Home, auto loan EMIs set to fall post 25 bps repo rate cut by RBI

By: | Updated: April 5, 2016 4:48 PM

Realty experts welcomed the RBI move to cut the repo rate by 25 bps and called it a positive step that will assist the sector.

home loan - RBI monetary policyHome, car loans are expected to become cheaper with RBI slashing the repo rate by 25 bps. Realty experts welcomed the RBI move to cut the repo rate and called it a positive step that will assist the sector.

Home and auto loans are set to become cheaper with Reserve Bank of India Governor Raghuram Rajan reducing repo rate by 25 basis points to 6.50 percent in its monetary policy review on Tuesday, a first reduction since September to bring the rate to its lowest in more than five years.

Keeping room for more rate cuts in future, the central bank said it will remain accommodative in its policy stance going forward. The monsson pattern will be a factor in deciding future course of interest rate reduction.

Rajan said that borrowing has already become significantly cheaper with banks having reduced interest rates by 25-50 bps even before monetary policy review.

In another surprise move, the Reserve Bank of India also raised the reverse repo – or the rates lenders charge to the central bank – by 25 basis points to 6.0 per cent, while taking measures to ensure more availability of cash in the banking system.

Realty experts welcomed the RBI move to cut the repo rate by 25 bps and called it a positive step that will assist the sector.

“The cut in repo rate is a positive development for the Indian economy and will certainly help in reviving sentiments amongst masses. This move will steer growth and is expected to infuse more liquidity in the system. The decision to cut the interest rate will now reduce the burden of EMIs on buyers and leads to more money in the hands of the consumer for greater spending. We welcome the RBI positive move, as this will assist realty sector,” Aman Agarwal, Director, KV Developers & Governing Council Member NAREDCO said on RBI rate cut.

The RBI had cut its repo rate by 125 basis points last year.

“The decision of RBI to reduce repo rate by 25 basis points today is a welcome move and is likely to spur demand in the housing sector. The real estate sector has seen sluggish demand in the last few years and the reduced rate cut will allow banks to offer loans at more attractive rates. Cheaper loans for home buyers will reduce EMI burden on buyers which is likely to see renewed interest in residential property purchase. Overall, the rate cut will positively impact sentiments surrounding the real estate market, ” Vineet Relia, managing director of SARE Homes.

RBI’s move to go for a rate cut will help both the new and existing loan borrowers. The new customers will enjoy the benefit of repo rate cut as the banks will pass on the benefit to them anyway. However, for existing customers the benefits will not be in the same proportion as new customers. Paisabazaar.com has given us a rough estimate on how the rate cut will impact your car and home loan.

For example, if you have a home loan of Rs 30 lakh for a tenure of 20 years at an interest rate of 9.50 per cent per annum, then a 25 bps cut on the lending rate by any bank would mean that a borrower may save around Rs 1,17,104 overall on its existing EMI.

How a 25 basis point rate cut will impact your home and car loan

emi table

 

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