RBI holds repo rate at 5.5% amid Trump tariff pressures; Home loan demand may rise during festive season

The RBI’s decision to maintain the repo rate at 5.5% comes amid rising economic pressures, including US President Donald Trump’s announcement of new 25% tariffs and a sharp drop in housing sales across major metros, reflecting growing buyer hesitancy and market uncertainty, say real estate experts.

In this uncertain environment, the central bank’s move is seen as a cautious attempt to stabilise sentiment and avoid further market deterioration. While many real estate experts believe a rate cut could have provided a much-needed boost to the affordable housing segment by lowering borrowing costs, the RBI opted for a status quo, citing tariff-related concerns and broader economic risks.

Despite the hold, experts remain optimistic that retail credit demand, especially for home loans, will gain momentum in the coming months, supported by improving consumer sentiment and the onset of the festive season, the experts said.

Anuj Puri, chairman, ANAROCK Group, said that Indian real estate weathers unrelenting turbulence as the sentiment is pressured by Trump’s new 25% tariffs and a notable 20% plunge in housing sales across top metros, as per the latest ANAROCK data. In Q2 2025 alone, just 96,285 homes were sold, a steep fall from 120,335 a year ago, indicating increasing buyer hesitancy and market uncertainty. Amid these headwinds, the central bank’s policy choices come with high relevance to initiate a turnaround and arrest further market deterioration.

The RBI has decided to keep the repo rates unchanged at 5.5%, also taking cognizance of the ongoing tariff uncertainties and the possible impact on the Indian economy. A rate cut leading to a lower interest rate environment would have particularly boosted the affordable housing segment, which has been under considerable pressure in recent years, he said.

That said, overall, homebuyers are currently driven by long-term confidence rather than short-term rate fluctuations. Given the upcoming festive season, developers may look to keep the market momentum going with offers and flexible payment plans, which may help improve affordability for many genuine buyers, he said.

Anshuman Magazine, chairman and CEO, India, South-East Asia, Middle East and Africa, CBRE said that “the RBI’s decision to hold the repo rate reflects a measured approach amidst evolving macroeconomic conditions. With a cumulative 100 basis points cut since February 2025, the focus is now on improved credit flow and broader economic momentum.”

He said that the announcement reflects ongoing demand recovery and a steady growth outlook, which reinforces market confidence for sectors including real estate, manufacturing, and infrastructure. For the real estate sector specifically, this signals stability and offers long-term predictability to developers and homebuyers. The upcoming festive season and range-bound inflation are expected to boost the market momentum further, he said.

Shishir Baijal, chairman and managing director, Knight Frank India, said that “The RBI’s decision to hold rates steady underscores its calibrated approach amidst a complex economic backdrop. While inflation has moderated, it remains uneven, and the central bank is understandably cautious given the persistent risks from global commodity prices, geopolitical tensions, and volatile capital flows.”

Stable policy rates provide much-needed predictability: Experts

For the real estate sector, the continuation of stable policy rates and surplus liquidity conditions provide much-needed predictability and help preserve affordability for homebuyers. Notably, some banks have already reduced consumer home loan rates, a move that supports housing demand, especially in the mid-income and low-income segment, and more transmission in interest rates is underway. This policy continuity, coupled with easing credit conditions and steady economic growth can provide a boost to the affordable housing categories, he said.

Manju Yagnik, vice chairperson of Nahar Group and senior vice president of NAREDCO, Maharashtra by maintaining the repo rate at 5.5 per cent, the Reserve Bank of India is signalling a continued focus on balancing growth and inflation. With retail inflation cooling to a six-year low around 2.1 per cent in June and price pressures under control, the decision appears prudent and timely.

Umang Jindal, CEO, Homeland Group, said that RBI’s decision to keep the repo rate at 5.50% signals a cautious approach amid evolving economic conditions. For the real estate sector, maintaining the current rate means borrowing costs remain stable, which may support ongoing housing demand but also means developers and homebuyers won’t get any additional financial relief for now.

“It could lead to a wait-and-watch sentiment among buyers expecting further rate cuts, while developers might focus on optimizing existing projects rather than aggressively expanding. The unchanged rate also reflects a balancing act, managing inflation without disrupting growth momentum,” he said.

Unchanged rates ensure continued affordability of home loans

Raoul Kapoor, co-CEO, Andromeda Sales and Distribution Pvt Ltd said that as anticipated, the Reserve Bank of India (RBI) has kept the repo rate unchanged, despite favourable factors such as a good monsoon and inflation remaining well below the comfort level. The decision appears to be guided by ongoing geopolitical uncertainties and unresolved global tariff concerns.

However, the cumulative 100 basis points cut over the last three Monetary Policy Committee (MPC) meetings has already reduced borrowing costs significantly. As noted by the RBI Governor, the full impact of these rate cuts is still unfolding, and “we expect retail credit demand, particularly for home and personal loans to gain further momentum in the coming months, driven by the upcoming festive season.”

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“We believe this is not the end of the current rate cut cycle, and we anticipate further easing in the repo rate in subsequent MPC meetings, depending on evolving macroeconomic condition,” he said.