Take It From Torbit - Beyond Rate Cut Status Quo - Missed Opportunity To Augment Affordability!

Amid the continuous dip in housing sales over the last couple of years due to unaffordable prices, there was a case for another 25 bps rate cut to boost affordability for both homebuyers and developers, to rekindle demand and supply of affordable/budget housing.

Affordable housing has been under severe strain, with its share crashing from 38% in 2019 to just 18% in 2025, as per Anarock data. PropEquity data points to a 12% decline in housing supply and an 11% decline in housing sales in 2025. In such a scenario, an interest stimulant in the recent RBI credit policy would have provided the much-needed relief, especially when the FY '27 budget failed to provide tax incentives to buyers and developers of affordable homes to push demand and supply.

Though, with the rate pause, homebuyers will not be further burdened with interest outgo, it will not push demand from price-sensitive homebuyers of affordable housing in the wake of elevated prices. In the absence of a fresh rate cut, many fence-sitters will remain in wait-and-watch mode, hesitating to take the plunge at this juncture.

So, now the big question is — is monetary policy easing behind us, and is it the end of the rate cut cycle? Are we going to see a prolonged pause? Now that the India-US trade pact will brighten growth prospects, many economists believe that the apex bank may not be under immediate pressure to further cut rates to push growth. However, there is still an environment of uncertainty due to heightened global tensions, which may drag GDP growth, necessitating another rate cut in the next quarter.

As the presently volatile global geopolitical environment and a declining rupee prevent the RBI from going for a further rate cut, it is all the more significant for the central bank to ensure faster transmission of rate cuts undertaken last year. During February–December 2025, the RBI cumulatively undertook a 125 bps rate cut of the repo rate from 6.5% to 5.25%. Between February and November 2025, the external benchmark-linked rate applicable to floating loans was eased by 100 bps. Overall, the lending rate fell by just above 60% against a 100% cumulative rate cut. Clearly, the full benefit of rate cuts is yet to be passed on to homebuyers.

In this situation, in order to ease the interest burden, there is a window of opportunity for existing homebuyers (who had taken a home loan at an 8% interest rate or more) to explore the balance transfer option, as many banks have brought down interest rates to around 7.5%. Banking experts like Adhil Shetty, CEO of BankBazaar, suggest borrowers optimize costs by keeping EMIs higher to shorten loan tenures, in turn reducing interest outgo.

Going forward, what will be the road ahead for home loan rates? Considering that the economy remains stable, with GDP projected to grow at 6.4% in FY '27, if inflation remains manageable and global risks are under control, we may well see a further 25 bps rate cut in Q1 FY '27. Adding to this, the National Housing Bank (NHB) has urged large home financiers to reduce prime lending rates. HFCs are expected to considerably transmit past rate cuts in April, when, during their annual review, their internal benchmarks are reset. Further, hope floats for homebuyers of affordable housing, with NITI Aayog presenting an approach paper giving a roadmap to turn affordable housing into a reality.

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