Repo rate cut: Will your home loan EMI reduce or stay the same?

Will your EMI stay same, go up or down?

For borrowers whose loans are linked to the repo rate through external benchmark-linked lending rates (EBLR), EMIs will reduce due to rate cut. Those with loans under older regimes, such as the base rate or MCLR, may want to evaluate whether switching to a repo-linked loan could offer better transparency and faster rate transmission going forward.

"For home loan borrowers, this might bring a tangible relief as floating-rate EMIs will ease. We expect the market momentum to accelerate further in the coming weeks and hope for greater demand in mid and affordable segments," said Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE.

After these reductions, the central bank chose to pause in the August and October bi-monthly policy review, adopting a cautious stance as it monitored the potential effects of US tariffs and other global uncertainties on India’s economic outlook.

What the repo rate cut means for home loan borrowers

For individuals repaying home loans, the RBI’s decision provides immediate relief. Since most housing loans are now tied to external benchmarks such as the repo rate, any hike would have directly translated into higher EMIs. A rate cut means that existing borrowers will likely face a cut in their monthly instalments.

"A 25 basis point rate cut at this stage will meaningfully support homebuyer sentiment and improve affordability across categories. Over the past few quarters, demand has remained resilient despite elevated prices, and a reduction in borrowing costs will give fence sitters the confidence to move ahead with their purchase decisions. The real estate sector has been navigating higher input costs and currency-linked inflation in materials, so a softer rate environment will ease financial pressure for both buyers and developers. With inflation stabilising and growth remaining strong, this rate cut sends a constructive signal that supports long term housing demand and keeps the momentum intact across mid, premium and luxury segments," said Manju Yagnik, Senior Vice President of NAREDCO- Maharashtra.

"The RBI’s decision to cut the repo rate by 25 bps is a distinct positive for the Indian real estate sector as we close 2025. Coming on the back of earlier easing cycles this year, this move further sweetens the value proposition for homebuyers, particularly in the affordable and mid-income segments which are highly sensitive to interest rate fluctuations," said Anuj Puri, Chairman – ANAROCK Group.

"Lowering the monthly home loan EMI by Rs 1,850 for a 20-year Rs 35 lakh loan will make housing more affordable. It will happen at a time when banks and NBFCs will set their loan rates," said Shiv Garg, Director, Forteasia Realty Pvt. Ltd.

"The recent reduction of the repo rate by 25 basis points to 5.25% is expected to have a significant impact on home loan rates in the coming months, assuming banks and HFCs quickly pass the benefit on to the borrowers. The combination of lower EMIs and a more optimistic growth outlook creates a perfect timing for the end-users in the affordable and mid-income segments, particularly in Tier II and III cities where EMI sensitivity is high," said Anurag Goel, Director, Goel Ganga Developments.

"The policy change is like rolling out the carpet for homebuyers, said Pramod Kumar Gupta, Director, Kadamashree Developers India LLP.

The RBI holds six bi-monthly policy meetings each financial year to assess interest rates, liquidity conditions, inflation trends, and the broader macroeconomic environment.