With home loan interest rates expected to decline further, the Indian real estate market is poised for a significant boost in FY26. The recent 25-basis point repo rate cut by the Reserve Bank of India (RBI) has set the stage for a potential easing cycle, making homeownership more affordable and enhancing loan eligibility for buyers.

Industry experts anticipate additional rate reductions in the coming months, which could further drive demand across all segments—particularly in metro and Tier II cities. As borrowing costs decline, both first-time buyers and investors are likely to benefit, reinforcing real estate as a preferred asset class in a growing economy.

Udit Jain, Director, ONE Group Developers, says, “Home loans play a pivotal role in home buying, particularly for end-users, as the majority rely on financing to purchase their dream homes. A reduction in interest rates directly impacts affordability, making homeownership more accessible and boosting demand across all segments of the housing market.”

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In its last Monetary Policy Committee (MPC) review meeting, the RBI reduced the repo rate by 25 basis points after maintaining a consecutive status quo for eleven meetings. This marked the beginning of a much-anticipated rate cut cycle, and further reductions are expected in the upcoming MPC meetings.

A sustained decline in interest rates is expected to act as a catalyst for the residential real estate sector in FY 2025-26. “Lower home loan rates will not only reduce the overall cost of borrowing but also enhance loan eligibility, encouraging more buyers—both first-time homeowners and upgraders—to enter the market. Additionally, with increasing urbanization and strong demand for quality housing in metro and Tier II cities, favorable lending conditions will further accelerate the growth of the housing sector in the coming year,” added Jain.

Real estate demand continues to remain robust, particularly in the high-end and luxury segments, driven by strong investor confidence and rising aspirations for premium living. The anticipated softening of home loan interest rates is expected to further fuel this momentum, making homeownership more attractive for both end-users and investors.

“In the last MPC meeting, the RBI Governor indicated that macroeconomic conditions are aligning favorably, paving the way for further measures to support economic growth. A repo rate cut is one such key intervention that could significantly impact borrowing costs,” says Sahil Agarwal, CEO, Nimbus Developer.

Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution Pvt Ltd,says lower interest rates reduce borrowing costs for consumers, thereby increasing their affordability and eligibility for loans. If the RBI proceeds with a 50-basis point rate cut in April, coupled with the previous 25-basis point cut in February, the cumulative reduction in repo rates will stand at 75 basis points (0.75%). This will have a significant impact on home loan borrowers.

For instance, if someone is planning to take a home loan of Rs 75 lakh at an interest rate of 9% for a tenure of 20 years, their current EMI would be approximately Rs 67,493. However, if the interest rate drops by 0.75% (from 9% to 8.25%), their EMI will reduce to approximately Rs 63,901. This results in a monthly savings of about Rs 3,592 and a total savings of nearly Rs 8.62 lakh over the loan tenure.

Additionally, “lower interest rates enhance loan eligibility. For the same EMI of Rs 67,493, the loan amount that a borrower could avail at 8.25% interest (instead of 9%) would increase to approximately Rs 79.2 lakh. This means a potential homebuyer can now afford a property priced higher than before, further stimulating demand in the housing sector,” Kapoor added.