The Domino Effect of 50 BPS RBI's Repo Rate Cut on Real Estate

The RBI has recently lowered the repo rate by 0.5 percentage points, bringing it to 5.5%. This change will ease the financial burden on home loan borrowers by reducing their monthly EMIs. In India, most new home loans are connected to the repo rate through the Repo Linked Lending Rate (RLLR) framework, suggesting that interest rates may be lowered soon.

Amit Prakash Singh, the Chief Business Officer of Urban Money and Co-Founder of Square Yards, states, “The RBI’s decision to cut the repo rate by 50 basis points was on the expected lines and marks a proactive step toward stimulating economic growth. This substantial reduction is expected to significantly ease borrowing costs, reduce EMIs, and increase disposable income, all of which are likely to support domestic consumption and drive demand across various sectors. With inflation well within the RBI’s comfort range, the move reinforces the central bank’s focus on growth. It is poised to have a meaningful impact on the credit landscape, encouraging both consumer and business lending. It signals a timely and growth-oriented policy stance in the face of a moderating economic outlook.”

For example, a 20-year housing loan may considerably lower your EMI, giving you more disposable income each month. Higher loan amounts will lead to increased savings.

Piyush Bothra, Co-Founder and CFO, Square Yards, expresses- “The 50-basis point rate cut, though bold, is expected to reflect the central bank’s acknowledgement of a shifting macroeconomic landscape. With the full-year FY25 GDP growth projected at only 6.5%, the slowest since the pandemic, there is clear evidence of softening momentum. With inflation at a manageable 3%, the RBI had enough headroom to ease policy without triggering price instability. For the real estate sector, which has already been witnessing muted growth, this move is the right dosage required to unleash the animal spirits. A 50-bps reduction will translate into meaningful EMI savings, improving affordability for homebuyers. It will also give developers greater confidence to move ahead with new launches, especially in the low-to-mid segments.”

Financial institutions such as UCO and Canara have reduced their rates to 7.75%. However, it may take several months for some private banks to pass on these benefits fully, so it’s advisable to check with your lender. When EMIs are lowered, you can utilise the extra cash for everyday expenses, savings, or to pay off your loan more quickly, thereby saving on interest. To optimise this situation, ensure that the rate cut has been reflected in your loan. Additionally, consider increasing your EMI slightly to shorten the loan duration.

Read more about it here:

Business Standard: https://bit.ly/43X7N7X
Fortune India: https://bit.ly/45NEYx4
Zee Business: https://bit.ly/4dQ2YBI