Will repo rate hike slow home sales?

The Reserve Bank of India’s Monetary Policy Committee has decided to increase the policy interest rate, or repo rate, by 25 basis points (0.25 percentage point), making it 5.50%. The repo rate is the rate at which the RBI lends money to banks. When it goes up, borrowing generally becomes more expensive for banks, which can lead to higher interest rates on home loans, car loans and other lendings.The decision was taken keeping various factors in mind, including the ongoing West Asia crisis, higher crude oil, high petrol and diesel prices and a deficit monsoon, which is leading to a hike in food prices.This decision may affect homebuyers as it will lead to high EMI charges, thus impacting their ability to buy a house.Manoj Goyal, director of Forteasia Realty Pvt. Ltd., says, “In Chennai, unlike Mumbai or Bengaluru where speculation is a major factor, most property purchases are by people who plan to live in them. A small interest rate increase of 0.25% therefore doesn’t stop demand completely, it just makes it grow a little slower,” he says.Goyal expects the impact to be more visible in areas such as the IT corridor, Old Mahabalipuram Road (OMR), Pallavaram and developments along GST Road, where first-time homebuyers account for a significant share of demand. Buyers in established premium neighbourhoods such as Adyar and Alwarpet, who rely less on home loans, are likely to be less affected. “While the latest increase is unlikely to bring housing activity to a halt, it could make affordability and the pace of sales more important considerations for both buyers and developers in the months ahead. The biggest concern for developers is buyers in the ₹50-₹75 lakh budget segment, which accounts for most of Faridabad’s sales, delaying the closure of transactions by a month or two”Aman GuptaDirector, RPS GroupHowever, NoBroker’s Q3 2026 data presents a more positive picture of Chennai’s demand. According to the real-estate platform, housing demand in the city grew 13% year-on-year, making it one of the two fastest-growing metros in its assessment. It attributes the growth to steady hiring in technology, global capability centres (GCCs) and manufacturing.Mid-market buyers face pressureThe repo rate hike will possibly affect buyers in the ₹50 lakh to ₹1.2 crore segment, who are more likely to rely on home loans. Even a small change can lead to reconsideration of budgets and negotiations, leading to postponement of house-buying.According to Goyal, prospective buyers have been seeking estimates of their revised EMIs on homes priced around ₹80 lakh in Perumbakkam and Thirumazhisai.A 25-basis-points increase could lead to rise of ₹800 on the EMI on a ₹50-lakh home loan, depending on the interest rate and loan tenure. For a ₹1-crore loan, the increase could be around ₹1,600 a month.Sanjay Chugh, director and city lead-land transactions at ANAROCK Property Consultants Private Limited, says the overall effect on housing demand is likely to remain limited, although buyers could become more conscious of affordability. “Instead of giving up space or location, buyers can try to recover the small difference through the deal itself, for example by asking for discounts in floor-rise charges, car parking or clubhouse fees, or for help with interiors and registration costs”Saurabh GargCo-founder and CBO, NoBroker“The mid-income segment may be somewhat more sensitive to changes in EMIs, while the premium segment is likely to remain resilient, as these buyers generally have greater financial flexibility,” he says.According to Saurabh Garg, co-founder and CBO of NoBroker, demand in Chennai is concentrated in the ₹65-lakh to ₹1.2-crore segment across new and resale homes. He expects buyers to compare more options or reconsider a home’s configuration or location to remain within budget.Buyers who cannot afford higher repayments will have no alternative but to opt for smaller homes or move to affordable neighbourhoods. Goyal says some buyers who initially considered three-bedroom apartments in Sholinganallur or Navalur are now exploring two-bedroom homes in Perumbakkam or further along OMR.Other marketsA similar trend is expected in other markets. Aman Gupta, director of RPS Group, which operates in Delhi-NCR, says buyers in Faridabad’s ₹50-lakh to ₹75-lakh segment may delay closing transactions by a month or two as they reassess affordability. “The biggest concern for developers is buyers in the ₹50-₹75 lakh budget segment, which accounts for most of Faridabad’s sales, delaying the closure of transactions by a month or two. In a market where quarters-to-sell [three-month sales period] matters, this impacts cash flow,” he says. “Every month that a buyer takes to decide, translates to a month of lost cash flow, which directly impacts the construction and the vendors. It will be felt most in the OMR corridor”Vijay RaundalManaging director, Teerth RealtiesRethink launch plansIt is not a smooth pace for developers. The increased rate can raise financing costs and affect new launches. Developers may also have to wait longer for buyers to make decisions, delaying bookings and cash flows.Goyal says at least three mid-sized developers in Chennai have postponed launches planned for the fourth quarter of 2026 as they assess the market’s response. He expects the October-December festive period to offer a clearer indication of whether the increase has affected sales. “The mid-income segment may be somewhat more sensitive to changes in EMIs, while the premium segment is likely to remain resilient, as these buyers generally have greater financial flexibility”Sanjay ChughDirector and city lead-land transactions, ANAROCK Property Consultants Private LimitedVijay Raundal, managing director of Teerth Realties, a real estate company in Mumbai, also expects the rate hike to affect sales momentum and financing costs.Chugh expects developers to continue focusing on projects with strong location fundamentals and clearly defined target audiences, with new launches calibrated to market demand.Next few months will be crucialGarg expects festive-season buying to continue, saying most families who have shortlisted homes have already established their budgets. However, he believes buyers could take longer to make decisions while waiting for better discounts, payment plans or other concessions from developers.Goyal expects registration data for November and December to offer a clearer picture of how the increase has affected the ₹50 lakh to ₹80 lakh segment. He says the possibility of further rate increases could have a greater bearing on market sentiment than the current hike alone.For Chennai, the outlook will therefore depend not just on borrowing costs, but also on employment growth, household incomes, property prices and how quickly developers can sell their existing inventory.While the latest increase is unlikely to bring housing activity to a halt, it could make affordability and the pace of sales more important considerations for both buyers and developers in the months ahead.