In a much-anticipated move that spells good news for homebuyers, the Reserve Bank of India (RBI) has slashed the repo rate by 50 basis points (bps), bringing it down to 5.5%. This is the third consecutive cut in 2025, aimed at reducing borrowing costs and improving affordability amid a backdrop of moderating inflation and global economic uncertainty.

The rate cut is a double win for the real estate sector, particularly affordable and mid-income housing, which has been struggling post-pandemic. The RBI also reduced the Cash Reserve Ratio (CRR), enhancing liquidity in the banking system and enabling more robust lending.

Lower EMIs, Higher Affordability

Industry experts unanimously agree that this move will bring relief to homebuyers, particularly first-time buyers and those eyeing mid-segment properties. With home loan interest rates likely to fall below 7.75%, monthly EMIs are expected to become significantly lighter, making homeownership more accessible.

Anuj Puri, Chairman of ANAROCK Group, noted that while affordable housing has seen a decline in both sales and new launches since 2019, a 19% dip in unsold inventory indicates that demand remains strong among end-users. “This rate cut makes borrowing cheaper for buyers and developers alike, and we hope the banks pass on the full benefit,” he said.

Boost for Developers and Project Timelines

Developers also stand to benefit from the RBI’s liquidity push. The CRR cut means banks have more capital to lend, potentially improving funding for project development and timely completion. Manju Yagnik, Vice Chairperson of Nahar Group, emphasized that this will help revive interest in both mid-income and premium housing, easing liquidity issues and stimulating fresh demand.

“This cascading effect through the lending ecosystem will not only improve affordability but also unlock capital needed to absorb unsold inventory and support over 200 allied industries tied to real estate,” Yagnik said.

Shift in Market Focus

According to Shishir Baijal, Chairman and MD at Knight Frank India, the rate cuts are likely to rebalance housing market activity, which has been skewed towards premium housing in recent years. “The RBI’s cumulative 100 bps reduction is expected to reignite interest in the lower segments and give longer legs to the ongoing housing upcycle,” he said.

Dharmendra Raichura, VP & Head of Finance at Ashar Group, sees the move as a confidence booster. “Lower rates improve sentiment, enabling developers to offer better deals and launch new projects,” he added.

Premium Segment to Benefit Too

Even premium housing could get a lift. Sunny Bijlani, Joint Managing Director at Supreme Universal, said the rate cut will make larger, lifestyle-oriented homes more attainable. “This boost in affordability and confidence enables developers to focus on quality and timely delivery,” he added.

Positive Macro Outlook Despite Global Headwinds

While global economic risks—like rising import costs due to trade tensions—pose a challenge, India’s growth fundamentals remain solid. Kanika Singh, Chief Risk Officer at IMGC, highlighted the significance of the repo rate being at a three-year low. “If banks transmit the rate cut effectively, homebuyers will see substantial EMI relief,” she said.

She also hinted at possible further rate cuts if inflation stays under control and geopolitical uncertainties continue.

Conclusion

With a decisive 50 bps cut in repo and supportive liquidity measures, the RBI has set the stage for stronger homebuyer sentiment and broader real estate revival. The focus now shifts to banks’ timely transmission of these benefits, and developers’ responsiveness to renewed demand. For those planning to buy a home, this could be the ideal window to act.

Also Read: RBI Repo Rate Hike May impact Home buyer sentiments

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Affordability Improvements on the Horizon

The affordability outlook for India’s residential market is promising. With the Reserve Bank of India (RBI) signaling a shift towards a neutral stance on monetary policy, a potential rate cut of 50 basis points over the next 12 months is expected to enhance affordability. This, combined with moderate price growth and rising household incomes, will support an improvement in affordability levels across the country’s key real estate markets.

JLL’s HPAI predicts that Mumbai and Pune will approach near-optimal affordability by 2025, meaning that the average household income in these cities will be sufficient to qualify for home loans based on the prevailing property prices. Kolkata, on the other hand, is expected to maintain its lead as the most affordable major city, potentially reaching new affordability peaks.

While Delhi NCR and southern cities like Bengaluru, Hyderabad, and Chennai are also set to see improved affordability, they are likely to remain below their peak affordability levels. However, even these cities will experience better affordability than in previous years.

Record Residential Sales Expected

The anticipated improvements in affordability come at a time of strong growth in India’s residential market. Residential sales are forecast to reach 305,000-310,000 units in 2024, and further growth is expected in 2025, potentially pushing sales to a new peak of 340,000-350,000 units. This surge in sales reflects a growing demand for housing, driven by evolving homeownership dynamics and rising household incomes.

Despite the challenges posed by higher property prices and interest rates in recent years, the market remains resilient, with a sustained bull run driven by strong homebuyer demand. The expected interest rate cuts, alongside moderating price growth and continued income increases, are poised to further fuel the market’s momentum over the next 12-18 months.

Factors Driving Affordability Shifts

JLL’s Chief Economist, Dr. Samantak Das, explains that while the overall economic outlook remains soft, India is still projected to be one of the best-performing large economies globally, supporting steady growth in household incomes. He notes that in 2021, affordability across all major markets reached peak levels. However, rising property prices and persistent interest rates caused affordability to dip in 2022 and 2023. With the anticipated interest rate cuts and moderate price growth, affordability levels are expected to improve to their best since 2022, creating a favorable environment for homebuyers.

The report also highlights the significant growth in real estate prices over the past decade. Hyderabad leads with a 132% price increase since 2011, followed by Bengaluru at 116%, and Delhi NCR at 98%. On the income front, Mumbai has experienced the highest growth, with a 189% increase in household incomes over the same period.

Future Outlook for the Market

Looking ahead, Siva Krishnan, Senior Managing Director at JLL, notes that the combination of strong income growth, potential interest rate reductions, and moderating price growth is expected to improve affordability across India’s key markets. This will ensure continued activity in the residential market, with sustained demand despite ongoing price increases.

JLL’s HPAI will continue to be a vital tool for aligning homebuyers’ affordability with suitable property offerings, ensuring that market demand remains resilient and responsive to economic shifts. The report emphasizes that strategic policy interventions, along with continued improvements in household incomes, will be critical in sustaining demand elasticity in India’s residential real estate market.

Conclusion

India’s residential real estate sector is on track to see improved affordability by 2025, driven by expected interest rate cuts and rising incomes. While cities like Mumbai and Pune are expected to approach optimal affordability, Kolkata is set to maintain its position as the most affordable major market. As residential sales continue to climb, India’s housing market is poised for a resilient and robust future, ensuring strong performance even in the face of rising prices.

Also Read: Oberoi Realty Reports Strong H1FY25 and Q2FY25 Results: Booking Value at ₹2,509.45 Crores; PBT Rises to ₹1,557.50 Crores

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