Home Loan: The Reserve Bank of India (RBI) is expected to reduce home loan rates significantly due to the repo rate cut. It is being said that it will reach the level before the global financial crisis in 2008.

Home Loan: The RBI's Monetary Policy Committee today reduced the repo rate by 25 basis points to 5.25 percent, which is expected to lead to a significant drop in home loan rates. It is being said that home loan rates will reach the level before the global financial crisis in 2008.

Many banks, such as Union Bank, Bank of India, Bank of Maharashtra, and Indian Overseas Bank, are already offering home loans at 7.35 percent. The reduction in the repo rate will reduce the interest rate to 7.1 percent. Accordingly, a 0.25 point rate cut on a 15-year home loan of ₹1 crore would reduce the EMI by approximately ₹1,440 per month.

Deposit Rates Need to Be Cut

Bankers say that to price home loans at 7.1% for new borrowers, lenders will have to significantly cut deposit rates or change the spread over the benchmark rate. If this happens, new borrowers may have to pay higher interest rates than existing floating-rate borrowers.

Until deposit rates are reduced, banks' net interest margins will decline, while non-banking finance companies will immediately benefit from lower funding costs. "This policy is a major boost for the NBFC sector, and especially for last-mile financiers like Shriram Finance. The continued neutral stance, combined with the announcement of ₹1 lakh crore worth of OMO purchases, ensures that liquidity remains healthy."

What are the experts' opinions?

Ankur Jalan, CEO of Golden Growth Fund, says that from a depositor's perspective, a 25bps cut in the repo rate will raise concerns about declining returns on fixed deposits and other interest-bearing savings instruments. Furthermore, this could force banks to lower deposit rates in the coming months, making it more difficult for savers to earn good returns. While lower rates can support broad-based economic growth, wealthy investors and family offices often redirect capital to higher-yielding products like real estate-focused Category II AIFs to maintain real yields, improving fundraising momentum for these funds. A low-interest-rate environment also reduces the cost of capital for developers and strengthens project viability, which in turn increases opportunities for AIFs.

Preksha Singh, CEO of Agrashil Infratech, said that India's real estate market is already a hot spot for global investors and the NRI community. Now, the reduction in interest rates will make investment even more profitable. A stable economy, growing demand, and low EMIs will combine to make India a promising investment destination over the next few quarters.