Mumbai/Navi Mumbai, 06 June 2025: The Reserve Bank of India’s Monetary Policy Committee (MPC) surprised markets today by announcing a 50 basis point cut in the repo rate, bringing it down to 5.5%. This move—marking a cumulative 100 basis point reduction over the last six months—is aimed at revitalising economic activity and easing the cost of borrowing across sectors. Leaders from both the real estate and academic sectors have responded positively while offering nuanced insights into the potential implications of the decision.
Real Estate Sector Welcomes RBI’s Proactive Stance
Mr. Amit Bhagat, Co-Founder, CEO & MD, ASK Property Fund, noted that the latest rate cut is a much-needed booster shot for India’s residential real estate sector:
“RBI’s announcement of a further rate cut of 50 bps is a significant proactive step at a time when demand for residential real estate is seeing signs of slowing down across segments due to increased prices. Home ownership continues to be an aspiration and dream for every Indian household, and these rate cuts, followed by reduced home loan interest rates, will strengthen home buyer confidence.”
“A cumulative rate cut of 1 per cent in the last 6 months is likely to benefit the affordable segment significantly, which was most impacted due to affordability.”
According to Bhagat, this is a timely move to support end-user demand, particularly in the affordable and mid-income housing segments where interest sensitivity is highest.
Academic Perspective Emphasises Transmission Mechanism
Dr. Bharath Supra, Associate Professor – Finance & Programme Chairperson, School of Business Management (SBM), NMIMS Navi Mumbai Campus, commended the RBI’s bold step but stressed the importance of effective implementation:
“The 50 basis point reduction in the repo rate, bringing it down to 5.5%, is a surprise move—something that surpassed market expectations. I congratulate the Reserve Bank of India’s MPC, under Governor Sanjay Malhotra, for this shot in the arm. It is exactly what India needed now to spur economic growth in the face of global uncertainties.”
“However, the rate cut’s impact hinges critically on how effectively banks and financial institutions pass them on to end borrowers. The transmission of rate cuts to retail and SME segments has remained a sticky point. Without stronger transmission mechanisms, the RBI’s monetary easing may not translate into actual credit growth or consumer spending. I am confident that the banks and financial institutions will rise up to the occasion and do their part for the country.”
Dr. Supra emphasized the importance of aligning policy measures with financial institutions’ operational realities to ensure tangible benefits to individuals and businesses.
Conclusion
While the RBI’s aggressive easing signals a clear intent to boost economic sentiment, the effectiveness of this measure will depend on swift and efficient transmission by financial institutions. The real estate sector is poised to benefit, especially in affordable housing, while academia calls for strengthened institutional responsiveness to ensure the broader goals of monetary policy are met.
