Good News for Homebuyers: RBI’s Repo Rate Cut to Ease Home Loan EMI Burden
In a move that brings cheer to borrowers, especially homebuyers, the Reserve Bank of India (RBI) has announced a surprising 50 basis point repo rate cut, reducing it from 6% to 5.5%. This unexpected double-dose rate cut, compared to the anticipated 25 bps, is expected to significantly lower EMIs for long-term loans, offering a welcome breather to existing and prospective homeowners.
The decision was made unanimously during the Monetary Policy Committee (MPC) meeting held from June 4 to 6, chaired by RBI Governor Sanjay Malhotra. The rate cut is seen as a proactive measure amidst easing inflation, steady consumption, and stable macroeconomic indicators.
Relief for Borrowers: Lower EMIs Ahead
With the new repo rate at 5.5%, banks are expected to pass on the benefit to consumers by reducing lending rates, particularly for housing loans. This could translate into meaningful EMI savings, enhancing affordability in the mid-income housing segment.
“A 50-bps reduction will improve affordability for homebuyers and boost developer confidence, especially in the low-to-mid segments,” said Piyush Bothra, Co-founder of Square Yards.
For Homebuyers: Why This Matters
- Lower EMIs mean more savings every month.
- Improved loan eligibility due to reduced interest burden.
- Boosted confidence in real estate investments.
- Developers likely to launch more affordable projects.
- Favorable time to invest in residential property, especially in mid-income segments.
Vimal Nadar of Colliers India echoed similar sentiments, stating that the move will “improve buyer sentiment, increase property enquiries, and lead to a pickup in sales across key urban markets.”
Liquidity Boost: CRR Cut to Release ₹2.5 Lakh Crore
In another major move, the RBI slashed the Cash Reserve Ratio (CRR) by 100 basis points, a move that will inject ₹2.5 lakh crore into the banking system. This will improve liquidity and support lending across sectors, including real estate.
The RBI also adjusted other key rates:
- Standing Deposit Facility (SDF): 5.25%
- Marginal Standing Facility (MSF): 5.75%
Inflation Eases, Economy on Strong Footing
Governor Malhotra noted that retail inflation has softened to 3.16% in April, down from 3.34% in March, well within the RBI’s comfort zone. The central bank revised its inflation projection for FY25 to 3.7%, from 4% earlier.
Despite a fragile global economy and downgraded trade projections, Malhotra assured that India remains resilient, with strong sectoral balance sheets and healthy consumption trends.
“India’s economy offers immense opportunities to both local and foreign investors. We are already growing fast, and we aim to grow even faster,” he emphasized.
Growth Outlook and Sectoral Momentum
The RBI retained the GDP growth projection at 6.5% for the current financial year, with quarterly forecasts as follows:
- Q1 (Apr–Jun): 2.9%
- Q2 (Jul–Sep): 3.4%
- Q3 (Oct–Dec): 3.9%
- Q4 (Jan–Mar): 4.4%
Positive signs include:
- Rise in discretionary spending
- Healthy private consumption
- Improving urban demand
- Steady rural demand
- Gradual pick-up in industrial activity
- Momentum in the services sector
Additionally, India’s foreign exchange reserves stand at $691 billion, sufficient to cover over 11 months of imports, reinforcing confidence in the economy’s macroeconomic stability.
