The Reserve Bank of India (RBI) on Friday cut the repo rate by 25 basis points (bps) to 5.25%. The monetary policy committee (MPC), the central bank’s rate-setting panel, unanimously voted to reduce the policy rate and also continue with “neutral stance”.
With this 25 bps cut, the central bank has reduced the key rate at which it lends to commercial banks for the fourth time in 2025. Overall, the repo rate has been cut by 125 bps this year. Any change in this rate directly impacts loan EMIs and bank deposit rates.
The RBI rate cut decision comes at a time when the economy is showing strong signals, with GDP clocking an 8-quarter high growth rate of 8.2% in Q2 2025-26 and retail inflation easing to 0.25% in October.
Impact on home loan borrowers
For home loan borrowers hoping for EMI relief, today’s announcement will see some reduction in monthly instalments. Since banks link home loan rates to the repo rate through external benchmark lending rates (EBLR), a rate cut would bring relief right away.
Here’s a table showing the impact of the cumulative 125 bps cut on home loan EMIs (assuming loan amount of Rs 50 lakh).
| Parameter | Original Loan | Lower Rate, Lower EMI | Lower Rate, Same EMI, Lower Tenor |
| Loan | ₹ 50,00,000.00 | ₹ 50,00,000.00 | ₹ 50,00,000.00 |
| Tenor (months) | 240 | 240 | 198 |
| Rate | 8.50% | 7.25% | 7.25% |
| EMI | ₹ 43,391.16 | ₹ 39,518.80 | ₹ 43,391.16 |
| Total Interest | ₹ 54,13,878.80 | ₹ 44,84,511.82 | ₹ 35,81,830.37 |
| Interest Saved | ₹ 0.00 | ₹ 9,29,366.98 | ₹ 18,32,048.43 |
| EMI Saved | ₹ 0.00 | ₹ 3,872.36 | ₹ 0.00 |
| Tenor Reduced | 0 | 0 | 42 months |
A saving of Rs 9.29 lakh on Rs 50 lakh home loan in 20 years
A cumulative 125-basis-point (bps) cut in the repo rate can make a significant difference to long-term home loan costs, as the table shows.
For a Rs 50 lakh loan taken for 20 years, a reduction in the interest rate from 8.5% to 7.25% brings down the EMI by nearly Rs 3,900 if the borrower chooses to keep the loan tenure unchanged.
This option alone helps save more than Rs 9.29 lakh in total interest over the full loan period. However, the bigger savings come when the borrower keeps the EMI the same as before and instead opts to reduce the tenure. In this scenario, the loan gets closed 42 months earlier, resulting in a massive interest saving of over Rs 18.32 lakh.
The comparison clearly highlights how even a moderate reduction in interest rates can substantially ease EMI burden or dramatically cut long-term interest outgo—depending on how borrowers choose to restructure their loans.
‘New borrowers gain from lower starting EMIs’
Adhil Shetty, CEO, BankBazaar, says that the cumulative 125 basis point reduction this year has already eased home loan rates and improved affordability.
“For a Rs 50 lakh loan over 20 years, the fall in rates can trim lifetime interest outgo by approximately Rs 9 lakh. New borrowers gain from lower starting EMIs, while existing borrowers can accelerate savings by holding EMIs steady and using the lower rate to shorten their loan tenure. Given that a home loan is usually the single largest liability for most households, this phase is an opportunity to restructure debt and bring long-term commitments under tighter control,” he added.
Here’s what realty sector says
B.K. Malagi, Vice Chairman, Experion Developers says, “The real estate sector welcomes the announcement by the RBI reducing the repo rate by 25 bps. Effectively, it brings down the current lending rate to 5.25%, which is the lowest in the last three years and will encourage new home buyers. Real estate developers will also benefit from the lower interest rates.”
Gautam Kanodia, Founder, KREEVA and Kanodia Group says, “The RBI’s move to cut repo rate by 25bps and bring it to 5.25% is in line with the sector’s expectations. The decision comes as a timely move aimed at stabilizing the economy in the coming year. This significant cut is expected to directly benefit the real estate sector by lowering home loan interest rates, thereby making homeownership more accessible.”
