RBI's Bold Rate Cut Expected to Boost Mid-Segment Housing Demand in India
Strategic Repo Rate Cut by RBI to 5.5%
In a significant move aimed at stimulating domestic demand and enhancing liquidity, the Reserve Bank of India (RBI) on June 6, 2025, announced a 50 basis point cut in the policy repo rate, bringing it down to 5.5% under the Liquidity Adjustment Facility (LAF). Accompanying this was a 100 basis point reduction in the Cash Reserve Ratio (CRR), which now stands at 3%, unlocking ₹2.5 lakh crore into the financial system. This cumulative 1% reduction over six months is being hailed by real estate stakeholders as a timely and strategic intervention.
Real Estate Industry Hails Move as a Boost for Mid-Segment Housing
Real estate executives widely welcomed the RBI's decision, viewing it as a targeted effort to make housing more affordable, particularly for the mid-segment and affordable housing markets. With lower EMIs resulting from reduced borrowing costs, real estate sales are expected to gain momentum across top-tier cities.
CREDAI President Shekhar G Patel called the move a “strategic catalyst” for the affordable housing sector, stating that both demand and supply-side pressures could now see relief. According to Manoj Gaur, CMD of Gaurs Group, the decision is not only about homeownership affordability but also about injecting economic vigor that could positively affect both residential and commercial realty sectors.
Broader Market Impact and Industry Optimism
Anshul Jain of Cushman & Wakefield added that the 50 bps cut is likely to improve affordability significantly for urban middle-class buyers. Similarly, Anuj Puri, Chairman of ANAROCK Group, noted that demand in affordable and mid-income segments could surge due to the increased purchasing power facilitated by this rate cut.
Pradeep Aggarwal, Chairman of Signature Global (India) Ltd, said that the demand for mid- and premium-segment homes was already on the rise following earlier rate reductions, and this latest cut would only further accelerate interest from both homebuyers and investors.
Niranjan Hiranandani, Chairman of NAREDCO & Hiranandani Group, believes that the move could spur refinancing activity and attract more investment in branded Grade-A properties, especially those known for consistent returns. Meanwhile, Homeland Group CEO Umang Jindal viewed the policy shift as a positive signal for the economy, suggesting that it enhances consumer sentiment and paints a confident outlook for future growth.
Real Estate’s Role in India’s GDP
According to government data, the real estate sector accounted for 7% of India’s GDP in 2018-19, and this figure is projected to rise to 13% by 2025. The latest rate cut aligns with this growth trajectory, further underlining the RBI’s role in supporting one of the country’s most pivotal sectors.
Indian Bond Market Stability Amid Global Volatility
Rising Global Bond Yields Spark Volatility
While India’s real estate market gains momentum, global bond markets are experiencing heightened volatility. The 30-year U.S. Treasury yield climbed to 4.89% (as of June 4, 2025), driven by inflation fears and fiscal uncertainty, while Japan’s 30-year government bond yield hit 2.89%, a historic high indicating weak investor demand for long-duration sovereign debt.
Resilience in Indian Government Securities
Despite this turbulence, Indian government securities (G-secs) have displayed remarkable resilience, thanks largely to RBI’s accommodative stance and robust domestic fundamentals.
Sonal Bandhan, Economics Specialist at Bank of Baroda, highlighted that Indian 10-year G-sec yields have not followed the upward trajectory of U.S. Treasury yields. Instead, yields in India have trended downward, thanks to liquidity support, limited fresh supply of government bonds, and well-anchored inflation.
She noted that any upside pressure would be confined to the shorter end of the yield curve, whereas the long-term yields are expected to remain low, supported by India’s internal macroeconomic strength and the recent RBI rate cuts.
Abhishek Bisen, Head of Fixed Income at Kotak Mahindra AMC, reinforced this view, stating that foreign bond market swings are unlikely to materially affect Indian yields. With headline CPI inflation well below 4%, and little foreign flow chasing arbitrage, 10-year Indian G-sec yields remain range-bound between 6.20% and 6.25%.
Conclusion: Domestic Policy Shielding India from Global Shocks
As India navigates a globally uncertain financial environment, the RBI’s policy decisions appear to be providing both monetary stimulus and investor confidence. While the rate cut supports affordability and demand in real estate, particularly in mid- and affordable housing, the bond market stability underscores the strength of India’s internal fundamentals.
With domestic inflation in check, strategic liquidity enhancement, and rate cuts, India seems better positioned than most emerging markets to withstand the headwinds caused by rising yields and fiscal instability abroad.
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