5th December 2025 l Navi Mumbai
The Reserve Bank of India (RBI) has reduced to 5.25% that is expected to have a positive impact on the sector of real estate and contribute to the overall economic growth of India. The decision about cutting the rate was taken during the 58th Monetary Policy Committee (MPC) meeting held from December 3 to 5, 2025, where the committee members voted without any disagreement in favour of the reduction of the repo rate.
Apart from the repo rate, the RBI also revised other policy rates. The Standing Deposit Facility (SDF) rate has been cut to 5.00%, while the Marginal Standing Facility (MSF) rate and the Bank Rate have been increased to 5.50%. The Central Bank has maintained a neutral stance, signalling that future rate decisions will depend on economic data and inflation trends.
This rate cut comes at a time when the economic environment is showing encouraging signs. Headline inflation has eased sharply due to a notable fall in food prices in October 2025. Core inflation, excluding gold and other volatile items, has also moderated. The softer inflation allowed RBI the flexibility to boost liquidity and support demand.
India’s economic growth remains strong. The GDP recorded 8.2% growth in Q2 FY26, marking the highest growth in six quarters. The RBI expects the full-year FY26 GDP to grow at 7.3%, higher than its previous projection of 6.8%. Inflation for FY26 is expected to stay around 2.0%, comfortably within the target range. These favourable conditions encouraged the RBI to bring down the policy rate.
For the real estate sector, the repo-rate cut is a welcome development. Lower policy rates reduce the cost of borrowing for both homebuyers and developers. If banks pass on the cut quickly, home loan interest rates are likely to fall, decreasing monthly EMI, this makes home ownership more attractive, especially for first-time buyers and families looking at affordable and mid-income housing.
Experts believe that this rate cut may encourage those who were delaying home purchases due to higher interest rates. Developers are also expected to benefit from lower financing costs, which can help them manage cash flows, ease project funding pressure, and launch new residential projects with better planning.
The rate cut could lead to improved housing demand across major Indian cities as well as growing Tier-2 and Tier-3 markets. The analysts making such forecasts point out that if banks fully transmit the repo-rate cut, home loan interest rates might go down to less than 8% which will stimulate the housing market further at the beginning of 2026.
On the other hand, experts share the opinion that the good things will happen only if banks will act swiftly on the reduction of lending rates and the passing of the benefits to the customers. Even omnipresent fears and concerns like rising construction costs, global uncertainties and currency fluctuations may still hinder project expense sides although the liquidity situation is better than before.
Overall, the 5.25% repo rate signals RBI’s confidence in the economy and its effort to support growth. With strong GDP numbers, lower inflation and steady demand, the real estate sector is expected to gain renewed energy from this policy shift.
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Disclaimer – This article is for general information only and is based on publicly available data. Readers should verify details independently before making financial or investment decisions.
Source – ET Realty
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