RBI Cuts Repo Rate to 5.5%: Real Estate Sector Rejoices as Home Loan EMIs Ease
The Reserve Bank of India's (RBI) decision to reduce the repo rate by 50 basis points to 5.50% has been welcomed by the real estate sector, particularly for its impact on reducing home loan EMIs.
Repo RateReal EstateHome LoansRbiEmisReal EstateJun 06, 2025
Governor Sanjay Malhotra remarked, “In contrast, the global backdrop remains fragile and highly fluid. The uncertainty around the global economic outlook has somewhat eased since the MPC met in April, following a temporary tariff reprieve and optimism surrounding trade negotiations.”
Compared to the earlier 25 basis point cut, Venkatesh Gopalakrishnan, Director of the Group Promoter’s Office at Shapoorji Pallonji Real Estate, stated, “This reduction is encouraging, particularly in the affordable and mid-income housing segments, where demand is highly sensitive to interest rate changes.”
Annuj Goel, Chairman of Goel Ganga Developments, responded, “If you had a ₹50 lakh loan for 20 years, you could save somewhere in the region of ₹1,960 off the monthly EMI or just under ₹4.7 lakh over the life of the loan. The corresponding change in its effect is showing inflation under 4 per cent for three months.”
As outlined previously, both the State Bank of India and the Punjab National Bank passed on rate cuts of only 25 basis points since April, considering that 36 per cent of loans are adjusted based on marginal cost of funds-based lending rate (MCLR) values that are four months old, said Aman Gupta, Director of RPS Group.
Home loans constitute the lion’s share of the real estate market, and reducing the repo rate directly benefits homeowners by lowering their EMIs (equated monthly instalments). Reacting to the decision, experts and several realtors expressed their approval of this reduction.
Commenting on fixed-rate borrowers and the broader market’s spending capacity, Keshav Mangla, GM of Business Development at Forteasia Realty, said, “This important rate cut serves a dual purpose: allowing households to free up some spending power while also stimulating the real estate market. Fixed-rate borrowers will not receive the benefits of the cut, while there are also no tax benefits available on home loans under the New Tax Regime.”
Prashant Sharma, President of NAREDCO Maharashtra, commented, “Lower inflation expectations and a stable GDP outlook will instil confidence in developers and investors alike. We believe this move will play a crucial role in reviving housing demand and sustaining growth in the sector.”
Frequently Asked Questions
What is the repo rate and why is it important?
The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks. It is crucial because it influences the cost of borrowing for banks and, in turn, affects the interest rates on loans and advances to customers, including home loans.
How does a reduction in the repo rate benefit home loan borrowers?
A reduction in the repo rate typically leads to lower interest rates on home loans. This means that borrowers can enjoy lower EMIs (Equated Monthly Installments), reducing their monthly financial burden and potentially saving a significant amount over the life of the loan.
What is the impact of the repo rate cut on the real estate market?
The repo rate cut can stimulate the real estate market by making home loans more affordable. This can increase demand for properties, especially in the affordable and mid-income segments, and boost overall market activity.
How do fixed-rate home loan borrowers benefit from the repo rate cut?
Fixed-rate home loan borrowers do not benefit directly from the repo rate cut, as their interest rates are locked in for the duration of the loan. However, they may benefit indirectly through a healthier real estate market and potentially lower costs in other areas.
What is the MCLR and how does it affect home loan rates?
MCLR stands for Marginal Cost of Funds based Lending Rate. It is the minimum interest rate below which a bank cannot lend, except in certain cases. The MCLR is adjusted based on the cost of funds, operational costs, and other factors. A reduction in the repo rate can lead to a decrease in MCLR, which in turn can lower home loan interest rates.
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