RBI rate pause brings EMI stability, offers limited relief to affordable housing

In its Monetary Policy Committee (MPC) meet on Friday, the Reserve Bank of India (RBI) kept the repo rate unchanged at 5.25 per cent, and maintained its neutral stance.

Commenting on the RBI decision, industry experts said this 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.

Amidst recent positive developments on the international trade front, India’s long term growth outlook remains favourable, with GDP growth estimated at 7.4% for FY 2025-26. Stability in benchmark lending rates, combined with supply-side push in the recent budget, is expected to complement demand traction across real estate segments, especially industrial & warehousing.

“The strategic manufacturing push alongside, the focus on urban development through “City Economic Regions” will catalyze real estate activity in the emerging Tier II & III cities. Although residential demand, particularly affordable and middle-income housing, is likely to remain firm in the near term, supported by lower borrowing costs and elbowroom for future interest rate reductions, the complete transmission of previous repo rate reductions to prospective homebuyers will remain critical,” said Vimal Nadar, National Director & Head, Research at Colliers India.

The RBI decision to keep the repo rate at 5.25% also means that home loan EMIs will not change either.

“This will keep buyers engaged but does nothing to lift demand further and does nothing to make housing more affordable. The upside is that current house loan borrowers will not experience any EMI shocks for now, and new borrowers can plan their housing purchases with the benefit of predictability,” said Anuj Puri, Chairman – ANAROCK Group.

Demand for affordable and mid-segment homes remains strong, but continues to be challenged by escalated pricing, which affects affordability. A rate cut would have potentially brought at least some fence-sitters back to the market.

Overall trends show that affordable housing remained considerably subdued in 2025, in terms of both sales and new launches. As per ANAROCK Research, the overall sales share of affordable housing was just around 18% of the total housing sales across cities in 2025. Back in 2024, out of the total sales of approx. 4.60 lakh units in top 7 cities, affordable housing share stood at 20%. This share stood the highest in 2019 when out of approx. 2.61 lakh units sold altogether, 38% was within this segment.

The Union Budget 2026-27 failed to deliver any notable relief to the affordable housing buyer segment, which is in dire need of proactive intervention by way of interest stimulants for both buyers and developers. The segment needs focused, high-impact measures like tax breaks – for developers, so that they shift their focus more on affordable housing from the current premium and luxury segments, and for buyers, to improve affordability.

“On a positive note, the move to allow banks to lend money directly to REITs within the rules makes it easier for REITs to raise capital, lowers expenses, and speeds up asset expansion in the office and retail segments. This makes these segments more appealing to investors and is positive for the broader real estate financing spectrum. It needs to be accompanied by strong regulatory safeguards on exposure limits, and robust credit underwriting and monitoring practices,” said Puri.

Shrinivas Rao, FRICS, CEO, Vestian observed that the year 2026 began with the repo rate being maintained at its three-year low. This is expected to enhance stability and provide an impetus to economic growth amid prevailing global uncertainties. Meanwhile, the RBI is also assessing market reactions following recent trade developments with the US and Europe. Taking cognizance of these factors, the repo rate is anticipated to remain stable in the coming months, supported by controlled headline inflation and robust economic growth.

“The real estate market continues to be supported by low mortgage rates, which are stimulating demand. Affordable financing for developers, along with the ready availability of foreign capital, is expected to accelerate construction activity nationwide and help narrow the demand supply gap,” added Rao.