Expected changes in interest rates, continued government support for affordable housing, and technological advancements in the loan process could provide much-needed relief to home loan borrowers in the coming year.
The Indian home loan segment has experienced some turmoil in recent years, due to rising interest rates, escalating property prices, and shifting economic dynamics. These factors have created significant challenges for homebuyers, particularly in the affordable housing segment. However, there is hope for a more favourable environment in 2025. Expected changes in interest rates, continued government support for affordable housing, and technological advancements in the loan process could provide much-needed relief to home loan borrowers in the New Year.
The Reserve Bank of India (RBI) raised interest rates by 250 basis points cumulatively between May 2022 and February 2023. This had an adverse impact on home loan borrowers because those who had taken loans saw a substantial hike in their EMIs which put a strain on their finances. Many borrowers had to extend their home loan tenure to keep the EMIs manageable.
The RBI paused the rate hike cycle in April 2023. In the last Monetary Policy Committee meeting on December 6, it kept the repo rate unchanged at 6.50 percent for the 11th consecutive time.
While inflation concerns may persist, there are signals that the RBI may potentially reduce the policy rates. In fact, some experts are predicting a 50-75 basis points reduction in repo rates in 2025, if food inflation moderates. This would directly translate into lower home loan interest rates, offering much-needed relief to borrowers who have faced the impact of rising EMIs in recent years.
If such rate cuts were to be announced, borrowers can expect some respite in their EMI payments and potentially better borrowing terms in the near future.
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