RBI rate hike to pressure affordable housing, commercial real estate likely unaffected

Residential sales, especially in the affordable segment, could come under pressure due to a hike in interest rates, but rising borrowing costs are unlikely to directly affect commercial real estate, which is driven by structural demand from GCCs and other sectors, say consultants.

“The rate hike will put pressure on consumer sentiment and discretionary spending – this has a direct correlation to housing demand. The festive season is a key period for housing demand, and an increase in borrowing costs will affect buyer sentiment,” said Anuj Puri, chairman of Anarock Group.

“With the rate hike, dearer home loans will make buyers more selective and cause decision timelines to extend, particularly in the price-sensitive segments,” he added.

RBI raises repo rate to 5.5 per cent

The Reserve Bank of India today raised the repo rate by 25 basis points to 5.5 per cent amid rising inflationary pressure. Governor Sanjay Malhotra also indicated rate cuts are off the table in the near term, considering the current environment.

“For real estate, higher borrowing costs could create some affordability pressures, particularly in interest-rate-sensitive and lower-priced segments, but we do not expect a material disruption to the sector’s broader trajectory in the near future. The economy has remained resilient, which is adequately demonstrated by the upward revision of GDP growth for FY 27 from 6.7 per cent to 7.1 per cent,” said Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India.

Housing sales remain resilient

As per Anarock Research data, average residential prices rose 7 per cent year on year. The third quarter of CY 26 has

recorded sales of around 1,00,220 housing units across the top 7 cities, up 3 per cent year on year. Affordable housing comprised a 16 per cent share of these sales.

While commercial real estate is unlikely to see an adverse impact, the retail sector may face challenges, and some mall projects could be deferred until demand becomes clearer, Puri said.

Developers stress discipline amid higher costs

Developers from Mumbai say residential demand has remained resilient, even as prices hold up, as the city continues to benefit from infrastructure investment.

“Supply and demand are becoming more balanced in several markets, making product selection and execution increasingly important for developers. A higher rate will therefore reinforce the need for discipline across the sector,” said

Srishti S Anandd, co-founder and chief advisor – Paradigm Realty. This will be particularly important as the sector faces pressure from rising material and labour costs.

“Buyer sentiment remains a mixed bag, with genuine end-user demand for quality homes continuing to hold up. Attractive offers, new launches and greater flexibility from developers could help offset some of the pressure from higher borrowing costs,” said Devanshu Bansal, Director, UK Realty.