RBI Repo Rate Cut Ignites Hope for Affordable Homes Amid Economic Surge

In a move set to ease financial pressure on millions of aspiring homeowners, the Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points, bringing it down to 5.25 per cent. The Monetary Policy Committee’s (MPC) decision is expected to push home loan interest rates to a historic low of 7.1 per cent — a welcome respite for the middle class grappling with rising living costs.

Home Loan EMIs to Drop as Banks Realign Rates

Public sector banks including Union Bank, Bank of India, Bank of Maharashtra and Bank of Overseas are now expected to adjust their home loan rates, currently averaging around 7.35 per cent. Analysts say borrowers will soon feel the impact of the rate cut.

For instance, a 25 bps reduction on a 15-year home loan of ₹1 crore would reduce monthly EMIs by approximately ₹1,440 — annual savings that could significantly support middle-class families chasing the dream of homeownership.

Banks Balance Margins While NBFCs Gain Advantage

The transition may not be seamless. Banks must recalibrate deposit rates to protect their net interest margins, potentially triggering a competitive phase in lending spreads.

Non-bank finance companies (NBFCs), however, are poised to benefit greatly. Many NBFCs serve rural and underserved regions, and the lowered rate environment will enhance their ability to extend affordable credit.
“This policy is extremely valuable for last-mile financiers in remote areas,” said Umesh Revankar, Executive Vice Chairman of Shriram Finance.

OMO Injection to Boost Liquidity Across Sectors

Alongside the rate cut, the RBI’s plan to inject ₹1 lakh crore into the system through Open Market Operations (OMO) in government securities is expected to maintain a healthy liquidity flow. This move is particularly beneficial for small truck operators, rural entrepreneurs, and MSMEs — key contributors to India’s robust 8.2 per cent GDP growth.

The additional liquidity is set to open access to cheaper credit for sectors that often operate with narrow margins and little financial cushion.

A New Year of Improved Affordability

With the fresh monetary policy signals aligning with the aspirations of millions, the rate cut could redefine housing affordability in the coming year. For many Indians, the long-cherished dream of owning a home may now be closer to becoming reality.