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Indian homebuyers are set to receive major relief after the Reserve Bank of India (RBI) cut the repo rate by 25 basis points, bringing it down to 5.25% in the December Monetary Policy announcement. With a total reduction of 125 bps in 2025, home loan interest rates are expected to drop significantly, lowering EMIs and making housing more affordable for millions of buyers. The new lending rates could come down to nearly 7.10% — the lowest in several years.

This move is expected to ease the financial burden on existing borrowers and boost demand in the real estate sector, especially among first-time and mid-income homebuyers.

Home Loan Interest Rates Likely to Drop to 7.10%

Many public sector banks currently offer home loans at around 7.35%. Once banks pass on the full benefit of the repo rate reduction, the new effective rate may fall to 7.10%, bringing it close to fixed deposit interest rates — a rare scenario in recent years.

Banks such as Union Bank of India, Bank of India, Bank of Maharashtra, and Indian Overseas Bank may soon adjust their lending rates accordingly. If they do, homebuyers can expect noticeable reductions in their monthly EMI.

Experts Call It a Big Relief for Borrowers

Atul Monga, CEO & Co-founder of BASIC Home Loan, says the rate cut will improve loan affordability and strengthen housing demand.

“Most floating-rate home loans are directly linked to the repo rate. So when banks pass on the reduction, EMIs will decrease. Lower borrowing costs will encourage faster purchase decisions, especially among middle-income groups, improving buyer sentiment and supporting the real estate ecosystem.”

He adds that with improved GDP outlook and better consumer confidence, the cut will create a positive environment for inclusive home ownership.

How Much Will Your EMI Reduce?

If interest rates come down from 7.35% to 7.10%, here is how much home loan borrowers can save over a 20-year tenure:

Even a small reduction of 0.25% can lead to savings of ₹3.5–4 lakh on a ₹1 crore home loan over 20 years, proving the huge long-term impact.

Easier Home Buying and Higher Affordability

Lower interest rates directly improve affordability. As EMI decreases, buyers can upgrade to larger properties within the same income level. For many families postponing their purchase decisions due to high EMIs, this reduction can be a game-changer.

Affordable borrowing costs also benefit real estate developers, as new project launches and buyer conversions improve.

Existing Borrowers May Consider Balance Transfer

For borrowers still paying 8%–9% interest, this is a good time to explore home loan balance transfer. Switching to lower rates can significantly reduce the interest burden and free up monthly cash flow.

Lower EMIs make household budgeting easier, offering space for savings and additional expenses.

Boost for Real Estate Market

Industry experts expect the repo rate cut to energize property sales. Home prices have risen nearly 10% in the last year, so any EMI relief becomes highly valuable. Metro cities such as Delhi-NCR, Mumbai, Pune, and Bengaluru are expected to witness faster buyer activity and renewed market momentum.

The combination of lower rates and rising demand could support steady growth in the housing sector over the next year.

Final Thought

The RBI’s decision to cut the repo rate brings welcome relief for existing borrowers and improves affordability for new homebuyers. With EMIs becoming lighter and long-term savings increasing, now may be the ideal time to evaluate home purchase decisions or refinance an existing loan.