RBI monetary policy: The Reserve Bank of India (RBI), in its last (MPC) meeting of 2025, held unanimously, decided to reduce the repo rate by 25 basis points to 5.25%. After this move, the Indian Central Bank has reduced the repo rate by 125 bps in 2025 (25 bps each in February and April, 50 bps in June and 25 bps in December). The move is expected to boost liquidity in the market through higher spending in rate-sensitive segments, such as banking, real estate, and consumer durables. According to tax and investment experts, the is expected to provide a sigh of relief to new home loan borrowers as well. They stated that a reduced repo rate would enable banks, NBFCs, and other financial institutions to lower their lending rates by up to 25 basis points, resulting in lower monthly .
On RBI repo rate cut would impact new home loan borrowers and real estate developers, Pankaj Mathpal, CEO & MD at Optima Money Managers, said, “The 25 BPS rate cut decision by the RBI is a welcome move as it would provide relief to both builders and home loan borrowers. A lower monthly home loan EMI is expected to boost demand, leading to lower unsold inventory.”
“The RBI’s decision to cut the repo rate by 25bps signals a shift toward supporting growth, and is a welcome move for home loan borrowers. With most floating-rate home loans directly linked to the repo rate, borrowers can expect relief in their loan EMIs as banks and lending institutions pass on the benefit. With inflation sitting comfortably within the RBI’s target range, the policy stance is well aligned with the current economic landscape,” said Atul Monga, CEO& Co-Founder at BASIC Home Loan.
Shiv Garg, Director at Forteasia Realty, said, “The Reserve Bank of India (RBI) has decreased the policy rate to 5.25% and made a bold statement by adopting the theme of growth support. The developers will be able to get working capital more easily, which will, in turn, make it possible for them to get their projects financed and thus speed up the construction of townships, plotted, and large integrated projects that are heavy on capital expenditure.”
Home loan EMI calculation
On how much a home loan borrower’s monthly EMI would come down, if the banks pass on this 25 bps benefit to its home loan applicants, Pankaj Mathpal said, “For a new home loan borrower, a ₹50 lakh loan borrowed over 20 years at a of around 8% would mean a monthly home loan EMI of ₹41,047, which is currently costing ₹41,822. Similarly, if the same loan is taken for 15 years, the monthly home loan EMI is expected to decrease from the existing ₹47,783 to ₹47,064.”
On how the RBI repo rate cut would impact a home loan borrower’s monthly EMI, Shiv Garg of Forteasia Realty, said, “In the current market scenario, home loan interest rates are in the range of 7.40% to 8.10%, depending upon the CIBIL score of a home loan applicant. Assuming 8% home loan interest rate on a ₹35 lakh home loan for the period of 20 years, one’s monthly home loan EMI would come down by around ₹582.”
Net relief for home loan borrowers in 2025
On total relief that the RBI has given to the home loan and other bank loan borrowers, Pankaj Mathpal of Optima Money Managers said, “In 2025, the RBI has slashed the repo rate from 6.50% to 5.25%. Out of the six bi-monthly Monetary Policy Committee meetings, the Central Bank of India has decreased the repo rate on four occasions: a 25 bps repo rate cut in February and April, a 50 bps rate cut in June, and now a 25 bps rate cut in December. The RBI left the repo rate unchanged in August and October. Taking this into account, if a potential homebuyer is waiting for the home loan interest rates to come down from a high-interest regime to a low-interest regime, this can be a good opportunity for such homebuyers to go for their dream home.”
On how much relief a home loan applicant would get if it had postponed its plans to buy a home by one year, Pankaj Mathpal said, “Taking the entire 125 bps rate cut into account, monthly home loan EMI on a ₹50 lakh home loan taken for 20 years at 9% per annum interest comes ₹44,986, while the same loan taken at same interest rate for 15 years, the monthly home loan EMI comes ₹54,713. Therefore, the net relief for a new home loan borrower on a ₹50 lakh loan for 20 years amounts to approximately ₹3,939 ( ₹44,986 – ₹41,047). Similarly, net relief for a new home loan borrower on a ₹50 lakh loan for 20 years comes around ₹7,649 ( ₹54,713 – ₹47,064).”
Relief for old home loan borrowers
Pankaj Mathpal of Optima Money Managers said that the RBI’s decision to cut the repo rate by 125 bps in 2025 would also benefit old home loan borrowers. If they don’t choose to decrease their monthly home loan EMI, their bank would reduce the period of the home loan they have taken. He said that a ₹50 lakh home loan taken at the beginning of 2025 at 9% home loan interest rate for 20 years or 240 months would end in 197 months, which includes the previous period of the home loan. Similarly, a ₹50 lakh home loan taken at the beginning of 2025 at 9% home loan interest rate for 15 years or 180 months would end in 158 months. However, it is possible if the home loan interest rate remains the same for the entire upcoming period, Pankaj Mathpal concluded.
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