RBI repo rate cut: Home loan EMIs set to fall as RBI slashes rate by 25 bps to 5.25% on December 5

Homebuyers are set to gain meaningful relief after the Reserve Bank of India (RBI) cut the repo rate by 25 basis points to 5.25 percent on December 5, continuing a cumulative 125-basis-point reduction this calendar year. This marks the most aggressive easing cycle since 2020 and is expected to translate into lower EMIs and more affordable home loans.

With the repo rate lowered, banks are expected to adjust lending rates downward for floating-rate borrowers—who form the majority of home loan customers. Most home loans issued after October 2019 fall under the External Benchmark Lending Rate (EBLR) system, directly linked to the repo rate. For these borrowers, rate transmission is typically swift: EMIs fall or loan tenures shorten without requiring any action from the borrower.

Banks usually keep the EMI constant and reduce the tenure unless the borrower explicitly requests a lower EMI. A BankBazaar analysis of home loan rates between January 31 and November 28 shows that most public sector banks have already cut fresh home loan rates by nearly 100 basis points in line with the RBI’s earlier moves. Currently, major lenders such as HDFC Bank, ICICI Bank, SBI, Bank of Baroda and Canara Bank offer home loans starting between 7.3 percent and 7.9 percent.

Who benefits most?

Borrowers on floating-rate loans see immediate gains. Rajat Bokolia, CEO of Newstone, said: “With the repo rate down to 5.25%, homebuyers will see interest moderation, making housing more accessible. Refinancing becomes easier as EMIs reduce.”

How much loan amount can you expect to cut?

This is where the relief becomes measurable.

BankBazaar CEO Adhil Shetty explained: “With a 25-basis-point cut, policy is now clearly aligned toward supporting growth. For a ₹50 lakh loan over 20 years, the cumulative 125-basis-point reduction this year can reduce lifetime interest outgo by about ₹9 lakh.”

Shetty noted that borrowers can maximise savings by keeping EMIs constant and allowing the tenure to shrink, which helps reduce long-term liabilities faster. “Savers, however, will need to brace for softer deposit rates and may want to lock in long tenors while higher slabs remain,” he added.

From a broader investment perspective, Shetty said lower rates support debt markets and are generally constructive for equity earnings, though valuations and global flows still matter. “This is a good phase for households to reassess both borrowing and saving decisions.”

Shiv Garg, Director at Forteasia Realty, said the cut will ease access to working capital, speeding up construction of large township and integrated projects. He pointed out that for a 20-year, Rs 35 lakh loan, EMIs could fall by roughly ₹1,850—improving affordability at a time when banks and NBFCs are already lowering lending rates. He expects the rate cut, coupled with an upgraded FY26 GDP forecast, to spur new launches, consolidation among smaller players, and stronger institutional investment.

Impact of Recent Repo Rate Cuts on Home Loans

Loan Amount: ₹50 lakh Tenure: 20 years Cumulative Rate Cut Considered: 125 bps Estimated EMI Reduction: Varies by bank (EMI unchanged → tenure drops) Estimated Lifetime Interest Savings: Approximately ₹9 lakh Notes: Savings are maximised when the EMI is kept constant and the loan tenure reduces.

------------------------------------------------------------

Loan Amount: ₹35 lakh Tenure: 20 years Cumulative Rate Cut Considered: 125 bps Estimated EMI Reduction: Approximately ₹1,850 per month Estimated Lifetime Interest Savings: Not specified Notes: Lower EMI improves affordability; developers expect demand boost.

Boost for developers and real estate sentiment

Developers also see the RBI’s move as a growth accelerator.

Anshuman Magazine, Chairman & CEO, CBRE India, South-East Asia, Middle East & Africa, said the cut reinforces the RBI’s growth-focused stance amid low inflation and strong GDP print. “Floating-rate borrowers will feel tangible EMI relief, and overall real estate momentum is expected to strengthen, especially in mid- and affordable segments.”

Anurag Goel, Director at Goel Ganga Developments, echoed this sentiment. He said the timing is ideal for end-users in Tier II and III cities where EMI sensitivity is high. “If banks and HFCs pass on the benefit quickly, this can trigger a revival in markets where recent price hikes were felt the most.”

What about MCLR, Base Rate and BPLR borrowers?

Borrowers on older benchmarks—MCLR, base rate, or BPLR—will also benefit, but more slowly. Transmission in these systems lags behind EBLR, and portions of previous cuts are still filtering through. Their EMIs may fall over the coming months rather than immediately.

Why now?

The RBI’s action comes at a time when small savings rates have remained unchanged for over a year and banks have already lowered fixed deposit rates, reducing their ability to independently cut loan rates further. The repo rate cut provides the macro push needed to stimulate credit demand and support economic activity.