RBI Rate Cut: Affordable Housing Buyers See EMIs Drop, FD Returns Fall
Affordable housing buyers get relief after RBI slashes repo rate. Depositors may see lower interest on term deposits across banks.
image for illustrative purpose
The people taking out new house loans and existing ones in addition to auto loans, are the ones who will definitely benefit from the latest cut in the policy rate announced by the Reserve Bank of India. On the other hand, it's the fixed deposit holders and retirees who will suffer a little since the interest rates on fixed deposits continue to go down.
The RBI's decision, which is part of the total 1% reduction in the repo rate between February and October, has already been reflected in the bank lending rates. The scheduled commercial banks have stated that the weighted average lending rate has gone down by 0.69% for new rupee loans and by 0.63% for the outstanding loans. The average domestic term deposit rate for new deposits has dropped by 1.05% while it has gone down by 0.32% in the existing deposits. Currently, the State Bank of India is paying 6.25% on a one-year deposit. An extra 0.5% is given to the elderly.
It is up to the individual banks to decide how quickly the repo rate cut will be passed on to customers in the form of reduced EMIs and altered interest rates on term deposits. Borrowers for home and auto loans may experience the changes in the next weeks depending on each bank's respective financial situation.
According to real estate experts, the drop in rates will affect mainly the first-time buyers in the affordable segment of the housing market, who had to put their purchases on hold because of the escalating prices of the properties.
"Average property prices across the top seven cities in the country have increased by 10% in 2025. The rate cut is a major relief for the affordability issue," commented Anuj Puri, Chairman of Anarock Group.
Chief Economist of JLL, Samantak Das, voiced a similar opinion stating that the policy change could entice first-time and mid-market buyers who have so far been patient. "This decision could turn the reluctant buyer into the active one in the housing market," he remarked.
Sushil Mohta, president of Credai Bengal and chairman of Merlin Group, stated that West Bengal market, which is completely controlled by affordable housing, would have a positive reaction.
The lending rate cut will result in quick EMI reduction for borrowers because of the large acceptance of loans linked to external benchmarks. The analysts expect that the action will not only trigger demand in the largest metropolitan areas but will also increase housing activity in smaller cities and towns.
