The Reserve Bank of India (RBI) on August 5 kept the benchmark repo rate unchanged at 5.25% for the fourth consecutive policy meeting, citing volatile energy prices, supply disruptions linked to the ongoing West Asia crisis and broader geopolitical uncertainties. While the decision provides greater certainty on borrowing costs for homebuyers and developers, real estate experts cautioned that rising input and construction costs are likely to be passed on to buyers, pushing up apartment prices despite stable home loan rates.
Experts said the affordable housing segment remains highly sensitive to interest rates, and with average residential prices across the top cities continuing to rise by around 7% annually, rate stability alone is unlikely to significantly improve affordability. They noted that the overall market’s resilience is being driven largely by the premium and luxury housing segments rather than the affordable segment that supports broad-based homeownership.
That said, the RBI’s decision is expected to provide a fillip to the housing market ahead of the festive season, traditionally the strongest period for residential sales. Stable borrowing costs are likely to encourage fence-sitting buyers to move ahead with purchases while enabling developers to plan new launches with greater confidence. The steady interest rate environment is expected to support residential sales through the second half of 2026, particularly in the mid-income and premium housing segments.
However, the shrinking share of affordable housing and persistent affordability challenges in the budget segment remain key concerns for the sector.
“The RBI’s decision to hold the repo rate, at 5.25%, for a fourth straight time reflects a calibrated approach at a time when rising crude prices, food inflation and continued geopolitical uncertainty continues to demand prudence over policy activism. For real estate, rate stability is a positive signal heading into the festive season, which is typically the strongest period for housing demand in India. Predictable borrowing costs give homebuyers the confidence to act on long-deferred purchase decisions, while developers benefit from a stable financing environment to plan launches around the festive calendar,” said Anshuman Magazine, Chairman and CEO – India, SE Asia, Middle East and Africa, CBRE.
“We expect this continuity to support healthy residential sales momentum through the second half of 2026, particularly in the mid and premium segments where affordability is closely tied to interest rate sentiment,” he said.
Real estate developers welcome move
RBI’s decision to maintain the repo rate provides much-needed stability and reassurance. Given the prevailing global uncertainties, maintaining the status quo sends a positive signal of confidence and policy continuity.
“Real estate is a long-gestation sector, and homebuyers make long-term financial commitments. A stable interest-rate environment enables both developers and buyers to plan with greater certainty,” said Shekhar Patel, president, CREDAI.
“Despite supply-side disruptions in recent months due to the situation in West Asia, the housing market has continued to demonstrate remarkable resilience, reflecting strong underlying demand. Stable borrowing costs further support this momentum by providing financing certainty and facilitating timely project execution,” he said.
Mismatch between luxury and affordable housing remains a key concern
The unchanged policy rate is a welcome signal of stability amid the ongoing macroeconomic uncertainty, but it is not enough to reignite the mass-market housing cycle.
“Affordable housing demand remains very rate-sensitive, and with average residential prices still growing at 7% annually across the top cities, rate steadiness alone will do little to improve affordability. The market is obviously moving to a more balanced position overall – but this balance comes from the high-end luxury housing segment, not from the part of the market that drives broad-based homeownership,” Anuj Puri, Chairman – ANAROCK Group.
ANAROCK’s Q2 2026 data shows that total sales in the top seven cities fell 6% year-on-year to about 90,715 units, while affordable housing supply has fallen to just 6% of total launches even as overall new supply increased 7% year-on-year to about 1.06 lakh units.
Rising construction costs may hurt affordability despite attractive lending rates
The RBI retained the status quo on the policy rate, keeping it at 5.25%, the fourth successive instance of the same action, with the stance remaining neutral as well. With H1 2026 residential sales coming in stronger sequentially as well as y-o-y, for the time being, the status quo on interest rates is positive for the real estate market, with certainty on lending rates for both developers and homebuyers expected to keep stakeholders relatively unfazed, consultants said.
“However, the impact of rising construction costs being likely to be passed on to buyers, may adversely impact affordability, though the attractive lending rates continue to provide buoyancy to the overall market. The shrinking share of affordable housing as well as pricing pressures on the mid-segment buyer however remain areas of concern. A general return of certainty to the economy is likely to support the residential market performance for the remainder of the year,” said Lata Pillai, Senior Managing Director and Head of Capital Markets, India , JLL.
Unchanged policy rate may provide certainty for buyers to plan purchases ahead of festive season
For the real estate sector, the timing of this decision is significant. “This is the last policy review before the festive season, giving homebuyers and developers greater certainty to plan purchases and launches. Stable EMIs are particularly important as some overheated markets begin to see demand moderate. We expect this unchanged interest rate, together with easing crude prices, to support buyer sentiment and help sustain housing demand through the festive season,” said Amit Goyal, Managing Director, India Sotheby’s International Realty.
