Festive home rush faces RBI rate shock, pinching affordable, mid-income buyers; luxury stays resilient

The Reserve Bank of India’s decision to raise the repo rate by 25 basis points to 5.50% is likely to put pressure on housing affordability and buyer sentiment, particularly in the affordable and mid-income segments, according to NAREDCO Chairman Niranjan Hiranandani.

“In the real estate sector, the impact is likely to differ across segments. Affordable and mid-income housing may see some moderation in sentiment as borrowing costs and EMIs come under pressure, particularly during the festive season,” Hiranandani said in a statement.

The repo rate hike comes at a time when developers are navigating higher input costs and supply-chain pressures, which are adding to project costs and affecting margins, Hiranandani said.

The NAREDCO chairman, however, said India’s strong growth outlook, sustained urbanisation, rising aspirations, and continued demand for branded, quality housing provide a solid foundation for the sector.

“Premium and luxury housing, driven by end-users, HNIs and NRIs, is expected to remain relatively resilient, as buyers in this segment are generally less sensitive to moderate changes in borrowing costs and continue to value larger homes, better lifestyles and trusted brands,” he said.

“Overall, while the policy move may lead to some near-term adjustment in affordability and financing, the long-term fundamentals of Indian real estate remain robust. Stable macroeconomic conditions, improving infrastructure and sustained consumption demand will continue to support housing demand and investment across segments,” Hiranandani explained.

The rate hike comes at a crucial juncture for the residential market, with the festive season typically driving a significant portion of annual housing demand. Higher borrowing costs could push up home loan EMIs and prompt price-sensitive buyers to reassess their purchase decisions.

However, NAREDCO President Praveen Jain said the impact of the interest rate hike on the residential market is expected to remain limited, supported by strong buyer sentiment, festive demand, and the long-term desire for homeownership.

“The festive season is a very important period for the real estate sector, and stability in interest rates during this period remains positive for homebuyers,” he said.

According to Anuj Puri of ANAROCK Group, the impact of the rate hike could be more pronounced because housing prices have already risen sharply in major cities. “Residential prices in the top seven cities have already risen significantly, stretching affordability,” Puri said.

According to ANAROCK Research, average residential prices across the top seven cities rose 7% year-on-year. Around 1,00,220 homes were sold in these cities in Q3 2026, up 3% year-on-year and 10% sequentially. Affordable housing accounted for 16% of sales.

Puri said the rate hike could make buyers more selective and lengthen decision-making timelines, particularly in price-sensitive segments. Even a modest increase in EMIs could lead affordable housing buyers to defer purchases or recalculate their budgets.