The Reserve Bank of India’s 25-basis-point repo rate hike is set to raise borrowing costs for home loan customers, with monthly EMIs increasing by about ₹307 on a ₹20 lakh loan, ₹460 on a ₹30 lakh loan and ₹767 on a ₹50 lakh loan, based on a 20-year tenure and an interest rate moving from 7.5% to 7.75%.
RBI Governor Sanjay Malhotra announced the increase after the three-day Monetary Policy Committee meeting on October 7, taking the repo rate from 5.25% to 5.50%. The hike is the first in nearly four years, according to the report, and comes after the policy rate was kept unchanged at 5.25% during the previous three meetings.
For a ₹20 lakh home loan at 7.5% interest over 20 years, the monthly EMI is calculated at ₹16,112. At 7.75%, the EMI rises to ₹16,419, increasing the monthly payment by ₹307. On a ₹30 lakh loan under the same assumptions, the EMI rises from ₹24,168 to ₹24,628, adding ₹460 a month.
Borrowers with a ₹50 lakh loan would see the monthly EMI increase from ₹40,280 to ₹41,047, or by ₹767. These calculations assume that the full 25-basis-point increase is passed on to the loan’s interest rate and that the repayment tenure remains unchanged. The report said the standard EMI calculation uses the loan amount, monthly interest rate and number of repayment months.
The impact will depend on how individual lenders transmit the policy change to borrowers. Home loans linked to floating or repo-linked rates are more directly exposed to changes in the central bank’s policy rate, while the effect on fixed-rate loans may differ according to their terms.
Atul Monga, co-founder and chief executive officer of Basic Home Loan, said the increase would cause a modest rise in EMIs and was unlikely to significantly affect long-term residential demand. He estimated that the EMI on a ₹50 lakh, 30-year loan could rise by ₹850-₹870 a month, with total interest increasing by about ₹3.1 lakh. He advised borrowers to consider increasing their EMI or making one additional EMI prepayment each year rather than extending the loan tenure.
Other experts cited in the report linked the rate decision to wider borrowing and business costs. Lakshmi Venkataraman Venkatesan, founder and managing trustee of the Bharatiya Yuva Shakti Trust, said higher rates could increase the working-capital and instalment burden on micro and small entrepreneurs. Naresh Biyani, founder and chief executive officer of Capwise Financial Services, said the policy shift towards calibrated tightening could affect smaller borrowers and suppliers through higher financing costs.
Real estate industry representatives said the immediate effect on housing demand could remain limited. Praveen Jain, chairman of NAREDCO, said strong festive demand would help support the residential market, while other developers cited in the report pointed to consumer confidence, infrastructure development and continued interest in quality housing. The RBI’s next policy actions and the extent to which banks pass on the increase will determine the subsequent effect on borrowers and the housing market.
