RBI rate hike to raise home loan costs, but real estate demand seen resilient
The Reserve Bank of India's Monetary Policy Committee has raised the repo rate by 25 basis points to 5.50 percent, marking the initiation of a rate hike cycle. The six-member committee unanimously voted for the increase in response to rising inflationary pressures stemming from food, fuel, and fertilisers. The MPC also changed the monetary policy stance from neutral to calibrated tightening.
The rate hike decision follows headline CPI inflation increasing to 4.8 percent year-on-year in August from 4.5 percent in July 2026, alongside strong economic growth of 7.8 percent recorded in Q1 of FY2026-27. The central bank raised its FY2026-27 growth forecast from 6.7 percent to 7.1 percent while lifting projected inflation to 5.2 percent. This marks a significant shift after the MPC held the repo rate unchanged at 5.25 percent during its August 2026 meeting.
Real estate developers in West Bengal anticipate marginal increases in home loan borrowing costs resulting from the move. Despite higher costs, developers believe genuine homebuyers will remain committed to purchases over the long term. However, affordability concerns for first-time buyers may surface during the festive season, prompting developers to roll out flexible payment options to sustain demand amid these pressures.
