The Reserve Bank of India (RBI) surprised the markets on Friday by cutting the repo rate by 50 basis points instead of the widely expected 25 basis points. A basis point is one-hundredth of a percentage point. By also shifting its policy stance from accommodative to neutral, the central bank signaled that further rate cuts may not happen in the near term.
After this decision, the repo rate stands at 5.5%, the lowest since August 2022 when it was 5.4%. This marks a cumulative 100-basis point reduction in the ongoing easing cycle, which began with a 25-basis point cut in February 2025. Notably, the accommodative stance lasted only two months, making it the shortest since the inflation-targeting framework was introduced in October 2016.
The RBI clarified that this move is “front-loading of the monetary easing” and not a response to deteriorating inflation-growth dynamics.
Relief for Homebuyers: EMIs to Fall, Loan Eligibility to Rise
While the festive season is still months away, this rate cut is welcome news for prospective homebuyers. It lowers borrowing costs and allows borrowers to access larger home loans without increasing their EMIs. However, the central bank’s shift to a neutral stance means further rate cuts are unlikely in the short term—making this an ideal window for committed buyers.
“With the RBI announcing a third rate cut this calendar year, bringing the total repo rate reduction to 100 basis points (bps), we’re seeing a gradual but positive shift for borrowers. Although each cut, including the recent 50 bps reduction, may seem modest in isolation, cumulatively they help ease the overall cost of borrowing,” said Deepak Kumar Jain, founder and CEO of CredManager.in.
Impact on EMI and Loan Tenure
Take the example of a ₹50 lakh home loan over 20 years:
- Before rate cut (8% interest): EMI ≈ ₹41,833
- After 50 bps cut (7.5% interest): EMI ≈ ₹38,781
- Monthly Savings: ~₹3,052 (~7.3% reduction)
For bigger loans:
- ₹1 crore → save ~₹6,329/month
- ₹1.5 crore → save ~₹9,493/month
Alternatively, borrowers can retain the same EMI and shorten their loan tenure by 2–3 years, depending on the lender.
“With this RBI rate cut, the EMIs will come down by almost 10-12%. For example, if a person wants to continue with the same tenure the EMIs will be lesser, however if someone opts for a shorter tenure, the EMIs can remain the same and the loan can be paid within a shorter tenure,” said Sanjay Daga, CEO and managing director of Anex Advisory.
What About Home Loan Interest Rates and CRR?
The benefits for borrowers depend on how quickly banks pass on the rate cuts by adjusting their Marginal Cost of Funds-based Lending Rate (MCLR). The RBI has also cut the Cash Reserve Ratio (CRR) by 100 basis points, indirectly boosting liquidity in the banking system.
“The reduction in the Cash Reserve Ratio (CRR) will help boost liquidity in the banking system, which means that banks have more funds to lend. Developers will be able to access more capital for their projects, and this can positively impact project completion timelines. It also gives banks the option to reduce home loan interest rates, which will have again positively impact sentiment in the affordable and mid-income segments,” said Anuj Puri, chairman, Anarock Group.
Should You Buy a Home Now?
The RBI’s neutral stance indicates stability in interest rates. For serious buyers, this may be the best time to make a move.
“This means if someone is paying a 9% interest rate for a ₹1 crore home loan and the interest rate comes down to 8%, then by keeping the EMI constant, they can opt for a higher loan amount by almost ₹7.5 lakhs,” explained Abhishek Kumar, founder and chief investment advisor of SahajMoney.
That said, undecided buyers should not rush into homeownership based solely on interest rates.
“Since floating rate loans fluctuate over the loan tenure, interest rates may rise or fall in the future. Instead, buyers should also consider their other financial goals and ensure they can afford the EMI payments throughout different economic cycles,” added Kumar.
With a substantial 100 bps cut this year—50 of which came in a single surprise move—the RBI has provided a timely boost to borrowing and liquidity. But the message is clear: don’t expect more cuts soon. For homebuyers and the real estate sector, this might be the most opportune moment to act.