RBI Monetary Policy: Good News For Home Buyers! Reserve Bank Cuts Repo Rate by 25 bp, Inflation Projected at 4%

In its first bi-monthly monetary policy for FY26, the Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points, bringing it down to 6 per cent. This decision by the Monetary Policy Committee (MPC) was taken unanimously. Additionally, the Standing Deposit Facility (SDF) has been reduced to 5.75 per cent, and the Marginal Standing Facility (MSF) and Bank Rate have been brought down to 6.25 per cent.

RBI Cuts Repo Rate by 25 Basis Points

The Reserve Bank of India (RBI) on Wednesday reduced the key repo rate by 25 basis points, bringing it down to 6 per cent. This decision, announced during the first bi-monthly monetary policy of FY26, was taken unanimously by the Monetary Policy Committee (MPC). The RBI also shifted its policy stance from ‘neutral’ to ‘accommodative’, signaling support for economic growth amidst global uncertainties.

Other Key Rate Adjustments

Alongside the repo rate cut, the Standing Deposit Facility (SDF) was brought down to 5.75 per cent, and the Marginal Standing Facility (MSF) and Bank Rate were reduced to 6.25 per cent. These moves aim to align the interest rate corridor and support liquidity in the system.

The RBI also shifted its policy stance from ‘neutral’ to ‘accommodative’, indicating a supportive environment for economic growth amid global uncertainties.

Inflation Outlook: RBI Maintains 4% Projection for FY26

Governor Sanjay Malhotra announced that the RBI has maintained its inflation projection at 4% for FY 2025–26, with quarterly estimates as follows:

Q1: 3.6%

Q2: 3.9%

Q3: 3.8%

Q4: 4.4%

The governor noted a decline in overall inflation during January and February 2025, largely due to easing food prices. Optimism around record wheat yields, higher pulse production, and strong arrivals of key vegetables is expected to contribute to a lasting reduction in food inflation.

How it Will Benefit the Home Buyers

The repo rate cut is expected to translate into lower interest rates on home loans, bringing relief to existing and prospective home buyers. With banks likely to reduce their lending rates, the cost of borrowing for housing will go down, making EMIs more affordable. The accommodative stance by the RBI further supports a growth-friendly environment, which could also positively impact the real estate sector.

Moreover, with inflation expected to stay within the target range and borrowing costs decreasing, consumer confidence is likely to improve, encouraging more individuals to invest in real estate. Developers are also expected to benefit from better financing conditions, which could accelerate ongoing housing projects and potentially lead to more competitive pricing in the housing market.