RBI repo rate hike to raise home loan EMIs, but housing demand likely to remain resilient
The RBI's 25 bps repo rate hike will increase home loan EMIs, but real estate experts predict housing demand will remain resilient during the festive season.
Home loan borrowers in India are bracing for a rise in their equated monthly instalments (EMIs) following the Reserve Bank of India's (RBI) decision to increase the repo rate by 25 basis points to 5.50 per cent on Wednesday. While the move is expected to push up borrowing costs for those with floating-rate loans, real estate industry experts believe the impact on overall housing demand will be limited due to strong buyer sentiment and the ongoing festive season.
The math behind the EMI increase
If banks decide to pass the full 25 basis point increase onto consumers, the financial impact on monthly budgets will be noticeable. To understand the scale, consider a standard home loan scenario:
- Loan Amount: Rs 50 lakh
- Tenure: 10 years
- Current Interest Rate: 8 per cent
- Current EMI: Approximately Rs 60,664
If the lending rate climbs by 25 basis points to 8.25 per cent, the new EMI would be roughly Rs 61,326. This represents an additional monthly burden of about Rs 662, which adds up to nearly Rs 7,944 over the course of a year.
This hike follows a period of easing, where the RBI had cumulatively reduced the repo rate by 125 basis points during 2025, bringing it down to 5.25 per cent before holding it steady through four consecutive reviews.
Industry experts predict resilient demand
Despite the rise in cost, leaders across the real estate sector remain optimistic that the residential market will hold its ground. They point toward the festive season and a deep-seated need for homeownership as primary cushions.
Anshuman Magazine, Chairman and CEO (India, South-East Asia, Middle East & Africa) at CBRE, noted that while borrowing costs will rise slightly, the sector is expected to hold up. He specifically highlighted that the mid and premium segments, where demand remains healthy, are likely to see only a measured impact. He added that the industry will be watching closely to see if this is a "calibrated move" or the start of a longer cycle of interest rate hikes.
Praveen Jain, President of NAREDCO, echoed this sentiment, stating that the rate hike must be viewed within the context of broader economic conditions. He emphasized that housing demand remains robust at present, supported by strong buyer sentiment and the long-term necessity of owning a home.
A long-term perspective for homebuyers
Shekhar Patel, President of CREDAI, reminded potential buyers that interest rates are only one piece of a much larger puzzle. Since a home loan is typically a commitment spanning at least 15 years, interest rates will naturally fluctuate up and down over that period.
While he acknowledged that higher costs might influence sales during the festive season, he maintained that the underlying demand for housing is fundamentally strong.
Vimal Nadar, National Director & Head of Research at Colliers India, suggested that the increase might lead to a more "nuanced and selective approach" among buyers. He noted that while near-term demand might soften, the strong underlying fundamentals of the Indian real estate sector should protect most asset classes. He specifically noted that price-sensitive categories might see the most careful decision-making from consumers.