The RBI’s 25-basis-point repo rate hike is expected to weigh on housing demand as it comes against a backdrop of rising property prices. The increase will push up borrowing costs for homebuyers and may lead to deferment in purchasing decisions, particularly in the price-sensitive segments.
After nearly three-and-a-half years, the Reserve Bank of India (RBI) on Wednesday raised the key benchmark policy rate by 25 basis points to 5.5% to control rising inflation amid the West Asia crisis.
“The rate hike will put pressure on consumer sentiment and discretionary spending – this has a direct correlation to housing demand. The festive season is a key period for housing demand, and an increase in borrowing costs will affect buyer sentiment,” said Anuj Puri, Chairman - ANAROCK Group.
Puri added that with the rate hike, dearer home loans will make buyers more selective and cause decision timelines to extend, particularly in the price-sensitive segments.
As per Anarock Research data, average residential prices increased 7% y-o-y. Q3 2026 recorded approx. 1,00,220 housing sales across the top 7 cities, up 3% y-o-y and 10% q-o-q. Affordable housing comprised a 16% share of these sales.
“This momentum will now be tested because even a modest increase in EMIs will result in deferred purchase decisions or budget recalculations among affordable housing buyers…Higher financing costs coupled with the possibility of softer festive consumption could make developers and investors more cautious. Some new mall projects could potentially be deferred until there is greater clarity on demand,” stated Puri.
RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) unanimously decided to raise the policy repo rate by 25 basis points. MPC also changed its stance to ‘calibrated tightening’ from ‘neutral’ and also underscored that rate cut is unlikely in the near term given the current conditions.
Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India said the RBI’s 25 bps repo rate hike to 5.50% is broadly in line with expectations, given the challenges posed by weak monsoons, the potential impact of El Niño, heightened geopolitical conditions and global trade and inflationary pressures.
“The shift to a ‘calibrated tightening’ stance signals that further rate action will remain data dependent. For real estate, higher borrowing costs could create some affordability pressures, particularly in interest-rate-sensitive and lower-priced segments, but we do not expect a material disruption to the sector’s broader trajectory in the near future,” added Baijal.
Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE, said “We expect the impact of the rate hike on housing demand to stay measured, particularly in the mid and premium segments, where the underlying demand is still healthy. While the 25 basis point increase will push borrowing costs up a little, but we expect the sector to hold up…What matters from here is where inflation and interest rates go, and whether this increase stays a calibrated response rather than the start of a long tightening cycle."