Annuj Goel, Chairman, Goel Ganga Developments
While the RBI’s 50 bps cut has been audacious and visually bold in terms of allowing savings for its lenders, the repo rate N/O is at 5.5%, so home loan borrowers can clearly save from the increase. This is how the product works, if you had a ₹50 lakh loan for 20 years, you could save somewhere in the neighbourhood of ₹1,960 off the monthly EMI or just under ₹4.7 lakh over the life of the loan. The corresponding change for its aggression is showing inflation under 4% for three months. So most will expect the interest rate cuts to draw n demand for homes and growth for the broader economy. The market transmission of the cut could be months and we all know because some lenders and lenders are quicker on the reaction, say based on the public sector Banks n employ Canara Bank and UCO Bank cut their’s first in at 7.75$, so you would get a view with some private banks who have not cut their rates and the benefit is also not present clean in the banks rates. So to either you or the clients you put with, there will be automatic changes to the EMIs if you hold ;your loan is a floating rate – recognition; so at least over the next three months you receive, say some timeliness toward being granted financial relief in terms of your overall cost of living load.
Aman Gupta, Director of RPS Group
While the RBI’s 50 bps cut will have an immediate impact on an EMI reduction, it is also opening doors of opportunity for homeowners to strategically reposition themselves. Borrowers with a ₹30 lakh loan of 20 years will see a decrease in their EMI of about ₹1,176 per month, and the best part is borrowers then have the choice they can either reduce their EMIs or as being discussed herein, retain their current EMI repayments to reduce the length of tenure and hence earn a greater interest saving. As outlined previously, both the State Bank of India and the Punjab National Bank passed on rate cuts of only 25 bps since April, after all have 36% of loans are considered and adjusted on the rates based on 4 months old MCLR (marginal cost of funds-based lending rate) values. For those considering refinancing with other banks it should also be considered if de-linking your variable rate loan from MCLR will automatically provide you with future benefit from the shift changes in the repo rate when it occurs? As the RBI is now signalling a neutral stance, it is unlikely PMI will increase any time soon; conversely, we can see how shifting monsoon patterns may impact inflation consideration going forward and ultimately limit windows for refinancing or transferring loan balance limitations.
Keshav Mangla, GM Business Development of Forteasia Realty
This important rate cut performs a dual role: allowing households to free up some spending power, as well as stimulating the real estate markets. A borrower with a ₹ 1 crore (loan) will receive a reduction in their EMIs of about ₹ 3,920. The additional ₹ 21,000 per year, will be used or stimulated in some sort discretionary spending. Industry experts are forecasting that buyers will return in droves to key areas: Noida and Mumbai, in particular, since the real estate values there were well above affordability for most people. Fixed-rate borrowers will not receive the benefits of the cut, while there are also no tax benefits available on home loans with the New Tax Regime. Borrowers with credit scores of 750 or more should also negotiate better terms or consider pre-payments like putting ₹ 5 lakh in a pre-payment after 5 years if the initial home loan was for ₹ 50 lakh which would mean that the lenders have to bear ₹ 11 lakh in interest. There is also room for more cuts, in 25 – 50 bps increments and this will be an important step towards making housing finance better to access seeing as the nature of the funding will be primarily through the banks.
LC Mittal, Director, Motia Builders Group
The RBI’s 50 bps rate cut provides relief but stretches a longer-term view. While a ₹75 lakh home loan means you could see your EMI reduced by ₹2,940 per month, the many borrowers will have to think of this as a short-term opportunity in an uncertain interest rate cycle. An aggressive interest rate cut accompanies increased inflation expectations. A future reversal could erase even a strong half year’s worth of cuts. Banks also have discretion in the transmission of the monetary policy change. The existing MCLR-linked loan (almost 40% of bank loan portfolios) base rate will lag behind the 4.0% for new repo rates, so traditional borrowers will benefit from policy action sooner than most. If you have fixed rate home loan as the first time buyer or branded housing developer, you will see nothing unless you eat the switching cost. It is also very hard to know if fixed rate borrowers had better communication skill or not! If you can spend time in making good use of the monthly EMI cash-flow savings by making accelerated repayments of your home loan principal – for a 20 year home loan – the average principal repayments are reduced by 3 years and interest cost savings can be estimated at ₹14 L. In the meantime if you are a buyer, negotiate with the lender on the various spread and margins aggressively. Even a 0.25% increase in squeeze negotiated from a lender work out to compound total savings over the whole loan tenure of ₹5.2 lakh. Excitingly, this cut also creates housing demand once again; albeit the discipline of making considered financial decisions is an absolute priority.
Impact on Fix Deposit
Anurag Goel, Director, Goel Ganga Developments
Due to the RBI holding the repo rate as is, it suggests interest rates will be unchanged in the medium term. Fixed Deposit investors ought to make the most of the current rates especially with longer term FDs before any downward revisions. Spreading deposits across various banks, including small finance banks which offer marginally better rates, will ensure maximum gains without much risk.
LC Mittal, Director, Motia Builders Group
What makes the most sense right now is adopting an FD laddering strategy where one places money in several different maturities with various timeframes. This increases liquidity while allowing the funds to be reinvested at higher rates in the future. Investors need to include returns adjusted for inflation along with income tax as fixed income investments while structuring their portfolio.
Overall Impact
Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara
The Reserve Bank of India (RBI) has changed its monetary policy stance to neutral to focus on trade and consumer confidence to get back to the central bank’s 4% inflation target without the inflation getting out of hand. The move includes cuts in the 50 bps repo rate and the slashing effect of February and April 25 bps cuts. We believe the repo rate would be further front-loading other monetary stimulus in 2025 with another cut of 100 bps to 5.5% with the emphasis on moving money and credit. The move will also require banks to know the full meaning of the cuts and being able to utilize those effectively.
Asma Javed, Head – leasing, Navraj Group
For the first time since COVID-19 wreaked havoc on the world’s economies, the Reserve Bank of India has made three consecutive cuts to the repo rate, indicating a significant turn toward growth resurgence. Governor Sanjay Malhotra left the FY26 GDP forecast gate at solid 6.5%, meaning the Reserve Bank anticipates the strength of India. Along with this, the inflation target was downgraded to 3.7% (downgraded from the 4%) due to anticipated benefits from the good monsoon. The dual benefit approach of the Reserve Bank of India in aggressively cutting rates while leaving growth expectations in tact, allows the new government to encourage increased investment while being confident of price stability. The Reserve Bank and the resultant cuts and interest rate cuts begun an earlier cycle in 2023, so to get out of the post-COVID-19 recovery phase without overheating the economy.
Lower rates trigger foreign outflows
Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara
A decline in interest rates decreases the returns on Indian debt instruments, such as bonds and fixed deposits, resulting in less appreciation by foreign institutional investors. Conversely, countries with higher interest payments become much more attractive. Often this leads to what is referred to as capital outflow, or the process of investors withdrawing funds from Indian markets and moving them elsewhere. The withdrawal of foreign funds leads to volatility in the equity and debt markets, and also reduces the overall liquidity in the Indian markets.
Aman Gupta, Director of RPS Group
When withdrawing funds from India, foreign institutional investors first sell the currency-denominated assets which results in the currency being traded to euros or dollars. This leads to an increase in the value of rupees from the currency exchange market and increase of demand for dollars or euros results in deficit rupee. Declining value of a currency increases the price of foreign goods, adds inflationary pressure to the economy, increases the current account gap, and creates the need for curbing the currency’s decline.
