Affordable housing, often considered as the underdog in the diverse landscape of real estate in India, just got a glimmer of hope. The Reserve Bank of India (RBI) recently decided to slash the repo rate by 25 basis points. Now, don’t let the jargon scare you. This basically means that borrowing money—especially home loan might become a tad cheaper. It’s the first rate cut in five years, and while it is good news, the impact might not be as big as we’d hoped. Let’s dive into what this really means for the housing market and those dreaming of owning a home without breaking the bank.

The RBI Rate Cut: What Does This Mean?

Let’s start with the basics first. The RBI recently announced a 25 basis point cut in the repo rate, taking it down to 6.25% (1 basis point = 0.01%). For those who don’t know, the repo rate is the interest rate at which commercial banks borrow money from the central bank. Why does this matter to you? Because when banks get cheaper money, they can pass on the benefits to us—the borrowers.

Now, if you have a floating-rate home loan, this is even better for you. Your Equated Monthly Installments (EMIs) will likely shrink a little once banks adjust their lending rates. Granted, the full benefit might take three to six months to reflect in your payments, but the wheels are already turning.

What’s more exciting is that this rate cut could be the beginning of a larger rate-cut cycle. This means that we might see even lower borrowing costs in the near future.

Is This Really Going To Benefit The Homebuyers?

Let’s not jump the gun. Of course, cheaper home loans sound like a dream come true for anyone staring longingly at “For Sale” boards. Especially, first-time homebuyers might finally muster the courage to take the plunge. If you’ve been waiting for a sign to stop renting and start owning, this is it. 

But there’s a catch. Rising property prices and stubbornly high inflation could eat into the benefits of the rate cut. Yes, EMIs might go down a little, but if home prices continue climbing, the overall affordability might not improve much. Still, RBI’s move does piggyback on some recent significant policies from the Union Budget, like income tax benefits. Together, they’re creating an environment that could nudge more people toward buying homes. It’s a small step in the right direction. 

The last few years have been a golden age for real estate sales in India, barring the affordable housing segment. Homes priced under ₹40 lakh have been steadily losing their share of total sales, especially in the post-COVID era.

Why? Well, developers seem to have shifted their focus to premium and luxury housing projects. After all, the margins are better, and demand in the luxury segment has been soaring in recent times.This means, there are fewer options available for homebuyers on a budget.

So what needs to be changed for this? To be honest, a single rate cut of 25 basis points isn’t going to move the mountains. It’s like adding a pinch of sugar to a bitter cup of coffee. For a meaningful impact, we need another round of cuts—ideally 25-50 basis points more. That could really make a difference, especially for middle-income and affordable segments. A more aggressive rate cut could revive demand and bring much-needed momentum to affordable housing sales.

The Bigger Picture: Beyond Rate Cut

The affordable housing market needs more than just cheaper loans. And here’s where the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund enters. This ₹15,000 crore fund aims to complete 100,000 stalled housing projects, as announced by Finance Minister Nirmala Sitharaman during the recent Union Budget 2025 session. Think of it as a much-needed CPR for unfinished homes that have been in limbo. It’s a win-win for everyone—developers get the funds to finish projects, and buyers finally get their homes.

But wait, there’s more. Developers are also asking for two critical things: access to cheaper land and better credit availability for budget housing projects. Land prices are a major pain point. If developers can get land at reasonable costs, they’ll be more willing to build homes in the ₹50 lakh-and-below segment. And that’s where the real magic could happen.

For now, though, this repo rate cut is a glimmer of hope. It might not change the game overnight, but it’s a step toward making homeownership a reality for several Indians.