The Reserve Bank of India (RBI) has increased its benchmark repo rate by 25 basis points to 5.5%, marking its first rate hike since February 2023. The decision was taken unanimously by the Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra.
The central bank has raised the rate from 5.25% to 5.5% against a backdrop of rising inflation, elevated oil prices and a weaker rupee. These factors have increased pressure on the domestic economy and raised concerns over the potential impact of higher input and import costs.
The repo rate influences the cost at which commercial banks access funds from the RBI. A change in the policy rate can therefore affect lending rates across the banking system. Borrowers with floating-rate loans, including home loans, may see changes in their interest costs or repayment schedules as banks respond to the latest policy decision.
The move also marks a shift in the RBI’s recent interest-rate approach, with the central bank now placing greater emphasis on containing renewed inflationary pressures. Higher crude oil prices remain a key concern because India imports a large share of its oil requirements, while a weaker rupee can make these imports more expensive.
For consumers and businesses, the impact will depend on how banks transmit the rate increase to their lending rates. Higher borrowing costs could influence demand for housing, vehicles, business expansion and other credit-dependent activities in the months ahead.
Industry Experts Opinions
Mr. Pratik Tibrewala, SVP & Head Corporate Finance, M3M India
“The RBI’s 25 bps repo rate hike to 5.50% is a calibrated step to anchor inflation amid global volatility. While borrowing costs may inch up marginally, long-term stability of the rupee helps in attracting global capital and will benefit the real estate sector. The demand for premium housing and commercial assets continues to be strong and is driven by wealth creation.”
Mr. Rajan Luthra, CFO, ACE- Action Construction Equipment
“The RBI’s decision to raise the repo rate by 25 basis points to 5.50% reflects a calibrated tightening in response to evolving inflationary pressures and persistent global uncertainties. While geopolitical developments and global commodity price volatility remain key risks, India’s economic fundamentals continue to remain resilient.
For the construction equipment sector, higher financing costs may impact investment decisions in the near term. However, sustained government capex and infrastructure activity across roads, railways and urban development should continue to support demand and sector growth. At ACE, we remain focused on product innovation and strengthening our capabilities to meet India’s evolving infrastructure needs. With strong long-term fundamentals, we remain committed to our growth plans and supporting India’s infrastructure development.”
Mr. Mukesh Choudhary, Managing Director, Accuspace, a real estate company
A repo rate hike and signal of future hikes could have some impact on the office real estate segment, primarily through higher financing costs and its potential influence on corporate expansion and capital expenditure decisions. However, seeing the underlying demand for quality office space which remains supported by business expansion, GCC growth and the need for modern, well-located workplaces, the demand for office space will continue its momentum. Developers may see some increase in the cost of capital, but projects with strong tenant visibility, robust fundamentals and good connectivity are likely to remain attractive. A stable interest-rate environment would, of course, provide greater confidence for new development and investment decisions, but we believe the office market can remain resilient even in a moderately higher-rate environment.
Mr. Ankur Jalan, CEO, Golden Growth Fund (GGF), a category II Real Estate focussed Alternative Investment Fund (AIF)
A repo rate hike, in view of the rising inflation, will have a broader impact on the cost of capital across the real estate ecosystem. For AIFs, which typically deploy patient institutional capital into development, redevelopment and asset-backed opportunities, a higher interest-rate environment can influence project financing costs, acquisition valuations and investment timelines. At a time when institutional capital is showing strong confidence in Indian real estate, policy stability remains important for maintaining investment momentum. A rate hike, which could be transmitted by banks within 1-3 months, could also make developers and investors more selective, with greater emphasis on projects with strong fundamentals, execution visibility and clearly defined exit strategies.
Mr. Suresh H. A., Managing Director, Sanjeevini Group
The residential market continues to be supported by strong end-user demand, employment growth and infrastructure-led development despite the increase in home prices. A repo rate hike at this stage and signal of further hikes in the future may impact housing demand going forward and further put some pressure on affordability by increasing home-loan costs, particularly for first-time and financing-dependent buyers. However, banks could hold on to the current rates with a view to support the festive consumption boost as stable interest-rate environment would help sustain buyer confidence and provide greater visibility to both homebuyers and developers.
Mr. Lalit Parihar, Managing Director, Aaiji Group, a real estate firm
The residential market has shown resilience, with sales continuing to remain steady despite evolving macroeconomic conditions. However, a repo rate hike and indication of further hik in the future will have an impact on homebuyer sentiments as they may prefer to postpone their purchase especially in the mid-income segment. While repo rate hike has become inevitable in view of the rising inflation, banks may prefer to wait until the passage of festive season to pass on the rate increase. Affordability is already a concern among buyers and by increasing borrowing costs may hurt certain section of homebuyers.
