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.