On April 9, Sanjay Malhotra, the Governor of the Reserve Bank of India (RBI), made a significant announcement that is poised to impact borrowers across the country. The central bank has decided to lower the repo rate by 25 basis points, bringing it down to 6 percent immediately. This decision also marks a shift in the RBI’s stance from ‘neutral’ to ‘accommodative’, a move aimed at bolstering economic activity.

Implications of the RBI’s Repo Rate Cut

This repo rate reduction follows a similar decision made in February when the RBI cut interest rates for the first time in nearly five years. The previous reduction saw the rate drop from 6.5 percent to 6.25 percent. Now, with the current cut, borrowers could see a tangible decrease in their Equated Monthly Installments (EMIs).

• Potential Impact on EMIs: If banks pass on the rate cut to consumers, homeowners could see their monthly payments decrease significantly. This is particularly beneficial for those with home loans and personal loans.
• Expert Predictions: Financial analysts expect that banks might lower home loan interest rates to around 8 percent, providing substantial relief to borrowers.

Insights from Industry Leaders

Experts are optimistic about the positive repercussions of this repo rate cut. Umesh Gowda HA, the Founder-Chairman of Sanjeevini Group, shared his insights, stating that these consecutive rate cuts could invigorate the housing sector. He noted that as banks adjust their rates, many borrowers could benefit from falling rates below 8 percent.

Anil Rego, the Founder and Fund Manager at Right Horizons, emphasized that this decision could lower borrowing costs, enhance liquidity, and boost domestic demand as fiscal policies and improving rural conditions take shape.

Arvind Kapil, MD and CEO of Poonawalla Fincorp, believes that this rate reduction will positively influence the banking and financial services sectors, aligning with the broader objective of maintaining a robust economy.

Borrowers Can Expect More Relief

Industry experts see this decision as a chance for increased affordability in home loans. Boman Irani, President of CREDAI National, remarked that the repo rate reduction could lead to improved home loan affordability and stimulate demand, particularly in the mid-income and affordable housing segments.

Anshul Jain, CEO of Cushman & Wakefield, highlighted the significance of the RBI’s accommodative stance, suggesting that it sends a strong message of support for economic growth, which could enhance homebuyer sentiment in the mid-segment housing market.

The Future of Home Loans

Aman Sarin, Director and CEO of Anant Raj, expressed optimism that the rate cut would make home loans more accessible, particularly for those looking to invest in mid and premium homes. He anticipates further rate cuts in the future, which would enhance both affordability and eligibility for potential homeowners.

Udit Jain, Director of ONE Group Developers, echoed similar sentiments, suggesting that the move would make homeownership attractive across various segments, from affordable to luxury housing.

Samir Jasuja, Founder and CEO of PropEquity, noted that property prices have surged 50 percent since the pandemic, and these rate reductions will provide a much-needed cushion for home loan borrowers, encouraging those who have been hesitant to enter the market.

As the RBI implements these changes, the landscape for homebuyers looks increasingly favorable, paving the way for a more accessible housing market.