Mr. Keshav Mangla-GM-Business Development -Forteasia Realty
“The 25 basis point repo rate increase to 5.50% will have a bearing on the residential demand, with the lower end and mid segments being the most vulnerable on account of their sensitivity to change inEMIs. Conversion will slow down during the festive quarter, with luxury housing being an exception. The larger issue is that the rate hikes have sent a signals that the borrowing cost may remain higher for longer, with ready-to-move inventory likely to benefit over launches as buyers tend to be wary of taking on additional liability. Unless there is a spike in demand, new project launches may have to wait. With the demand moderation, price correction will remain on the cards with buyers having the upper hand in a buyers’ market scenario”
Mr. Anurag Goel, Director,Goel Ganga Developments
“Coming to the home loan segment, the increase in repo rate will directly impact floating rate borrowers and hence have a bearing on the overall demand for real estate. Taking the example of a Rs 50 lakh loan at 20 year tenure, a 25 basis point increase will result in additional EMI of around Rs 780 per month or Rs 1.88 lakh extra interest payout over the life of the loan. While lenders may also look to increase the tenure to reduce EMI burden, it will continue to be a challenge for first time buyers to qualify for a home loan. For investors looking to leverage on homebuyer tax benefits, a higher down payment will be required. While real estate demand will not collapse, affordability will take a hit.”
Mr. Hardik Shah, Director, Shyam Group -Dholera SIR
“Developer financing will also be impacted on account of higher cost of funding which will have a bearing on project pricing. With a 25 basis point increase, the existing project launches will see higher EMI burden on account of higher interest outgo, while approvals for new launches will also be taken with caution. It will be interesting to see how the market responds to this rate hike, with subsidies, benefits and flexible payment options being on offer during the festive quarter. Unless there is a subsequent rate hike, the impact will be more visible on project viability for mid segment developers with a high proportion of inventory under development, with leverage being passed on to the buyers. While demand will hold, job security and inventory clearance will be the key factors driving sales in the near term.”
Mr. Vijay Raundal, Managing Director, Teerth Realties
“As far as commercial real estate is concerned, the transmission of increase in repo rate will have varied impact on office space, warehousing and retail segment, with demand being driven by business cycles and return to office trends. With increased borrowing cost, cap rates for commercial real estate may also see increase, with impact being more visible on REITs and institutional investors. While demand for Grade A offices with assured rentals will sustain, there may be further delay in refinancing for weaker assets. For retail real estate, increase in EMI burden may further reduce footfalls with discretionary spending being curtailed, with impact being more visible on capital expenditure and new supply in the short term. Stability in money market rates is critical for commercial real estate to maintain its appeal as an asset class.”
Mr. Nikhil Mawale, Co-Founder & CEO, PropertyDrone Realty
“The increase in fixed deposit rates will also have an impact on capital allocation with real estate having to compete with safer investment options on the table. End users considering fixed deposit versus real estate must factor in the illiquidity of the latter and associated maintenance cost. A 25 basis point increase in repo rate will lead to reallocation of savings by conservative investors away from second home purchases and land banking. With affordability and liquidity being the primary concern, end-users must focus on ready to move inventory. Buyers should look to negotiate on prices and leverage on existing benefits to offload inventory. With another round of rate hike expected later this year, higher EMI burden will further reduce affordability in the real estate sector.”
Mr. Pradeep Aggarwal, Founder and Chairman, Signature Global (India) Ltd.
“The RBI’s decision to raise the repo rate by 25 bps from 5.25% reflects its commitment to price stability amid a challenging macro backdrop. While housing demand has been supported by rising incomes, urbanisation and a growing aspiration for homeownership, and has stayed resilient even through global uncertainty, volatile crude prices, currency pressures and persistent inflation risks have made the central bank’s task a delicate one. The RBI has consistently balanced growth and stability, and this decision reflects the prevailing macro realities.
That said, a stable repo rate would have better sustained the current demand momentum. Higher borrowing costs may temporarily moderate buyer sentiment, particularly in the mid-income segments. Still, with strong fundamentals, and the upcoming festive season, we expect the sector to remain resilient.”
Mr. Yashank Wason, Managing Director, Royal Green Realty
“The real estate industry is expected to be somewhat impacted by the RBI’s 25 basis point increase in repo rates, which raised the policy rate to 5.50%. For homebuyers with floating-rate loans, rising borrowing costs might slightly raise EMIs, but for those with steady incomes and lengthy investment horizons, the effect should be tolerable. Depending on the current lending rate, a 25 basis point rise on a ₹50 lakh, 20-year home loan could result in a slight increase in EMI. Given India’s robust underlying housing demand, urbanization, and 7.8% GDP growth in the first quarter of FY27, we think the industry is still robust and fundamentally sound.”
