NE BUSINESS BUREAU
CHENNAI/MUMBAI/PUNE, DEC 5
The RBI’s Monetary Policy Committee on Friday reduced the repo rate by 25 basis points to 5.25% from 5.50%. Thus, the central bank retained a “neutral” policy stance. Additional liquidity-support measures were announced: open market bond purchases and a major forex-swap operation to support banking and bond markets.
Analysts noted that while the rate cut eases borrowing costs and could stimulate credit growth, there is pressure on bank profit margins (NIMs) in the near term. Industry bodies and real estate developers broadly welcomed the rate cut, citing multiple benefits.
Industry pundits view the policy as a strong signal of support for growth: with inflation subdued and real GDP growth forecasted at 7.3% for FY26, the rate cut is seen as reinforcing consumption demand and investment sentiment.
For sectors dependent on credit — including auto, realty, NBFCs and others — lower borrowing cost and increased liquidity are expected to ease pressure and encourage fresh demand.
Some caution remains: banking analysts warn that while borrowers and rate-sensitive sectors benefit, banks may see short-term margin compression. Overall, the consensus is that the move lowers EMI burden, improves affordability and could revive housing demand — if transmission to borrowers is effective.
Here are the excerpts;
IOB commits to pass on policy benefits swiftly to customers
Ajay Kumar Srivastava, Managing Director and CEO, Indian Overseas Bank, said : “We welcome the RBI’s decision to reduce the repo rate by 25 basis points to 5.25 per cent while maintaining a neutral stance. This policy supports growth while keeping inflation at or below the 4 per cent target, with real GDP expected at 7.3 per cent for 2025-26 (Q3 at 7.0 per cent; Q4 at 6.5 per cent; Q1 2026-27 at 6.7 per cent and Q2 at 6.8 per cent). The rate cut is expected to ease borrowing costs, spur demand in housing and real estate, support MSMEs and sustain personal and auto loan growth.
On the financial sector side, bank credit growth remains healthy at 11 per cent and overall credit from bank and non-bank sources has risen by 13.1 per cent. The RBI’s ₹1 lakh crore OMO purchases along with the 3-year USD/INR buy-sell swap will support liquidity and monetary transmission. These measures will encourage domestic investment and deepen financial access.
We appreciate the RBI’s two-month drive beginning January 1 to address pending Ombudsman complaints, which will further strengthen customer service across the banking system. At Indian Overseas Bank, we remain committed to passing on policy benefits swiftly to customers and supporting inclusive national growth.”
RBI’s timely rate cut offers critical support to economy
Sakshi Gupta, Principal Economist, HDFC Bank, described the rate cut as both “timely and prudent” highlighting its importance amid global uncertainties and wavering domestic consumption trends. “The RBI delivered a rate cut in line with our expectations, recognising the impending risks to growth and utilising the monetary space yielded by low inflation,” Gupta noted, underscoring the rationale behind the central bank’s calibrated policy easing.
Despite GDP growth climbing above 8% in Q2 FY26, Gupta warned that the external environment continues to pose challenges. “The risk from external headwinds on exports continues to linger on. Moreover, the sustainability of the consumption pick-up during the festive season remains to be seen,” she said. Given these concerns, she emphasized that the rate cut would provide a “counter-cyclical push to consumption and growth,” helping balance potential slowdowns in the months ahead.
Gupta expects inflation to remain below the RBI’s 4% target until mid-year, indicating further room for policy flexibility. “Space for another rate cut remains if growth shows signs of faltering in the coming quarters,” she added. However, she also cautioned that if current economic momentum persists—particularly alongside the possibility of a favourable trade deal—this could mark the end of the rate-cutting cycle.
Realty & Housing Sector Reactions
Shekhar Patel, MD and CEO, Ganesh Housing Limited/National President of CREDAI, said: “RBI’s decision to cut the repo rate by 25 basis points to 5.25 percent signals a measured shift toward growth support at a time when the real estate sector is entering a phase of structural expansion. A lower policy rate will help enhance home loan affordability and strengthens end-user sentiment, especially in markets where fence-sitters were waiting for monetary easing. For developers, the reduction in financing costs improves liquidity planning and supports timely execution cycles, which has become critical in a demand driven environment driven by credibility and delivery discipline. If banks transmit this cut effectively, we could see a renewed acceleration in housing sales across both established metros and emerging growth corridors. With infrastructure investments reshaping urban centres and commercial sector expansions deepening regional economic activity, today’s policy move provides the monetary stability needed to sustain real estate’s long-term growth trajectory.”
Bittu Varghese, CFO, Table Space, said: “A 25 bps repo rate counterbalances the low inflation rate and supports increase in domestic consumption by making debt more attractive. Within our industry, this can lead to higher demand from enterprises and GCCs; cheaper capital directly translates into greater headroom to scale hybrid operations in high-quality Grade A environments. The flex segment, already a key contributor to office absorption, stands to gain as zero-capex, tech-enabled models become even more attractive amid resilient metro demand and steady consumption. This is more than a marginal rate adjustment; it has the potential to reshape occupier behaviour, accelerate credit deployment, and reinforce flexible, serviced workspaces as a central pillar of the next phase of India’s office market.”
CREDAI said the cut should reduce home-loan interest rates and “boost housing demand.”
NAREDCO called the repo-rate reduction “an important step” to boost economic activity and support the real estate sector.
Property-market watchers such as ANAROCK Group flagged the repo cut as likely to stimulate demand and broaden sales momentum into early 2026 — provided banks pass on the rate cuts quickly.
Overall, the consensus is that the move lowers EMI burden, improves affordability and could revive housing demand — if transmission to borrowers is effective.
Key Takeaways
- Home-buyers and real-estate developers likely stand to benefit the most — lower EMI burden plus resumed buyer interest.
- Rate-sensitive sectors like auto, NBFCs and developers may get a growth boost if demand picks up.
- For banks, the policy presents a trade-off — more credit growth potential but pressure on interest margins.
- From a macroeconomic lens, the move signals RBI’s confidence in stable inflation and aims to support growth while preserving financial stability.
Vijay Wadhwa, Chairman, The Wadhwa Group, said: “The reduction in repo rate, though measured, is a timely step that strengthens momentum in the housing sector. A decrease of 25 basis points can meaningfully influence sentiment, especially for first-time and end-use buyers, and may stimulate incremental investment appetite. The RBI’s decision to bring the repo rate down to 5.25%, alongside raising the GDP growth outlook to 7.3%, reinforces confidence in the broader economic trajectory and is expected to ease EMIs for millions of households.
With inflation comfortably moderated and economic growth well supported, the easing of borrowing costs is likely to encourage families to advance their home-buying decisions.
In pivotal markets like Mumbai, along with fast-growing destinations such as Panvel and Karjat, this welcoming policy move is expected to accelerate demand for well-planned, future-ready residential communities. Real estate is a long-term asset class and benefits most from steady, predictable policy movement rather than abrupt shifts. If the direction holds, we anticipate further improvement in affordability, deeper institutional confidence, and continued consolidation of developers who operate transparently and at scale.”
