RBI Cuts Repo Rate to 6.25% After Nearly 5 Years – Homebuyers, Businesses to Benefit

The RBI has cut the repo rate by 25 basis points to 6.25% for the first time in nearly five years to boost economic growth. The move is expected to lower borrowing costs, stimulate investment, and strengthen homebuyer confidence. Governor Sanjay Malhotra emphasized economic resilience despite global uncertainties, with GDP growth projected at 6.7% for FY 2025-26.

CONTENTS:

• RBI Cuts Repo Rate by 25 Basis Points to 6.25%, Aims to Boost Economic Growth
• Rate Cut to Strengthen Homebuyer Confidence: Property Experts
• RBI Cuts Interest Rates for the First Time in Nearly Five Years to Stimulate Economy

RBI Cuts Repo Rate to 6.25% After Nearly 5 Years – Homebuyers, Businesses to Benefit

RBI Cuts Repo Rate by 25 Basis Points to 6.25%, Aims to Boost Economic Growth

RBI Cuts Repo Rate to 6.25% After Nearly 5 Years The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points to 6.25%, marking the first rate cut in five years since May 2020. Prior to this, the repo rate stood at 6.5%. This decision by the RBI’s six-member Monetary Policy Committee (MPC) aims to stimulate economic activity by lowering borrowing costs and encouraging spending and investment. Despite the rate cut, the RBI has maintained a “neutral” stance, allowing flexibility in response to evolving economic conditions.

RBI Governor Sanjay Malhotra highlighted that the existing monetary policy framework has effectively supported the Indian economy, particularly during the challenges posed by the pandemic. He emphasized that inflation has remained largely aligned with targets, barring occasional deviations. The RBI plans to refine this framework further by incorporating advanced data analysis and improving macroeconomic forecasting models.

Amid global uncertainty—including newly announced tariffs by U.S. President Donald Trump on Canada, Mexico, and China—the RBI has projected India’s GDP growth for the 2025-26 fiscal year at 6.7%. This aligns with government estimates of 6.3-6.8% growth, as outlined in the Economic Survey.

Regarding inflation, the RBI has projected retail inflation at 4.2% for 2025-26, with quarterly estimates ranging from 3.8% to 4.5%. The forecast for 2024-25 remains at 4.8%. A decline in food prices, particularly vegetables, contributed to a four-month low in Consumer Price Index (CPI) inflation at 5.22% in December.

A reduction in the repo rate is expected to lower equated monthly installments (EMIs) for borrowers as banks adjust external benchmark lending rates. It may also prompt banks to reduce interest rates on loans tied to the marginal cost of funds-based lending rate (MCLR).

The RBI also introduced measures to combat cyber fraud, including an additional authentication layer for international digital payments and the introduction of exclusive internet domains (“bank.in” for banks and “fin.in” for financial institutions) to enhance cybersecurity.

On the forex front, Malhotra reiterated that the RBI’s intervention aims to maintain stability without targeting specific exchange rate levels. The rupee has faced depreciation pressures, and the central bank is actively managing volatility using available tools.

Additionally, Malhotra assured stakeholders that regulatory decisions will continue to be made through a consultative approach, with sufficient transition time provided for implementation. He acknowledged that global economic conditions remain challenging, with financial market volatility influenced by monetary policy divergence, geopolitical tensions, and trade uncertainties.

Despite these global risks, Malhotra affirmed that the Indian economy remains strong and resilient. However, factors such as excessive market volatility, uncertain trade policies, and adverse weather conditions could pose risks to both growth and inflation in the coming months.

Rate Cut to Strengthen Homebuyer Confidence: Property Experts

RBI Cuts Repo Rate to 6.25% After Nearly 5 Years The Reserve Bank of India’s (RBI) decision to cut the repo rate by 25 basis points to 6.25% in its first Monetary Policy Committee (MPC) meeting post-Budget is expected to significantly boost homebuyer sentiment. This marks the first rate reduction in nearly five years, following an extended period of rate hikes and stability driven by global uncertainties. The move comes amid moderating growth and easing inflation, with the central bank maintaining a positive outlook on the domestic economy and forecasting a 6.7% GDP growth rate for FY 2025-26.

Real estate experts and consultants have welcomed the rate cut, stating that it arrives at a crucial moment as housing demand stabilizes after record sales over the past two to three years.

“The rate cut, along with budgetary measures such as the Urban Challenge Fund and tax relief under the new regime, is expected to drive urban growth and boost domestic consumption. Reduced financing costs and increased disposable income will benefit both homebuyers and developers. Additionally, the allocation of ₹15,000 crore for the SWAMIH II fund is set to accelerate the completion of stalled projects, improving liquidity and further stimulating homebuyer confidence,” said Vimal Nadar, Head of Research at Colliers India.

