RBI MPC decision on June 5: Homebuyers await RBI call amid inflation and global risks

The housing market is closely tracking the Reserve Bank of India’s upcoming monetary policy decision as global uncertainties, including rising geopolitical tensions and crude oil price volatility, continue to weigh on the inflation and growth outlook.

The Monetary Policy Committee (MPC), headed by RBI Governor Sanjay Malhotra, is widely expected to keep the key repo rate unchanged at 5.25 per cent when it announces its decision on June 5, according to market expectations and expert views cited in PTI reports. However, analysts believe the central bank is likely to adopt a cautious stance amid external risks.

State Bank of India Chairman CS Setty said the economic growth process is expected to stabilise if the RBI opts for a status quo on rates.

“Growth and inflation dynamics are more important. I think a pause will definitely help us to stabilise in terms of ensuring smooth growth rates are achieved,” Setty said, as quoted by PTI.

He added that a stable interest rate environment supports broader economic momentum and improves predictability in borrowing conditions.

A report from private lender Yes Bank said policy challenges remain elevated despite some easing in geopolitical tensions, keeping the economy vulnerable to supply-side shocks. It noted that rising fuel prices and input costs are already beginning to pass through to retail inflation.

“While every policy remains live, we see a very small probability of a rate and stance change in June, as the RBI buys time to assess the second-round impact of price rises,” the report said.

For the housing sector, stakeholders believe policy stability is crucial as homebuyer sentiment and affordability remain closely linked to borrowing costs and long-term rate expectations.

“A stable interest rate environment is particularly important for the real estate sector, where affordability and buyer sentiment remain closely linked to borrowing costs. Continued rate stability would support housing demand, sustain momentum in residential sales, and encourage investment across the broader real estate ecosystem. Given the growth-supportive benefits and the limited effectiveness of rate hikes in addressing supply-side inflation and external currency pressures, we expect the MPC to hold rates steady while retaining a calibrated and data-dependent stance," said Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India.

Kunal Rishi said lower borrowing costs are essential to sustain housing demand and affordability, while Tanuj Shori highlighted that interest rate predictability is key for homebuyer confidence.

"...we believe the RBI should maintain its growth-supportive stance. The ideal approach would be to keep rates unchanged to support economic activity. For the housing sector, lower borrowing costs are critical to sustaining homebuyer demand and enhancing affordability," said Kunal Rishi, COO, Krisumi Corporation.

"Looking ahead, policy measures that balance growth and inflation while supporting liquidity in the financial system will help sustain housing demand in key markets. For prospective homebuyers, predictability of interest rates is a crucial factor in their purchasing decisions, and continued macroeconomic stability will further enhance confidence in the sector," Tanuj Shori, CEO of Square Yards said.

In April, RBI had kept its key policy rate unchanged, adopting a cautious wait-and-watch stance as policymakers assessed the fallout from the West Asia conflict on energy supplies, inflation and growth.