The Reserve Bank of India (RBI) has lowered the repo rate by 25 basis points to 6.25%. This is the first rate cut since May 2020. The decision was announced during the Monetary Policy Committee (MPC) meeting on February 7, 2025. The move aims to reduce borrowing costs and support economic activity.
The MPC, consisting of six members, voted unanimously to lower the repo rate. The committee decided to maintain a “neutral” policy stance, allowing flexibility for future changes based on economic conditions.
The repo rate is the rate at which RBI lends to commercial banks. Lowering it makes loans cheaper, potentially increasing demand for credit. The previous rate was 6.5%.
The repo rate cut follows a recent reduction in personal income tax by the central government, intended to increase disposable income and spending. RBI Governor Sanjay Malhotra stated that India’s monetary framework has helped manage inflation since its introduction. He acknowledged that inflation has occasionally exceeded the target range but emphasized that overall stability has been maintained.
RBI has projected a GDP growth rate of 6.7% for 2025-26. This aligns with the Economic Survey’s estimate of 6.3%–6.8%, reflecting steady private consumption and fiscal policies. However, growth for 2024-25 is expected to be 6.4%, the lowest in four years.
Inflation is forecasted at 4.2% for 2025-26. The projected inflation rates for each quarter are:
- Q1: 4.5%
- Q2: 4.0%
- Q3: 3.8%
- Q4: 4.2%
RBI expects inflation to remain under control if the monsoon remains normal.
The reduction in the repo rate lowers interest rates on loans, reducing Equated Monthly Installments (EMIs) for borrowers. Banks may also adjust their lending rates linked to external benchmarks (EBLR) and marginal cost of funds-based lending rates (MCLR).
For depositors, lower rates could reduce returns on fixed deposits and other savings instruments.
The decision comes at a time of global economic uncertainty. The U.S. government has announced new tariffs on China, Canada, and Mexico, raising concerns about trade disruptions. Inflation in advanced economies remains high, delaying expected rate cuts by central banks. The U.S. dollar has strengthened, leading to capital outflows from emerging markets, including India.
Industry Experts Opinion
Mr. Vishal Raheja, Founder & MD,InvestoXpert.com.
‘We appreciate RBI’s decision to cut the repo rate by 25 basis points to 6.25% is a much-needed stimulus for the economy, particularly the real estate sector, which thrives on affordable credit. This is the first rate cut in five years, signaling a shift in policy to support growth, especially after GDP growth projections for FY25 were revised to 6.4%.
Lower borrowing costs will enhance homebuyer sentiment, making housing loans more affordable and boosting residential sales. The tax relief announced in the Budget, coupled with this rate cut, will increase disposable income and potentially revive demand in the housing sector.
Earlier, a repo rate cut has led to a reduction in home loan interest rates, encouraging fence-sitters to make purchase decisions. Given that real estate contributes nearly 7% to India’s GDP and is projected to reach 13% by 2030, this move could provide the momentum needed for sustained growth in the sector.”
Mr. Sunil Sisodiya, Founder, Geetanjali Homestate
‘The RBI’s decision to cut the repo rate by 25 basis points is a welcome move, particularly for the real estate sector. This rate cut, coupled with recent tax relief measures, is expected to boost homebuyer sentiment by making home loans more affordable. The timing is crucial, as it aligns with the government’s broader efforts to stimulate economic growth and revive consumer demand.
Lower interest rates have historically encouraged fence-sitters to take decisive steps towards property investments, driving demand across residential and commercial segments. With the inflation outlook stable and economic growth projected at 6.7%, we anticipate increased liquidity in the market, making real estate an even more attractive asset class.
We see this as a significant opportunity for first-time buyers and investors looking to capitalize on a more favorable financial environment.”
Mr. Dharmendra Raichura – VP & Head of Finance at Ashar Group
“The Reserve Bank of India’s (RBI) decision to reduce the repo rate by 25 basis points to 6.25%. This move is expected to have a positive impact on the real estate sector, particularly for first time homebuyers. With lower home loan interest rates, our homebuyers will find housing more affordable, especially in the mid and premium segments. This reduced financial burden will boost property demand, encouraging more purchases and enhancing market liquidity. Developers, will also stand to benefit from improved cash flow and reduced financing costs. This will enable us to stimulate construction activity, leading to more real estate projects and employment. This policy shift, combined with stabilising inflation and accelerating urbanisation, creates a favourable environment for our customers to invest in their dream homes. With growing market confidence, developers are committed to delivering long-term value and success to our customers in 2025.”
Mr. Sunny Bijlani, the Joint-Managing Director at Supreme Universal
“The RBI’s decision to cut the repo rate by 25 bps from 6.50% to 6.25% in February 2025 is a significant boost for the real estate sector, particularly for homebuyers and developers. Lower borrowing costs translate into reduced home loan EMIs, making property purchases more accessible, especially in the premium and luxury segments. This move will not only ease the financial burden on existing homeowners but also encourage new buyers to enter the market, strengthening overall demand.
