RBI hikes repo rate: Will higher home loan costs take the shine off Navratri, Durga Puja, Diwali housing sales?

India’s festive housing season is getting underway with a new affordability challenge. As Navratri, Durga Puja and Diwali bring buyers and developers to the market, the RBI’s decision to raise the repo rate to 5.50% could make home loans costlier and test how much buyers are willing to stretch their budgets.

The industry, however, does not expect a 25-basis-point increase to derail housing demand, with end-user buying, rising incomes and festive offers likely to support sales.

The October 7 rate hike, the first since February 2023, also marks a shift towards calibrated tightening. For homebuyers, the immediate concern is whether higher lending rates will affect purchase decisions during a period when developers traditionally offer discounts, flexible payment plans and other festive incentives.

Will higher EMIs affect festive home sales?

Navratri, Durga Puja and Diwali are among the most important periods for the housing market, with many buyers considering property purchases during the festive season. Developers also typically step up launches and promotional offers during this period in an effort to convert demand.

The repo-rate hike could, however, make floating-rate home loans marginally more expensive. Depending on how lenders transmit the increase, borrowers could face higher EMIs, a longer loan tenure or a combination of both.

Shekhar Patel, President, CREDAI, said the rate increase could have some impact on festive-season sales, but added that the underlying need for housing remains strong.

“We are also entering the festive season, which is an important period for the housing market, and the increase in borrowing costs could have some impact on sales during this period, although the underlying demand for housing remains strong,” Patel said.

He said homebuyers should look beyond short-term movements in interest rates because a home loan is a long-term financial commitment.

“A home loan is generally a commitment of at least 15 years. During that period, there will be times when rates go up and times when they come down. We should not look at repo rate changes in isolation. What matters is the long-term outlook for the economy and overall growth,” Patel said.

Buyers may adjust rather than walk away

The immediate impact of the rate hike is likely to be felt most by buyers who are already close to their affordability limits. Higher EMIs could prompt some buyers to increase their upfront contribution, opt for a smaller-ticket property or negotiate more aggressively with developers.

Ashish Narain Agarwal, Founder & Managing Director, PropertyPistol, said the rate increase was a recalibration of borrowing costs rather than a disruption to the underlying housing cycle.

“Homebuyers are likely to adapt through higher upfront contributions, longer loan tenures or more carefully calibrated ticket sizes, rather than stepping away from homeownership altogether,” Agarwal said.

He expects end-user housing demand to remain resilient, particularly in markets supported by employment growth, improving connectivity and social infrastructure.

“The ongoing festive season could further support buyer sentiment and transaction momentum,” Agarwal said.

This could make developer incentives particularly important during Durga Puja and Diwali. Offers such as reduced upfront payments, construction-linked plans, limited-period discounts and other financing-related benefits could help offset some of the impact of higher borrowing costs.

Affordable housing could feel greater pressure

The impact of the RBI’s move is unlikely to be uniform across the housing market. First-time buyers and lower-income households, who typically depend more heavily on housing finance, are likely to be more sensitive to even a modest rise in borrowing costs.

Rishi Anand, MD & CEO, Aadhar Housing Finance, said: “For the housing finance sector, the increase could have some impact on borrowing costs, with EWS and LIG households and first-time homebuyers likely to remain more sensitive to changes in affordability.”

However, he said the underlying need for affordable housing remains strong.

“With the festive season approaching, we expect genuine housing demand to remain resilient, although access to affordable and predictable credit will be important in enabling more households to take the step towards homeownership,” Anand said.

How the RBI rate hike could affect the housing market

Area	What could change
Home loan borrowers	Higher EMIs or longer repayment periods
First-time homebuyers	Affordability could come under pressure
Affordable housing	Borrowing costs could have a bigger impact on demand
Festive sales	Durga Puja and Diwali purchases could see some pressure
Developer offers	Discounts and flexible payment plans may become more important
Real estate developers	Higher cost of debt could affect project financing
End-user demand	Expected to remain supported by genuine housing needs
Leveraged projects	Higher funding costs could increase scrutiny
Tier II & III cities	Urbanisation, connectivity and rising incomes could support demand

Rishe Singh, Founder and CEO, Silverdome Realtors said “The 25 basis point hike taking the repo rate to 5.50% will add a little pressure on financing costs in the short term, and some buyers may pause to recalculate their budgets. But I don't see it changing the bigger picture for Indian real estate. People still want homes of their own, incomes are rising, and more families are choosing organised developments they can trust. Those with a genuine need to buy, especially in well-connected, established micro-markets, will keep moving ahead. If anything, a moment like this reminds all of us to plan our finances carefully, and that makes the sector stronger over time."

Developers may also face higher financing costs

The repo-rate hike could affect the housing sector beyond homebuyers. Higher interest rates can raise the cost of financing for developers, particularly those relying significantly on debt to fund construction and expansion.

Vishal Raheja, Founder & Managing Director, InvestoXpert Advisors, said the impact would extend beyond home loans.

“With inflation at 4.82% and input-cost pressures still relevant, the transmission will extend beyond home loans to developer financing, leveraged investors and the return thresholds applied to new projects,” Raheja said.

He said higher rates could accelerate a shift towards projects with established demand, stronger rental potential and infrastructure-led appreciation, while highly leveraged and speculative opportunities face greater scrutiny.

Will Diwali housing demand hold up?

For now, the industry expects the festive season to provide some support to the housing market despite the higher cost of credit. Durga Puja and Diwali could encourage buyers who were already planning purchases to bring forward decisions, particularly where developers offer attractive pricing and payment schemes.

The bigger risk would emerge if the repo hike marks the beginning of a prolonged tightening cycle. Sustained higher rates could gradually affect affordability, credit demand and developer financing.

For the festive season, however, industry players believe the housing market is being supported by structural demand rather than liquidity alone. The RBI’s 25-basis-point move may make home loans costlier, but it is unlikely by itself to take the shine off the Durga Puja and Diwali housing season.