RBI cuts repo rate by 25 basis points, reduces to 6%

February 7, 2025: The Reserve Bank of India’s (RBI) new governor, Sanjay Malhotra, announced today that, as decided in the Monetary Policy Committee (MPC) meeting, the repo rate is reduced by 25 basis points to 6.25%.

The repo rate is the interest charged by the RBI to banks and financial institutions for short-term loans in India. A lower repo rate fosters economic growth, while a higher repo rate can slow it down.

After remaining unchanged for 11 consecutive sessions, the repo rate was cut following a unanimous vote by the six-member Monetary Policy Committee (MPC). This marks the first rate cut in five years, the last one being in 2020.

According to the RBI, the Bank Rate and the Marginal Standing Facility (MSF) will both be adjusted to 6.5%. The Standing Deposit Facility (SDF) will be adjusted to 6%. The GDP growth projection for FY26 is expected to be around 6.7%.

The RBI’s MPC meeting took place from February 5 to 7, marking the first policy meeting led by Governor Sanjay Malhotra since his appointment in December 2024.

What is the impact of rate cut in repo rate on the real estate market?

Mentioned below are some of the industry reactions on the rate cut in repo rate.

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.

Dharmendra Raichura – VP & head of finance, Ashar Group

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.

Boman Irani, president, CREDAI National

The RBI’s decision to reduce the repo rate by 25 basis points to 6.25% supplements recent announcements in the budget aimed at boosting spending and spur economic growth. This supportive monetary policy was imperative, especially after the recent 50-basis-point reduction in the Cash Reserve Ratio (CRR), which has already injected significant liquidity into the banking system.  As inflations continues to remain a notch higher than the medium-term target of 4%, the central bank has its task cut out – Contain inflation, inject liquidity into banking system and cut repo rates in the coming quarter too. While the current cut may have a limited direct impact, we anticipate that a further rate cut in the next MPC meeting will provide stronger impetus to overall demand, accelerating housing sales, particularly in the mid-income and affordable segments. Together, these measures signal a robust framework for sustainable growth, fostering confidence among homebuyers, developers, and investors alike.

Amit Bhagat, co-founder, CEO and MD, ASK Property Fund

Home sales for the affordable and lower mid-income segment have been affected by declining affordability. The impact of increasing prices in the recent past and elevated interest rates have impacted the housing sales in this segment, as it is quite sensitive to movements in interest rates and prices. A rate cut was definitely needed to uplift sentiment and define a direction for the near future.

RBI’s rate cut along with the Government’s Budget initiatives like providing tax benefits across tax slabs, provisions on self-occupied houses, SWAMIH Fund 2, etc. will aid in maintaining the housing demand momentum and drive a sustained sales growth.”

Housing.com POV

Following the center’s decision to cut personal tax in the Union Budget 2025-26 to boost consumption, this rate cut will further strengthen that initiative. This is a step in the right direction and is expected to translate many fence sitters to home buyers in 2025.