The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has recently cut the key repo rate by 25 basis points to 5.25%, continuing a sequence of rate reductions in 2025 that total 125 basis points (1.25%) over the year.
The repo rate is the interest rate at which the RBI lends to commercial banks; a lower repo rate generally translates into cheaper loan costs for borrowers — especially in the case of home loans that are linked to benchmark rates like RLLR or MCLR.
Banks have started adjusting their lending rates following the RBI’s repo rate cut — reducing Repo Linked Lending Rates (RLLR) and related benchmarks — which means lower EMIs for borrowers with floating-rate home loans.
Several public sector banks have cut home loan interest rates — in some cases quite down for eligible borrowers — making residential loans significantly more affordable.
Financial analysts estimate that cumulative rate cuts in 2025 could result in substantial savings for borrowers: for a ₹50 lakh loan over 20 years, borrowers could collectively save up to ₹9 lakh in interest over the loan term.
One of the most important psychological impacts of the repo rate cut is on buyers who were previously hesitant — the “fence sitters.”
With borrowing costs lowering and EMIs potentially falling each time rates are reset, many potential homeowners who were delaying purchases due to affordability concerns are now re-evaluating their decisions.
Real estate leaders and housing finance professionals have noted that these rate cuts boost buyer confidence, particularly for affordable and mid-income housing — segments where price sensitivity is highest.
Even developers suggest that lower loan costs activate fence sitters and revive interest across urban and semi-urban pockets, supporting increased demand.
Cheaper home loans mean more buyers can afford to enter the market — especially first-time and mid-income buyers. Lower EMIs make budgeting easier and reduce financial stress for households.
Reduced borrowing costs for developers (due to cheaper capital) can lead to a pickup in new project launches, especially in mid-price housing segments. That, in turn, supports broader growth in the housing supply.
As affordability increases, demand isn’t just concentrated in top metros — secondary cities and suburban markets also benefit as more buyers consider homeownership viable with favourable loan terms.
The RBI’s repo rate cuts throughout 2025 — most recently bringing the rate down — have created a more favourable environment for home loans, encouraging people to reconsider property purchases that they may have postponed due to cost concerns.
Lower borrowing costs, improving affordability, and enhanced buyer sentiment are working in tandem to make this an opportune moment for new homebuyers to step into the market. Waiting for more rate cuts, while tempting, comes with uncertainties and risks — especially if property prices continue to rise or if banks delay passing on full benefits.
In today’s context, with EMIs trending lower and lending benchmarks being adjusted, buying a home now could be both financially wise and emotionally satisfying — turning the dream of homeownership into a reality while the conditions are favourable.