For developers, the rate cut means lower financing costs, enabling them to fund projects more efficiently and accelerate delivery timelines. With capital becoming more affordable, we expect renewed momentum in high-end real estate, where buyers seek quality living spaces with long-term value appreciation. The increased liquidity and affordability will help clear unsold inventory, drive sales, and sustain the sector’s upward trajectory in 2025.”
Ms. Manju Yagnik, Vice Chairperson of Nahar Group and Senior VP, NAREDCO, Maharashtra
“The RBI’s decision to cut the repo rate by 25 basis points to 6.25% is a welcome step for the real estate sector, especially as this is the first reduction since February 2023. Lower home loan interest rates will provide much-needed relief to homebuyers, making property purchases more affordable by reducing EMIs. This move is expected to drive demand for housing, boosting market activity and encouraging more people to invest in real estate. It also enhances confidence among both buyers and developers, leading to a stronger and more dynamic sector. Developers will benefit from easier access to funds, helping them complete projects faster and meet the rising demand. At the same time, this decision aligns with the government’s focus on economic growth, supporting long-term stability in the housing sector. This rate cut is a much-needed push that will help both homebuyers and developers while driving positive momentum in real estate.“
Mr. Aman Sarin, Director & Chief Executive Officer, Anant Raj Limited
‘“We welcome the RBI’s decision to cut policy rates, a crucial step toward stimulating consumption and strengthening purchasing power.
This rate reduction is set to bring down lending rates, making borrowing more accessible and affordable for consumers. In particular, it serves as a strong catalyst for the real estate sector, encouraging fence-sitting homebuyers to move forward with their purchase decisions. Given the RBI Governor’s assurance that all economic factors will be carefully considered to maintain balanced growth and stability, this cut could be helpful in sustaining economic momentum.”
Mr. Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd.
“The RBI’s decision to cut the repo rate to 6.25%—its first reduction in nearly five years—signals a pro-growth shift aimed at sustaining India’s economic momentum. With GDP growth projected at 6.7% for FY26, this move will enhance liquidity, encourage investments, and stimulate demand across key sectors.
For real estate, a rate cut after such a long period is a significant boost. Lower borrowing costs will improve home affordability, strengthening buyer sentiment, particularly in the mid-income and premium housing segments. Historically, reduced interest rates have triggered an upswing in housing demand, benefiting both homebuyers and developers. Additionally, improved credit access will support developers in securing funding for project execution, ensuring steady supply and timely deliveries.
The real estate sector, contributing nearly 7% to India’s GDP and projected to reach 13% by 2030, will gain further momentum as urbanization accelerates and infrastructure investments expand. This move will also positively impact allied industries such as cement, steel, and construction materials, creating a multiplier effect on employment and overall economic activity. With a sustained focus on affordability and sustainable development, India’s housing market is well-positioned for long-term growth.”
Mr. Akash Khurana, President and CEO, Krisumi Corporation
The Central Bank’s unanimous decision to cut the repo rate by 25 bps to 6.25 percent is definitely a welcome move that will enhance liquidity in the economy, making credit more accessible and boosting overall consumption. This follows the last MPC’s decision to reduce the Cash Reserve Ratio (CRR) by 50 basis points, which has already injected significant funds into the banking system. Lower interest rates are expected to stimulate housing demand by making home loans more affordable, strengthen market confidence, and provide much-needed momentum to the real estate sector, ultimately supporting economic growth.”
Mr. Sahil Agarwal, CEO, Nimbus Group
“We welcome the RBI’s decision to cut the repo rate. There were strong expectations for a modest 25 bps rate cut in today’s monetary policy meeting, and the RBI has delivered on those expectations. The decision was driven by the need to support GDP growth, inflation remaining within a comfortable range for the past few quarters, and prevailing tight liquidity conditions. Additionally, global trade dynamics and financial market trends further reinforced the case for a rate reduction.
The repo rate cut will not only improve liquidity but also boost consumption and purchasing power, ultimately driving economic growth. Lower borrowing costs are set to provide a significant push to the real estate sector, as reduced home loan interest rates make homeownership more accessible. This move is expected to encourage higher demand for housing, benefiting both end-users and investors alike.”
Mr. Udit Jain, Director, OneGroup
“The 25 basis point cut in the repo rate is a welcome move, particularly for homebuyers in the affordable and mid-segment categories. Given that these housing segments are highly cost-sensitive, a lower EMI burden will undoubtedly encourage more buyers to take the plunge into homeownership.
