A New Dawn for Homebuyers: RBI’s Repo Rate Cut to Boost Real Estate and Middle-Income Growth

RBI’s Landmark Decision: A Game-Changer for Real Estate

In a move that promises a brighter future for aspiring homeowners, the Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points to 6.25%. This decision, coming just days after the Union Budget 2025, is expected to provide a significant boost to the real estate sector and offer much-needed financial relief to middle-income homebuyers.

For over 11 consecutive monetary policy meetings, the repo rate remained unchanged, keeping borrowing costs stagnant. However, with retail inflation projected at 4.2%, the central bank, led by its newly appointed governor Sanjay Malhotra, took a proactive step to enhance affordability and stimulate economic activity.

The Double Advantage for Middle-Income Groups

The Union Budget 2025 has already paved the way for increased disposable income by exempting the middle-income group I (earning under ₹12 lakh annually) from income tax. Now, with a reduced borrowing rate, financial experts believe that consumers will be encouraged to channel their savings into long-term investments, particularly in real estate.

Industry Leaders Applaud the Move

Financial and real estate experts have hailed this decision as a pivotal moment for the housing sector.

BankBazaar CEO Adhil Shetty

“With the tax relief earlier this month, the salaried and middle class now have a dual advantage—higher savings and lower interest rates. For instance, if you have a 20-year home loan at 8.75% interest and have paid 12 EMIs by March, this rate cut will help you save approximately ₹8417 per lakh in interest,”he explained.

Samir Jasuja, Founder & CEO, PropEquity

“The repo rate cut, combined with budgetary provisions to boost consumption, will fuel economic activity and channel investments into affordable and mid-income housing. Lower borrowing costs will not only attract new buyers but also ensure better liquidity for developers.”

Garvit Tiwari, Director & Co-Founder, InfraMantra

“While luxury housing may see limited impact, affordable housing and mid-segment buyers will greatly benefit. With urban consumption witnessing a slowdown, this policy could drive a positive turnaround in the coming quarters.”

Vishal Raheja, Founder & MD, InvestoXpert.com

“Reduced borrowing costs will significantly enhance buyer sentiment, making housing loans more accessible and encouraging residential sales. Coupled with the tax benefits announced in the Budget, this move is likely to stimulate demand in the housing sector.”

How the Repo Rate Cut Impacts Homebuyers

Historically, lower interest rates have encouraged potential homebuyers who were hesitant to make property investments. According to Sunil Sisodiya, Founder of Geetanjali Homestate, this trend is likely to repeat itself.

“Lower interest rates have always encouraged fence-sitters to take decisive steps towards property purchases. With inflation stable and economic growth projected at 6.7%, we expect increased liquidity in the market, making real estate an even more attractive asset class.”

The Future of Real Estate: A Sector Poised for Growth

With an environment of rising affordability, lower borrowing costs, and government incentives, the real estate sector is set to witness renewed momentum. Experts predict a surge in demand, especially in affordable housing, with more individuals capitalizing on the reduced interest burden.

For those considering purchasing a home, the time has never been better. With the repo rate cut and tax benefits creating the perfect mix of affordability and opportunity, the dream of homeownership is now within reach for many.