RBI’s Repo Rate Cut Brings Hope, But Will It Really Benefit Homebuyers?

2025 has been going good for home loan borrowers as of now, with the Reserve Bank of India (RBI) cutting repo rates twice this year. Previously, in February, the central bank announced a 25 basis point reduction in the repo rate. Now, it has again reduced the repo rate by 25 basis point today, April 9. With the latest announcements, the repo rate stands at 6%.

Ideally, this should have given relief to home loan borrowers as their EMIs will fall substantially when lenders begin passing on the benefit of this rate cut. The repo rate (rate at which RBI lends money to commercial banks) and interest rate on loans have a direct relationship --- the lower repo rate leads to cheaper loans for borrowers across all sectors.

But surprisingly, the announcement has drawn mixed responses from the Indian real estate sector. While some industry leaders have welcomed the move as a boost for housing demand and liquidity, home loan borrowers may not see an immediate reduction in EMIs. Developers believe that the benefits of this rate cut will depend heavily on whether banks actually transmit the lower rates to end consumers.

Will Rate Cut Bring Relief to Homebuyers?

Anarock Group Chairman Anuj Puri stated that home loan borrowers may not see much meaningful or immediate interest rate relief because banks have not transmitted earlier MPC rate cuts to borrowers due to higher funding costs, pressure on net interest margins, higher NPAs, and a cautious lending climate.

“If banks do pass on the benefits of last two rate cuts, it will be a boost to homebuyers, particularly for those eyeing affordable housing. Many first-time homebuyers who had been hesitating to take the plunge may make their move if home loan rates reduce,” he explained.

In India, metro cities have already been witnessing a clear split between the luxury and affordable housing segments. Latest data from the real estate consultancy firm Anarock indicated that home buyers are more inclined towards luxury houses, with the sale of residential properties above Rs 2 crore increasing by 53% share last year. On the contrary, the affordable housing segment (units priced below Rs 50 lakh) saw its share of total sales decrease 27% to 15% in Q1 2024.

This shift adds another layer to the implications of RBI’s recent rate cuts because the actual relief may be modest if banks do not fully transmit the benefit. “Home loan borrowers whose lenders don't pass on the rate cut could consider negotiating a lower rate or a balance transfer. They should keep their expectations realistic as there may be only partial relief, if any,” he said.

“Any potential EMI reduction should be used to prepay home loans or invest for higher returns instead of on mere consumption,” Puri added.

On the other hand, Savills India CEO Anurag Mathur echoes the same viewpoint, saying the residential market may now see stimulated demand, particularly in the affordable segment. According to him, end users, as well as individual and institutional investors, will increase their property purchases.

“Developers would also benefit from lower financing costs, which could lead to acceleration in new construction projects. Overall, a great push that augurs well to drive demand in the residential sector,” said Mathur.

With inflation within target and GDP showing ease, the repo rate cut aims to boost investment and consumption without fueling price pressures. “We hope that the benefits will be passed to the consumers on an immediate basis, which will be crucial to boost consumption,” said Shishir Baijal, chairman and managing director of Knight Frank India.

Amid global headwinds, including the US tariffs of 26% on Indian exports, this rate cut signals the central bank’s proactive approach to sustaining economic drive. Alpha Corp CFO Santosh Agarwal said the real estate industry is poised to witness increased momentum in residential and commercial segments.

In addition, the move also enhances credit availability and lowers borrowing costs as it will offer developers a stable financial environment to plan and execute projects efficiently, according to Aarize group founder Aman Sharma.

“These accommodative measures support structured growth and sustained demand. We believe this step will further strengthen market sentiment and align well with the broader goals of economic revival and infrastructure-led development,” he added.