Additionally, the rate cut is expected to provide a strong boost to housing demand in Tier II and Tier III cities, where affordability plays a crucial role in purchasing decisions. Combined with other favorable factors—such as increased savings from revised tax slabs in Budget 2025-26 and the upcoming implementation of the 8th Pay Commission—this move sets the stage for sustained growth in the real estate sector. The combined impact of these measures will give a much-needed boost to industries linked to housing, enhance home loan eligibility, improve affordability, and drive higher demand for housing in the near future.”
Mr. Amit Goyal, Managing Direct, India Sotheby’s International Realty
“The RBI’s 0.25% rate cut after five long years—is the much-needed oxygen for the Indian economy, more particularly for the real estate sector. It lightens EMIs, boosts investments, and signals a pro-growth stance. Coupled with income tax breaks for incomes up to ₹12 lakh in the Union Budget, it widens the path to homeownership for many aspiring buyers.”
Mr. Vimal Nadar, Head of Research at Colliers India
“In line with expectations, RBI in its first MPC meeting after the Budget, has decided to reduce the repo rate by 25 basis points to 6.25%, the first rate cut in nearly five years, following a prolonged cycle of rate hike and stability triggered by global uncertainties. This comes in the backdrop of easing inflation and moderation in growth prospects. The Central Bank, however, maintains confidence on the robustness of domestic economy and projects the GDP growth rate at 6.7% in FY 2025-26. As housing demand had begun to stabilize after witnessing record sales in the last 2-3 years, this rate cut comes at an opportune time and will have a significant bearing on boosting homebuyer sentiments. The rate cut along with the recent budgetary announcements related to creation of Urban Challenge Fund and tax reliefs under the new regime, are likely to stimulate urban growth and enhance domestic consumption. Higher disposable income and lowering of financing costs stand to benefit homebuyers and developers alike. Furthermore, the recent allocation of INR 15,000 Crores for SWAMIH II fund is likely to expedite completion of stressed projects, boosting liquidity and spur home buying sentiments. Overall, evident tailwinds should boost real estate demand across asset classes in upcoming quarters.”
Mr. Shrinivas Rao, FRICS, CEO of Vestian,
“The RBI’s 25 bps reduction in the repo rate was anticipated, given the slowdown in GDP growth to 5.4% in the second quarter of FY’25, marking the slowest expansion over seven consecutive quarters. This rate cut, the first in nearly five years, aims to bolster market liquidity. It’s likely to buoy the real estate sector with expectations of major banks trimming mortgage rates. However, it is also expected to exert downward pressure on rupee value in international markets, barring foreign investments.”
Mr. Piyush Bothra, Co-Founder and CFO, Square Yards
“The Reserve Bank of India’s decision to cut the repo rate by 25 basis points to 6.25% is a welcome move for the real estate market. This will lower borrowing costs for home buyers, making home loans more accessible and improving buyer sentiment. Additionally, it could enhance liquidity in the banking system, easing access to financing for developers. Combined with recent tax reforms, stable inflation projections and sustained economic growth, it will act as strong tailwinds for the residential real estate sector. Needless to say “acchhe din” for real estate will continue for a long time”
Mr. Nitesh Kumar, MD & CEO Emami Realty
“The Reserve Bank of India’s decision to cut the repo rate by 25 basis points is a welcome move that will significantly boost economic growth and enhance market sentiment. This rate cut will lower borrowing costs, making it easier for businesses to access capital and invest in expansion projects. For the real estate sector, this reduction in interest rates is particularly beneficial as it will stimulate demand for housing and commercial properties. We believe this step will contribute to a more robust and resilient economy, fostering a positive environment for both businesses and consumers.”
Mr. Dinesh Yadav, Founder and MD of Fine Acers
“The RBI’s latest decision to reduce the repo rate by 25 bps to 6.25% will boost enhance liquidity, promote borrowing and support consumer demand. Lenders offering reduced rates welcome homebuyers as well as developers, therefore rendering real estate investments affordable and attractive. This will, in turn, induce activity in the residential and commercial sectors, which, in turn, will support its allied industries of construction, cement, and steel. Moreover, the real estate sector continues to promise premium investment opportunities given the demand for branded resorts & residences on sales lease back model and integrated townships. Such policy supports the economy, enhancing job creation, and confidence in the market.”
Mr. Avinash Rao, Founder of Alt DRX
“The RBI governor’s latest announcement on Rate Cuts should be seen in conjunction with the FM’s announcement on changes in the IT Act and rationalization of Tax Slabs. Both these steps will act as catalysts, fuelling economic growth & optimism in the economy. Such steps augur well not just for demands for New Homes but also help in building a sense of optimism & positivity in the larger population. I am quite positive that this is the first of many similar steps that the government will be taking to provide the necessary growth impetus required to build Viksit Bharat.”
Image source- Hemanshi Kamani/Reuters