Home Loan Benefits for Buyers and Existing Borrowers

RBI Cuts Repo Rate to 6.25% After Nearly 5 Years According to Dhruv Agarwala, Group CEO of Housing.com and Proptiger.com, the rate cut will directly lower home loan interest rates, benefiting both new buyers and those with existing loans.

“At this crucial time, the rate cut will be instrumental in improving housing affordability in India, complementing the recently announced measures in the Union Budget 2025. Additionally, the reduction in the cash reserve ratio (CRR) will increase liquidity for developers, positively influencing new housing supply and expediting project completions,” he explained.

Boost for First-Time Homebuyers and Affordable Housing

RBI Cuts Repo Rate to 6.25% After Nearly 5 Years Property analysts believe the reduction in the repo rate will provide a significant boost to the affordable housing segment, encouraging first-time buyers who had been hesitant due to higher interest rates.

“Many potential buyers who were on the fence may now proceed with their purchase, provided banks pass on the benefits of lower rates. This aligns with the current momentum in the housing market, where demand has remained strong. Lower home loan rates will reinforce positive consumer sentiment, which is especially crucial given that property prices across the top seven cities have risen significantly in the past year,” said Anuj Puri, Chairman of ANAROCK Group.

ANAROCK Research indicates that in 2024, housing prices in these cities increased by 13% to 30%, with the National Capital Region (NCR) witnessing the highest surge at 30%. By the end of 2024, the average housing price across these cities rose to approximately ₹8,590 per square foot from ₹7,080 per square foot at the end of 2023, reflecting an annual increase of 21%.

Positive Outlook for Commercial Real Estate and REITs

RBI Cuts Repo Rate to 6.25% After Nearly 5 Years Beyond the residential sector, the rate cut is also expected to benefit commercial real estate, particularly office spaces, by lowering borrowing costs for businesses. Additionally, lower interest rates could enhance the attractiveness of Real Estate Investment Trusts (REITs), as investors seek stable returns in a declining rate environment.

Udit Jain, Director at OneGroup, noted, “Since housing demand, particularly in Tier II and Tier III cities, is highly sensitive to costs, the reduced EMI burden will likely encourage more buyers to invest in homeownership. Along with increased savings from the revised tax slabs in Budget 2025-26 and the anticipated implementation of the 8th Pay Commission, this move is poised to drive sustained growth in the real estate sector.”

The combination of these factors is expected to provide a significant boost to housing-related industries, enhance home loan eligibility, improve affordability, and drive stronger housing demand in the near future.

RBI Cuts Interest Rates for the First Time in Nearly Five Years to Stimulate Economy

RBI Cuts Repo Rate to 6.25% After Nearly 5 Years : The Reserve Bank of India (RBI) has reduced its key repo rate for the first time in almost five years, aiming to boost economic growth. The Monetary Policy Committee (MPC) unanimously decided to lower the rate by 25 basis points, bringing it down from 6.5% to 6.25%, according to RBI Governor Sanjay Malhotra. This marks his first major policy announcement since assuming office last December.

The MPC, consisting of three RBI members and three external experts, last reduced the repo rate in May 2020 and had maintained it unchanged over the previous 11 policy meetings.

Economic Outlook and Global Context

RBI Cuts Repo Rate to 6.25% After Nearly 5 Years Governor Malhotra highlighted that global economic conditions remain challenging, with growth rates trailing historical averages. However, high-frequency indicators suggest resilience in global markets. While India is not entirely insulated from global economic pressures, he assured that the country’s economy remains strong and resilient.

He noted that expectations regarding the scale and timing of interest rate cuts in the United States have shifted, leading to a rise in bond yields and a strengthening of the US dollar.

Growth and Inflation Projections

According to the RBI’s latest estimates, real GDP growth for the current financial year, ending March 2025, is projected at 6.4%. For the upcoming financial year, quarterly growth rates are expected to be:

• Q1 FY 2025-26: 6.7%
• Q2 FY 2025-26: 7.0%
• Q3 FY 2025-26: 6.5%
• Q4 FY 2025-26: 6.5%

Retail inflation is forecasted to average 4.8% for the current financial year, with the last quarter seeing a decline to 4.4%. While core inflation is expected to remain moderate, food inflation is likely to ease further.

Banking Sector and Cybersecurity Concerns

Governor Malhotra assured that banks have sufficient liquidity buffers and that the RBI will take proactive steps to ensure smooth liquidity conditions in the financial system. He also emphasized that banks’ return on assets and equity remains robust.

Additionally, he expressed concern over the increasing instances of digital fraud and urged financial institutions to strengthen their preventive and detection mechanisms to mitigate cyber risks.