RBI rate hike may raise borrowing costs, but strong growth fundamentals to cushion impact: Experts

New Delhi, Oct 7 (TNT): The Reserve Bank of India’s 25-basis-point hike in the repo rate to 5.50 per cent and shift in policy stance from “neutral” to “calibrated tightening” may increase borrowing costs and put some pressure on housing demand, but strong domestic growth fundamentals are expected to cushion the impact, industry experts said on Wednesday.

The RBI’s decision comes amid elevated crude prices, inflationary pressures and renewed geopolitical uncertainties, with experts noting that the central bank’s revised FY27 GDP growth forecast of 7.1 per cent indicates continued resilience in the Indian economy.

Colliers India National Director and Head of Research Vimal Nadar said the rate hike could soften near-term real estate demand, but strong underlying fundamentals were likely to cushion the impact across most asset classes.

In the residential segment, higher borrowing costs could make homebuyers, particularly those in price-sensitive categories, more selective. Developers may respond with festive discounts and innovative pricing plans to support sales, he said.

CBRE Chairman and CEO, India, South-East Asia, Middle East and Africa, Anshuman Magazine said the impact on housing demand was likely to remain measured, particularly in the mid and premium segments where underlying demand remained healthy.

He said the 25-basis-point increase would raise borrowing costs marginally, while India’s strong growth fundamentals would continue to provide support to the housing market. Pasted markdown

ANAROCK Group Chairman Anuj Puri said the rate hike could affect consumer sentiment and discretionary spending, which in turn could impact housing demand during the festive season.

He said residential prices in the top seven cities had already increased seven per cent year-on-year, stretching affordability. Housing sales in these cities stood at around 1,00,220 units in Q3 2026, up three per cent year-on-year and 10 per cent quarter-on-quarter.

The rate hike could make homebuyers more selective and extend decision timelines, particularly in price-sensitive segments, Puri said.

He said commercial real estate was unlikely to be directly affected as demand continued to be driven by global capability centres, technology, BFSI and other occupier segments. Retail real estate, however, could see some near-term impact from higher financing costs and potentially softer festive consumption.

Reloy Founder and CEO Akhil Saraf said India’s relative stability amid pressure in global bond markets and the measured repo rate hike were reassuring.

He said greater macroeconomic stability could reduce uncertainty and provide homebuyers with greater confidence to take long-term purchase decisions. Pasted markdown

Kotak Life Insurance Senior Executive Vice President-Investment Churchil Bhatt said the policy action reflected the RBI’s focus on containing the second-round impact of supply-side inflationary pressures.

He noted that the central bank had raised its FY27 GDP growth forecast by 40 basis points to 7.1 per cent and its FY27 CPI inflation forecast by 20 basis points to 5.2 per cent, while projecting core inflation at 4.4 per cent. Pasted markdown

Baroda BNP Paribas Mutual Fund Chief Investment Officer-Fixed Income Prashant Pimple said the 25-basis-point hike was the first in nearly four years and that the shift to “calibrated tightening” signalled the possibility of further rate hikes depending on domestic inflation and global geopolitical developments.

PGIM India Mutual Fund Head-Fixed Income Puneet Pal described the policy as hawkish, saying the change in stance reinforced expectations of tighter monetary conditions. Pasted markdown

Deepak Agrawal, CIO-Debt, Kotak Mahindra AMC, said the shift in stance strengthened the hawkish signal and left room for further tightening.

He said the FY27 inflation forecast had been raised to 5.2 per cent from five per cent, while the GDP growth forecast was revised upwards to 7.1 per cent from 6.7 per cent.

Vestian CEO Shrinivas Rao said higher mortgage rates could increase borrowing costs for homebuyers and raise the cost of capital for real estate developers, potentially putting pressure on margins and demand if further rate hikes followed.

Square Yards Co-founder and CFO Piyush Bothra said the Indian residential market was more resilient than during earlier rate cycles, supported by rising household incomes, urbanisation, infrastructure development and preference for quality housing.

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