RBI keeps interest rates unchanged, bringing EMI stability for homebuyers

RBI holds repo rate at 5.25%, keeping EMIs stable and borrowing costs predictable, a move expected to support confidence among homebuyers

The Reserve Bank of India’s decision to keep its benchmark interest rate unchanged on February 6 is expected to bring stability and predictability to borrowing costs, supporting homebuyer confidence. While some real estate experts say the pause will help new borrowers plan housing purchases with greater certainty, others argue that elevated property prices continue to strain affordability, particularly in affordable and mid-segment housing, and that a rate cut could have nudged fence-sitters back into the market.

The RBI’s February 6 decision to hold rates steady brings predictability to borrowing costs and boosts buyer confidence, though high property prices continue to limit affordability and keep fence-sitters cautious, say experts. (Punit Paranjpe/AFP Photo)

RBI also proposed to allow banks to lend to Real Estate Investment Trusts (REITs) with certain prudential safeguards to deepen the financing pool for the real estate sector.

The central bank's six-member Monetary Policy Committee (MPC) voted unanimously to keep the repurchase or repo rate at 5.25 per cent. RBI retained its neutral policy stance, signalling that it is likely to remain on hold for now.

The RBI has cut rates by a total of 125 basis points since February 2025, marking its most aggressive easing cycle since 2019. It reduced rates by 25 basis points at its December meeting.

The February MPC meeting follows soon after the Union Budget 2026–27 and the announcement of the India–US trade deal.

Industry leaders welcome the rate pause

Anshuman Magazine, chairman and CEO for India, South-East Asia, the Middle East and Africa at CBRE, said stable policy rates provide long-term visibility for developers and investors. “With inflation being comfortably low and progress on the India-US trade agreement, stable policy rates are likely to support organic growth in the sector, offering long-term visibility to developers and investors.”

“The RBI's decision to keep the repo rate unchanged at 5.25 per cent is a welcome step. Domestic economic activity remains robust, and the growth outlook is positive. Maintaining stable interest rates at this time will encourage homebuyers to make purchasing decisions. It will also motivate developers to launch new projects to meet customer demand,” said Parveen Jain, president, NAREDCO.

Shekhar G Patel, president of CREDAI, also said that “we view this continuity as constructive for real estate, where predictability in financing costs is essential for sustaining demand and investment sentiment. As liquidity conditions normalise, a stable rate regime supports measured growth across segments.”

“The RBI's decision to maintain the repo rate at 5.25% reflects a measured pause-and-watch strategy, balancing inflation management with sustained economic expansion. This approach preserves stability in borrowing costs, supporting consumer spending, housing demand, and business investment while providing market participants with confidence and predictability,” said Samantak Das, chief economist and head of research and REIS, India, JLL said.

RBI’s decision to hold rates reflects a cautious, stability-focused approach

Ramani Sastri, chairman and managing director of Sterling Developers, said the steady rate environment would help sustain residential sales momentum, even as the market increasingly tilts toward premium housing. He noted that a supportive interest-rate regime remains essential for maintaining homebuyer confidence and supporting long-term housing demand.

Shishir Baijal, international partner, chairman and managing director at Knight Frank India, said the RBI’s decision to hold rates reflects a cautious, stability-focused approach amid global volatility. With India’s growth outlook remaining steady, he said the broader economic momentum is likely to support the real estate sector, even as the central bank prioritises managing currency pressures and external risks.

While an additional rate cut could have further lifted homebuyer sentiment, especially in the affordable housing segment, Baijal expects banks to pass on a greater share of the existing rate benefits to borrowers in the coming months.

Expected to improve cash-flow planning for real estate developers

For real estate developers, predictable financing conditions enhance visibility on funding costs, improve cash-flow planning, and support timely project execution and calibrated new launches in well-performing urban markets, said Anurag Mathur, CEO, Savills India.

"Aligned with the Union Budget’s continued emphasis on infrastructure, urban expansion and public capex, the current monetary stance reinforces long-term demand across residential, office and industrial real estate, anchoring growth in fundamentals rather than short-term policy impulses," he said.

Stable EMIs offer relief, but high property prices continue to weigh on affordability

Anuj Puri, chairman of ANAROCK Group, said the RBI’s decision ensures that home loan EMIs will remain unchanged, preventing any immediate shocks for borrowers. “RBI's decision to keep the repo rate at 5.25% means that home loan EMIs will not change either. This will keep buyers engaged, but does nothing to further lift demand. The upside is that current house loan borrowers will not experience any EMI shocks for now, and new borrowers can plan their housing purchases with the benefit of predictability.”

However, Puri noted that elevated property prices continue to weigh on affordability, especially in the affordable and mid-segment housing segments. “A rate cut could have brought at least some fence-sitters back into the market,” he said.

According to ANAROCK Research, affordable housing remained significantly subdued in 2025. The segment accounted for just 18% of total housing sales across major cities, down from 20% in 2024. In contrast, affordable housing’s share stood at 38% in 2019, highlighting the sharp structural shift toward premium and luxury supply in recent years.

RBI considering allowing banks to lend to REITs

RBI Governor Sanjay Malhotra said "To further promote financing to the real estate sector, it is proposed to allow banks to lend to REITs with certain prudential safeguards."

At present, banks are not permitted to lend directly to the REIT entity and can extend loans only to the underlying special purpose vehicles (SPVs). The proposed change, once implemented, will allow direct bank lending to REITs, marking a significant shift in the regulatory framework governing real estate financing.

REITs are investment vehicles that allow individuals to invest in large, income-generating commercial properties, such as office buildings, malls, or warehouses, without owning the properties directly. Investors earn a share of rental income and can benefit from capital appreciation, while enjoying liquidity similar to that of stocks, since REITs are listed on exchanges.

At present, there are five listed REITs in India - Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, Nexus Select Trust, and Knowledge Realty Trust.

Vijay Agrawal, MD and Sector Lead, Infrastructure, at Equirus Capital, said this may help lower REITs' cost of capital, as bank funding is typically cheaper and longer-term than bond or NBFC financing.