RBI Rate Pause: Stability for Home Loans, Limited Relief for Affordable Housing
The rate pause comes at a time when macroeconomic conditions remain supportive – consumer inflation levels remain well below target level; domestic demand is resilient and global trade linkages are getting realigned.
The RBI decision to keep the repo rate at 5.25% means that home loan EMIs will not change. (AI Image)
The Reserve Bank of India (RBI) kept the repo rate unchanged at 5.25% during its latest Monetary Policy Committee (MPC) meeting, maintaining a neutral stance.
Industry analysts note that this pause aligns with supportive macroeconomic conditions, including consumer inflation levels remaining below target and resilient domestic demand. With GDP growth estimated at 7.4% for FY 2025-26, stability in benchmark lending rates and recent budget supply-side measures are expected to boost demand in real estate, particularly in industrial and warehousing segments.
Vimal Nadar, National Director and Head of Research at Colliers India, suggests that a manufacturing push and the development of City Economic Regions will drive activity in Tier II and III cities. While demand for middle-income and affordable housing remains firm, Nadar emphasizes that the full transmission of previous rate reductions to homebuyers is critical.
For current borrowers, the 5.25% repo rate means home loan EMIs will remain stable. Anuj Puri, Chairman of ANAROCK Group, states that while this predictability prevents EMI shocks for existing borrowers and helps new buyers plan, it does not actively increase affordability or stimulate further demand.
The affordable and mid-segment markets continue to struggle with rising property prices. A rate cut might have encouraged hesitant buyers to enter the market, but the current pause leaves them on the sidelines.
Data shows a steady decline in the affordable housing share. In 2025, affordable housing accounted for only 18% of total sales. This is a drop from 20% in 2024 (out of 4.60 lakh units sold in top 7 cities) and a significant fall from its 2019 peak, when the segment represented 38% of the 2.61 lakh units sold. This trend suggests the affordable segment loses ground to premium developments.
The Union Budget 2026-27 provided little relief for this segment. Experts argue that the market needs a policy reset to unlock realty opportunity through high-impact measures. Specifically, tax breaks for developers could incentivize a shift from luxury projects back to affordable housing, while buyer-side stimulants would improve overall accessibility.
On the commercial side, Puri notes that allowing banks to lend directly to Indian REITs will lower capital expenses and accelerate expansion in office and retail sectors. However, he warns that this must be paired with strict credit underwriting and exposure limits.
Shrinivas Rao, CEO of Vestian, observed that starting 2026 with the repo rate at a three-year low provides economic stability despite global uncertainties. He expects the rate to remain stable in the coming months as the RBI monitors trade developments with Europe and the US, supported by controlled inflation. Rao adds that low mortgage rates and the availability of foreign capital should help developers narrow the demand-supply gap through accelerated construction.
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