Housing market cheers RBI’s rate cut, but how much are you actually saving?

India's housing market is buzzing with excitement over the Reserve Bank of India’s (RBI) latest reduction in the repo rate. This is the third consecutive rate cut by the central bank since February, aimed at revving up consumption across the economy, and it’s fuelling the interest of new and existing homebuyers in a country where real estate remains the most preferred asset class.

The repo rate is essentially the rate at which the RBI lends money to banks, and right now, it’s sitting at its lowest in almost three years—5.5%—after a 50 basis point reduction in early June. This decrease naturally lowers borrowing costs for homebuyers and real estate developers, hinting at a possible surge in the housing market.

“Overall housing demand is likely to gain traction, especially in the affordable and middle-income segments. Sales and launches in the residential market can potentially pick up pace in the second half of the year, particularly during the festive season, when developers try to capitalise on home-buying sentiments,” Vimal Nadar, National Director & Head, Research at Colliers India, a real estate consultancy, told The CapTable.

Nadar also highlighted that the RBI’s decision could lead to a rise in residential property enquiries and conversions across India’s major urban areas, with the positive effects likely to be felt more in price-sensitive markets and among affordable (Rs 50-65 lakh) and middle-income housing (Rs 70 lakh to Rs 1 crore) segments.

Interestingly, affordable housing accounts for the majority of India’s apartment sales, with around 11.22 million units expected to be available in the market in 2025. This means that the impact of cheaper loans is most significant in this segment. Prospective homebuyers can now access larger home loans at lower interest rates, while existing borrowers dependent on EMIs can enjoy reduced monthly payments or shorter repayment terms.