The monetary policy committee of India’s central bank decided on a 50 basis point cut in policy rate to 5.5 per cent, RBI Governor Sanjay Malhotra announced on Friday morning. Ahead of the MPC decision, Indian equities traded in the red but recovered strongly, right after the announcement.
Indian benchmark equity indices had declined in early Friday trade ahead of the RBI monetary policy outcome, with the BSE Sensex falling more than 159 points to 81,282.11 and the NSE Nifty shedding over 27 points to 24,723.25.
RBI Governor Malhotra announcing a 50bps repo rate cut, double that of the expected 25bps cut, triggered a recovery run, bringing the equities on level ground. A rally in the market followed, with the Sensex gaining 500 points in the first hour of the RBI announcement. Nifty jumped close to 170 points during the same time.
Apart from the key policy rate reduction, the MPC also announced a revision in the inflation outlook. The RBI now sees India’s inflation for FY 2026 at 3.7 per cent, lower than the earlier estimate of 4 per cent. India’s apex bank, however, retained the GDP growth forecast for the current fiscal year at 6.5 per cent but stated that geopolitical tensions and extreme weather could pose headwinds.
Malhotra stated that the MPC would now assess income data and chart out future policy accordingly.
The RBI Governor also stated that India’s forex reserves were at $691.5 billion, noting that it was “sufficient” to service import needs for more than 11 months.
What will happen to Home EMIs?
Let’s say you took ₹50 lakh home loan for 20 years at a floating 9 per cent rate of interest.
This means at the beginning of the year, your home loan EMI was at around ₹45,000. The 25bps cut in February and the 25bps cut in April itself would have brought your monthly EMI down to below ₹43,400.
This time, the rate cut is 50bps, and it could essentially bring your EMI down to under the ₹40,000 mark. Of course, if you have opted for a tenure change instead of a monthly instalment change with your bank, the months left on your EMI reduce—you get to pay off your loan faster.
The cut in EMI is quick if your loan is directly linked to the repo rate as an external benchmark. However, if it is linked to the marginal cost of funds-based lending rate or MCLR, then this change would come into effect only after your bank assesses its asset-liability conditions.
Welcome relief for middle-class home buyers
Real estate developers welcomed the RBI rate cut. “As affordable financing remains a key driver of demand in real estate, we welcome the RBI’s decision to cut the repo rate by 50 bps, thereby encouraging end-users to make purchase decisions. However, it is important that the benefits are passed on to borrowers immediately,” said Ramani Sastri, the Chairman and MD of Sterling Developers.
“While homebuyers will be able to secure home loans at lower rates, developers will benefit from low borrowing costs, thereby easing financing pressures. Overall, a rate cut would strengthen market confidence, infuse much-needed liquidity, and also act as a strong signal of policy support for the real estate sector and the broader economy, thereby encouraging investments. With sustained demand and softening home loan interest rates, the sector’s growth momentum will definitely accelerate further with continued policy support, firmly establishing the real estate sector as a key driver of the nation’s economic development,” Sastri added.
Lincoln Bennet Rodrigues, Chairman and Founder of Bennet & Bernard, however, stated that luxury homebuyers were typically not driven by EMIs, but the softening monetary policy signalled broader economic confidence.
“This sentiment plays a key role in high-ticket real estate investments, especially in markets like Goa, where lifestyle migration and legacy asset creation are driving demand. We expect renewed interest from NRIs, long-term investors, and domestic HNIs who are looking to diversify into tangible, inflation-resilient assets. Overall, a rate cut acts as a confidence marker, even if its direct impact on the luxury segment is limited,” said Rodrigues.
Shishir Baijal, Chairman and MD of Knight Frank India, pitched in, “With this cumulative 100 basis point cut in the policy interest rate, we expect rekindling of the lower segments as affordability will witness a meaningful improvement for such homebuyers.”
