RBI holds repo rate at 5.25%: What it means for home loan borrowers and homebuyers

The Reserve Bank of India (RBI) has kept the repo rate unchanged at 5.25% for the fourth consecutive Monetary Policy Committee (MPC) meeting, providing relief to millions of home loan borrowers whose loans are linked to floating interest rates.

The decision means there will be no immediate increase in EMIs, allowing borrowers to continue benefiting from the cumulative 125 basis points of rate cuts delivered during 2025. However, experts caution that rising inflationary pressures could influence future policy decisions, making this period of stable borrowing costs potentially temporary.

Borrowers continue to benefit

The repo rate is the rate at which the RBI lends money to commercial banks. Changes in the repo rate directly affect borrowing costs for banks, which in turn influence home loan interest rates, particularly for loans linked to external benchmarks such as the repo rate.

According to Adhil Shetty, CEO of BankBazaar, the current rate pause means borrowers continue to enjoy the benefits of the previous rate cuts. On a ₹50 lakh home loan with a 20-year tenure, borrowers are saving around ₹3,050 per month compared to earlier rates, while a ₹75 lakh loan translates into savings of nearly ₹5,800 per month.

Raoul Kapoor, Co-CEO of Andromeda Sales and Distribution, said home loan rates are expected to remain stable in the 7%-7.25% range, helping both existing borrowers and prospective homebuyers plan with greater confidence.

Real estate sector

Industry stakeholders believe the RBI's decision will support housing demand, particularly in the affordable and mid-income segments.

Manoj Goyal, Director, Forteasia Realty Pvt. Ltd., said the decision is positive for the real estate sector as home loans have become significantly more affordable following the rate cuts implemented in 2025.

"The RBI decision to keep the repo rate at 5.25% is good news for the real estate space. Since lenders reduced rates by 125 basis points after 2025, borrowers have seen a meaningful reduction in their EMIs. A standard ₹50 lakh housing loan now carries an EMI that is nearly ₹4,000 lower than peak levels. This improves affordability for first-time homebuyers and has led to stronger customer footfall and enquiries for affordable and mid-income housing projects," Goyal said.

He added that the current rate environment presents an opportunity for buyers to enter the market before property prices move higher.

Stable rates

Sandeep Ahuja, Global CEO of Atmosphere Living, said the RBI's move comes at a time of continued global economic uncertainty and offers much-needed stability.

"The RBI's decision to keep rates unchanged at 5.25% is a sensible move in the current environment. While some homebuyers were hoping for a rate cut, stability itself is valuable because it improves predictability and makes financial planning easier," Ahuja said.

According to him, home purchase decisions are increasingly being driven by lifestyle aspirations and long-term needs rather than short-term interest rate movements.

"We continue to witness healthy demand across aspirational housing and luxury segments, where homeownership is viewed both as a lifestyle choice and a long-term asset. The residential market remains on a strong footing," he added.

Next phase of housing demand

Dr Niranjan Hiranandani, Chairman, NAREDCO, said the RBI's decision should be viewed as a sign of policy stability rather than a pause in growth.

"The RBI's decision to maintain the repo rate at 5.25% should be viewed as a signal of stability rather than a pause in growth. The real estate sector has already benefited from the cumulative rate reductions since early 2025; what the market needs now is visibility and predictability. In housing, sustained demand is built not by isolated rate cuts but by a prolonged period of confidence that allows consumers and businesses to plan for the long term," he said.

According to Hiranandani, the central bank's calibrated approach is helping balance economic growth and financial stability at a time when inflationary pressures are being driven largely by global supply-side factors rather than domestic demand.

He noted that stable borrowing costs provide reassurance to homebuyers, particularly salaried professionals, entrepreneurs and MSMEs, supporting long-term purchasing decisions.

Hiranandani also highlighted that housing demand typically evolves in phases. The first phase is driven by affordability and attracts first-time buyers into homeownership. The second phase is driven by aspiration, where households gain confidence from repayment stability, leading to demand for larger homes, integrated townships, better social infrastructure and premium living environments.

"We are already witnessing this trend across emerging urban corridors and growth centres, where demand is expanding beyond entry-level housing towards mid-income, premium and luxury segments. For developers, such broad-based demand visibility encourages fresh investments, new project launches and long-term urban development," he said.

Could rates rise later?

While the current scenario remains favourable, inflation risks remain a concern. Rising fuel and energy prices, higher import costs due to rupee weakness, and geopolitical tensions in West Asia have increased inflationary pressures. India's inflation rate has already moved up from 2.74% in January to 3.48% in April, with expectations of further increases.

If inflation continues to rise, the RBI may consider tightening monetary policy in future MPC meetings, which could lead to higher home loan rates and EMIs.

For now, however, home loan borrowers can continue to enjoy stable borrowing costs, while prospective homebuyers benefit from one of the most affordable home financing environments seen in recent years.