Homebuyers across India may soon receive a much-needed reprieve, as industry experts widely expect the Reserve Bank of India (RBI) to announce another repo rate cut of 25 basis points during its upcoming Monetary Policy Committee (MPC) meeting in early June. If implemented, this would mark the third consecutive reduction in policy rates, bringing cumulative cuts for the year to 75 basis points and significantly improving housing affordability.
Inflation Eases, Expectations Rise
With inflation cooling to 3.16% in April 2025 — well below the RBI’s 4% target — and GDP growth stabilizing, economists and real estate leaders say the central bank has room to continue its accommodative stance.
“The RBI is expected to provide major relief to homebuyers by reducing the repo rate by 25 bps,” said Pradeep Aggarwal, Chairman of Signature Global. “This will encourage first-time homebuyers and investors to re-enter the market.”
Positive Sentiment in Real Estate
The real estate sector, especially the affordable and mid-income segments, is highly sensitive to changes in interest rates. Lower EMIs can make homeownership viable for millions who were priced out due to rising property prices and borrowing costs.
“With each rate cut, affordability improves significantly,” noted Piyush Bothra, CFO of Square Yards. “Even a 1% interest rate drop can increase a homebuyer’s purchasing power by nearly 10%.”
According to Anurag Goel of Goel Ganga Developments, “A 50 bps cut would reduce EMIs by about ₹1,200 on a ₹50 lakh home loan over 20 years — a meaningful difference for salaried homebuyers.”
Real Estate Sector at a Crossroads
Despite long-term potential, the real estate market is grappling with challenges — a 28% drop in residential sales in India’s top 7 cities (Q1 2025 vs Q1 2024), tight lending conditions, and high construction costs.
“Lower borrowing costs could stimulate stalled demand in affordable housing,” said Anuj Puri, Chairman of ANAROCK. “But transmission is key — banks must ensure end borrowers actually benefit.”
Affordable housing, once dominant, now makes up only 18% of total residential sales (down from 38% in 2019), according to ANAROCK. Yet a 19% drop in unsold affordable units signals there’s still strong demand from genuine end-users — if financing becomes easier.
What Homebuyers Should Watch For
- Rate Transmission: Not all banks pass rate cuts equally. Repo-linked loans benefit faster; MCLR-linked loans may take longer.
- Refinancing Opportunity: If cumulative rate cuts hit 75–100 bps, borrowers with older loans could save ₹6–7 lakh on a ₹50 lakh loan by refinancing.
- Tenure vs EMI: Banks may prefer shortening loan tenures instead of reducing EMIs. Homebuyers should negotiate for better terms.
“Now is a good time for homebuyers to explore options, compare rates, and check reset clauses,” said LC Mittal of Motia Group. “If you’re planning to buy or refinance, this policy cycle could be your moment.”
Bottom Line for Homebuyers
With inflation under control and macroeconomic indicators stable, the stage is set for a potential repo rate cut in the June MPC meeting. If banks swiftly transmit this to home loan rates, homebuyers could see lower EMIs, better loan eligibility, and enhanced affordability — all of which can be game-changers in today’s high-priced housing market.
Also Read: RBI repo rate hike