Mr. Varun Garg, Director, Karyan Group
“The 25 bps repo rate hike is a measured step, and we expect its impact on residential real estate to be limited. Markets like Noida and Ghaziabad are emerging as strong growth corridors, with improving metro connectivity, expressway access, and better social infrastructure drawing both end-users and investors. Homebuyers are choosing these markets for their affordability, larger homes and long-term appreciation potential, and a marginal rise in EMIs is unlikely to change the intent.The wider NCR continues to offer compelling residential opportunities. We remain confident that housing demand will stay resilient in the coming quarters.”
Mr. Rishabh Periwal, Sr. Vice President, Pioneer Urban Land and Infrastructure Ltd . says,
“The 25 bps repo rate hike is a calibrated move, and we expect its impact on real estate to remain contained. In gurugram, the luxury residential segment continues to see strong demand from affluent buyers and senior professionals who prioritise space, design, and lifestyle over marginal changes in EMIs. The commercial segment stands equally resilient, with growing demand from GCCs and a steady appetite for premium workspaces along key corridors. Backed by robust infrastructure and connectivity, Gurugram remains one of the most dynamic markets in the country. We remain optimistic about demand across both segments in the quarters ahead.
Mr. Manik Malik, CEO & President, BPTP
“The RBI’s decision reflects the strength and resilience of the Indian economy, which provides policymakers the room to act decisively on emerging inflationary pressures. For real estate, the larger opportunity remains firmly intact — rising incomes, rapid urbanisation, infrastructure creation and the growing aspiration for home ownership continue to drive long-term demand. A stable macroeconomic environment, anchored inflation and sustained economic growth provide the strongest foundation for consumer confidence and investment. We remain positive on the long-term outlook for housing and believe quality real estate will continue to be an important asset for both end-users and investors.”
Mr. Rahul Singla, Director, MAPSKO Group
“The RBI’s move to raise the repo rate by 25 basis points is aligned with the broader objective of ensuring economic stability and keeping inflation under control. Although it may slightly increase the cost of borrowing, the real estate sector remains supported by strong underlying demand and positive long-term growth drivers. Continued infrastructure investments, urban expansion, and rising aspirations among homebuyers are expected to sustain market activity. We believe the sector’s fundamentals remain intact, and demand for well-planned residential developments will continue to remain resilient in the months ahead.”
Mr. Vivek Singhal, Founder & CEO, Multigen
“The RBI’s decision to raise the repo rate by 25 basis points to 5.50% should be viewed as a calibrated response to inflationary pressures rather than a signal of weakening economic momentum. A stable inflation environment is ultimately beneficial for both consumers and businesses, including the real estate sector. While financing costs may witness a modest increase, housing demand is increasingly being driven by lifestyle upgrades, wealth creation, and aspirations rather than purely interest rate considerations. Given the sector’s strong fundamentals and improving buyer confidence, we expect residential demand to remain healthy, especially across premium and mid-income segments in key urban markets.”
Mr. Sidharth Chowdhry, Managing Director at Dalcore
“The RBI’s decision to increase the repo rate by 25 basis points to 5.50% comes at an important juncture for the Indian economy, with policymakers continuing to balance growth with price stability. For the real estate sector, the move is likely to encourage a measured approach among both buyers and developers. At the premium end of the market, however, we continue to see demand supported by strong consumer aspirations, improving economic confidence and a preference for quality-led developments. At Dalcore, we believe that well-designed homes in the right locations continue to hold strong long-term appeal, even as the broader interest-rate environment evolves. The current policy direction also highlights the importance of financial discipline and creating genuine value for homebuyers. We remain optimistic about the sector’s long-term prospects and believe India’s structural growth, rising aspirations and increasing preference for differentiated living experiences will continue to support quality real estate.”
Mr. Anil Godara, Managing Director, J Estates
The senior living segment is fundamentally different from conventional housing because the purchase decision is often driven by life-stage requirements rather than interest-rate movements alone. A 25 bps increase may influence financing considerations, particularly for families supporting the purchase, but it does not change the underlying need for safe, accessible and professionally managed living environments. As India’s ageing population grows, senior citizens are increasingly looking for homes that provide healthcare access, social interaction, security and longevity. That structural demand is likely to remain relatively resilient even in a slightly higher-rate environment.
Mr. Parvinder Singh, CEO, Trident Realty
The modest increase in the repo rate may encourage some buyers to take a more measured approach, but it is unlikely to change the broader shift underway in Tier-II housing markets. Premium homes and plotted developments are increasingly finding favour as buyers look for larger spaces, better locations and greater flexibility in how they build and use their homes. In many emerging cities, buyers also see the purchase as a long-term asset decision. This combination of aspiration and investment value should continue to support demand, even as buyers remain mindful of financing costs.
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