liquidity of about 6.9 lakh crore rupees, the system liquidity deficit tapered during February-March 2025 and further turned into surplus on 29th March 2025. "Coupled with government spending picking up pace during the latter half of March, system liquidity further improved and it stood at a surplus of ₹1.5 lakh crore as on 7th April, 2025," says Malhotra.

The real estate players also say the MPC move will ensure there's enough liquidity in the system to implement expansion plans. Santosh Agarwal, CFO & Executive Director, Alpha Corp Development Ltd, says the RBI "decision is expected to inject greater liquidity into the market and bring down borrowing costs. With enhanced access to capital and improved investor confidence, the industry is poised to witness increased momentum in both residential and commercial segments."

Lower borrowing costs are anticipated to make home loans more affordable, enhancing the purchasing power of potential homebuyers and stimulating demand across housing segments, says Aman Trehan, Executive Director, Trehan Iris. "The reduction in interest rates is likely to ease financial constraints for developers, facilitating the timely completion of ongoing projects and encouraging the initiation of new developments," says Trehan.

The RBI has said it is committed to providing sufficient system liquidity and will continue to monitor the evolving liquidity and financial market conditions. Rohan Khatau, Director, CCI Projects Pvt. Ltd., says the accommodative monetary policy and easing of interest rates signal support for developers and homebuyers. However, from the perspective of the bank, the "balance between stimulating economic activity and controlling inflation still remains a crucial mandate".

Shweta Mittal, COO, MORES, also agrees that the RBI's decision is likely to positively impact "buyer sentiment and improve home loan affordability—providing a gentle but much-needed nudge to fence-sitters.”

Adil Altaf, MD, Trinity, says the move will ensure lower home loan EMIs, leading to a boost in buyer confidence. "We expect growing interest from first-time homebuyers in the luxury segment, which sits well with the overall outlook for the real estate industry."

RBI rate cut sets a positive tone for the future 

As per the RBI Governor, the domestic growth-inflation trajectory demands monetary policy to be growth supportive, while being watchful of the inflation front. "We shall remain agile and decisive in our response and put in place policies that are clear, consistent, credible and in the best interest of the economy," he said.

Fully agreeing with the RBI's mandate, the industry thinks today's measures will set a positive tone for the real estate sector. Sandeep Chhillar, Founder & Chairman, Landmark Group, says that with home loans expected to be reduced, the decision will make the home-buying process for first-time homebuyers increasingly accessible. "We anticipate sustained interest from buyers and the sector shall continue to reap the benefits."

The change in stance indicates the readiness of the central bank to act as per the prevailing situation, say the developers. Nitin Bavisi, CFO, Ajmera Realty & Infra India Ltd, says: "The rate cut is complemented well by the change in policy stance from neutral to accommodative, indicating readiness to act as per the prevailing situation." 

At a time of global economic volatility caused by increasing tariffs and geopolitical tensions, the move reflects a continued shift toward a pro-growth stance amid easing inflation and a stabilising macroeconomic outlook, says Boman Irani, President, CREDAI National. "This move reflects a continued shift toward a pro-growth stance amid easing inflation. It is likely to improve home loan affordability and stimulate housing demand."

Ramani Sastri, Chairman & MD, Sterling Developers, says the move will significantly boost investor confidence and support the overall development of the real estate sector, especially by enabling more first-time homebuyers to enter the market.

Ashish Jerath, President- Sales & Marketing, Smartworld Developers, says the policy shift will further enhance housing affordability, especially in urban and aspirational micro-markets, at a time when investor confidence and end-user interest are both gaining traction. "Smartworld, as a brand focused on creating future-ready luxury communities, sees this as a pivotal moment for both homeownership and real estate investment."

Realtors say this is an opportune time for developers to accelerate project execution and financing strategies. "We anticipate renewed interest from both homebuyers and institutional investors—particularly in premium and commercial segments where financial planning plays a crucial role. Overall, this decision will act as a catalyst for long-term industry momentum and support sustained demand in a market already showing signs of healthy recovery,” says Yateesh Wahaal, Director, M3M India.