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

April 9, 2025: The Reserve Bank of India’s (RBI) governor, Sanjay Malhotra, announced today that, following a unanimous vote by the six-member Monetary Policy Committee (MPC), the repo rate is reduced by 25 basis points to 6%. This rate comes in the backdrop of the reciprocal tariff announced by US President Donald Trump, effective today.

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. Prior to the rate cut, the repo rate was cut to 6.25% in February 2025.

According to the RBI, the Bank Rate and the Marginal Standing Facility (MSF) will both be adjusted to 6.25%. The Standing Deposit Facility (SDF) will be adjusted to 5.75%. The GDP growth projection for FY26 is expected to be around 6.5% from the previously estimated 6.7%.

Amid the global uncertainties surrounding imposition of tariffs and trade wars, the domestic policymakers have instilled confidence with RBI leading from the front including interest rate cuts and shifting its stance from neutral to accommodative. This is a much-needed rate cut on top of the slew of liquidity enhancement measures that we saw from the RBI in the run-up to the policy in the last couple of months. This will go a long way in stabilising the Indian economy amidst the global uncertainties and market turbulences especially from the perspective of individual homebuyers who will find that these measures will comfort them in terms of benign interest environment at least for the next few quarters.

The RBI’s MPC meeting took place from April 7 to April 9, 2025.

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

“As the global economy braces to withstand the impact of recently announced US trade tariffs, the Reserve Bank of India has taken a proactive step to support domestic growth by implementing a 25-basis point reduction in the repo rate — its second such cut following a similar move in February. At a time when downside risks to growth persist — India’s GDP is projected to have grown by 6.5% in fiscal year 2025, marking the slowest pace in five years — this prudent decision by the banking regulator is both commendable and reassuring for investors,” said Dhruv Agarwala, group CEO, Housing.com and Proptiger.com.

“For the housing sector, the rate cut holds the potential to improve affordability and renew homebuyer enthusiasm, particularly in the backdrop of steadily rising prices. However, the true impact will hinge on the swift and effective transmission of this cut by banks and lending institutions. It is imperative that lenders pass on the benefits in the form of lower interest rates — helping reduce EMIs and making the aspiration of homeownership more attainable for millions of Indians,” he added.

Seconded Boman Irani, president, CREDAI National and said, “At a time of global economic volatility caused by increasing tariffs and geopolitical tensions, this move reflects a continued shift toward a pro-growth stance amid easing inflation and a stabilizing macroeconomic outlook. With CPI inflation expected to moderate to 4.5%, the rate cut is well-timed to uplift consumer sentiment and enhance borrowing capacity — especially in the housing sector. It is likely to improve home loan affordability, stimulate housing demand, and provide a strong impetus to the mid-income and affordable segments, where interest rate sensitivity remains high. The RBI’s continued policy easing highlights its commitment to sustaining growth while safeguarding macroeconomic stability.”

The reduction in the repo rate is a positive sign for the entire real estate sector. “The MPC’s decision to lower interest rates will make home loans more affordable, encouraging fence-sitters to take buying decisions. It will usher in benefits across affordable, mid-income, and premium segments. The rate cut also eases financing costs for developers and thus benefits ongoing and upcoming projects. Overall, we see this move to stimulate demand, boost buyer sentiment, and contribute better to sustained growth in the housing market,” says Chintan Sheth, chairman and managing director, Sheth Realty.

Vimal Nadar, Head of Research at Colliers India, said, “The change in stance from ‘neutral’ to ‘accommodative’ is indicative of a growth-supportive monetary policy and this becomes more critical in the backdrop of heightened uncertainty in global markets following the levy of reciprocal tariffs by the US. Although the intensity and impact of ongoing tariff escalations need to be fully ascertained, RBI remains optimistic on domestic growth outlook and projects the GDP to grow by 6.5% in the fiscal 2025-26. Recent easing of inflation is likely to increase disposable income which in turn has the potential to boost domestic consumption.”

Nadar added that consecutive reductions in benchmark lending rates will boost homebuyers’ sentiments and resultantly improve housing demand particularly in affordable and middle-income segments. Real estate developers across segments also stand to benefit from likely lowering of financing costs. Overall demand and real estate growth is likely to be on the upswing, given the anticipation of further easing in monetary policy. However, global headwinds and trade frictions will remain a key monitorable for all economic sectors including real estate.

Ramani Sastri, chairman and MD, Sterling Developers, said, “This move will also strengthen market confidence, infuse much-needed liquidity, and trigger greater investment activity in the sector. As India’s economy continues to grow, homebuyers are showing strong intent to invest in residential real estate for long-term returns. We remain hopeful for further reductions in interest rates, which would provide an added impetus not just to the real estate sector, but also to broader industrial activity and economic growth.

With sustained demand and softening home loan interest rates, the sector’s growth momentum is set to accelerate well into 2025, firmly establishing Indian real estate as a key driver of the nation’s economic development.”