RBI repo rate hike to raise home loan EMIs, but housing demand likely to remain resilient

The rate hike could increase borrowing costs for homebuyers with floating-rate loans if banks transmit the full 25 basis point increase to their lending rates.

For instance, on a Rs 50 lakh home loan for 10 years at an interest rate of 8 per cent, the monthly EMI is around Rs 60,664. If the lending rate rises by 25 basis points to 8.25 per cent, the EMI would increase to around Rs 61,326, translating into an increase of about Rs 662 per month or nearly Rs 7,944 annually.

The latest rate increase comes after the RBI had reduced the repo rate by a cumulative 125 basis points during 2025 to 5.25 per cent and subsequently kept it unchanged through four consecutive policy reviews.

While the latest hike is expected to put some pressure on home loan affordability, industry leaders said strong buyer sentiment, festive demand and underlying housing demand are likely to cushion the immediate impact on the residential real estate market.

Anshuman Magazine, Chairman and CEO - India, South-East Asia, Middle East & Africa, CBRE, said the impact on housing demand is expected to remain measured, particularly in the mid and premium segments, where underlying demand remains healthy.

"A 25 basis point increase in the repo rate will push borrowing costs up a little, but we expect the sector to hold up," Magazine said.

He added that the trajectory of inflation and interest rates would remain important for the sector, particularly whether the latest increase remains a calibrated move rather than the beginning of a prolonged tightening cycle.

Praveen Jain, President, NAREDCO, said the festive season remains an important period for the real estate sector and housing demand continues to be strong.

"The 25 bps increase in the repo rate should be viewed in the context of the broader economic conditions. Housing demand remains strong at present," Jain said, adding that strong buyer sentiment, festive demand and the long-term need for homeownership are expected to limit the impact on the residential market.

Shekhar Patel, President, CREDAI, said, "We are also entering the festive season, which is an important period for the housing market, and the increase in borrowing costs could have some impact on sales during this period, although the underlying demand for housing remains strong. At the same time, we should understand that for a homebuyer, the interest rate at any particular point is only one part of a much longer decision. A home loan is generally a commitment of at least 15 years. During that period, there will be times when rates go up and times when they come down."

Vimal Nadar, National Director & Head of Research, Colliers India said, For the real estate sector, although the increase in benchmark lending rate may soften near-term demand, the sectors strong underlying fundamentals should help cushion the impact across most asset classes in India. In case of residential segment, rise in borrowing costs is likely to drive homebuyers to adopt a nuanced & selective approach in their purchase decisions, particularly in price-sensitive categories".

The latest repo rate hike, therefore, is set to increase borrowing costs for floating-rate home loan borrowers, but real estate industry leaders expect resilient buyer sentiment and sustained demand across key housing segments to limit the immediate impact on residential sales. (ANI)