RBI Repo Rate Hike To 5.50% Puts Festive Housing Demand Under Pressure, Costlier Home Loans May Hit Retail Real Estate

Mumbai: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC)'s announcement on Wednesday on unanimously raising the repo rate by 25 basis points to 5.50% from 5.25%, is expected to pressure on consumer sentiment and discretionary spending. 

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This has a direct correlation to housing demand, especially when the festive season is a key period for housing demand, and an increase in borrowing costs will affect buyer sentiment, experts say. The residential prices in the top seven cities in India have already risen significantly, stretching affordability.

"The RBI’s 25 bps increase in the repo rate was expected because of the prevailing inflationary pressures and geopolitical uncertainty brought on by the Gulf conflict. 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.

As per Anarock recent research data, average residential prices increased 7% year on year. 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 the data, Q3 2026 recorded approx. 1,00,220 housing sales across the top seven cities, up 3% y-o-y and 10% quarter to quarter.

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.

"The rate hike is unlikely to have a direct impact on commercial real estate, which continues to be driven by structural demand from GCCs, technology, BFSI and other occupier segments. However, retail real estate may see some near-term impact. 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," Puri said.

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