RBI keeps repo rate unchanged: What homebuyers should know before buying a ₹1 crore home

If you are planning to buy a ₹1 cr home, you should evaluate affordability not only at prevailing loan rates, but also consider higher interest rate scenarios

Neha Kumari, a 34-year-old HR professional in Hyderabad, booked a ₹1 crore apartment with a 25% down payment and took a home loan for the remaining amount. While the EMI fits within her monthly budget, it leaves limited room for discretionary spending. She has maintained a small emergency fund and plans to restart her systematic investment plan (SIP) once initial moving and furnishing costs settle. Like many homebuyers, she is comfortable for now, especially since the RBI has decided to keep the repo rate unchanged today, but remains aware that any future rate hikes could tighten her cash flows.

Planning to buy a house? From a financial planning perspective, a commonly followed rule of thumb is to fund no more than 50–60% of the property value through a home loan (Photo for representational purposes only). (Pixabay)

With the RBI keeping the repo rate unchanged at 5.25% at the end of its three-day Monetary Policy Committee (MPC) meeting, home loan EMIs linked to the policy rate are expected to remain stable. If this stability makes you more confident about taking a home loan, it is important to assess affordability not only at current interest rates but also under higher-rate scenarios.

From a financial planning perspective, a commonly followed rule of thumb is to fund no more than 50–60% of the property value through a home loan. Equally crucial is to look beyond the headline price and factor in the total cost of ownership. For a ₹1 crore ready-to-move home, additional expenses such as brokerage (1–2%), interiors ( ₹10–20 lakh), and maintenance deposits can significantly push up the overall cost.

Think total cost, not just price

When buying a house, focus not on price but on the total cost of ownership. Additional expenses such as brokerage (1-2%), interiors ( ₹10-20 lakh), and maintenance deposits can add up quickly for a ready-to-move property.

“Verify title deed (30+ years chain), encumbrance certificate (no liens/loans), and all approvals (occupancy, completion). Check RERA registration for project details and builder track record,” says Madhupam Krishna, Securities and Exchange Board of India (Sebi) registered investment advisor (RIA) and chief planner, WealthWisher Financial Planner and Advisors.

Prioritise areas with metro/business hubs/infra growth for 10-15% annual appreciation. Luxury properties are often harder to sell.

Personally inspect construction quality, amenities, and resale liquidity. Avoid overpaying in saturated markets where yields lag (2-4%). In areas with too many similar homes, prices rise slowly, and rental returns stay low. Paying a premium there can lock your money into an asset that barely beats inflation, hurting long-term wealth.

How much should you really borrow?

From a financial planning perspective, a commonly recommended thumb rule is to fund no more than 50–60% of the property value through a home loan.

“For a ₹1 crore home, this would translate to a loan amount of ₹50–60 lakh. However, financial institutions typically offer home loans of up to 80–90% of the property value, depending on the borrower’s profile,” says Raoul Kapoor, co-CEO, Andromeda Sales and Distribution.

In reality, many homebuyers, especially first-time buyers, do not have an ideal down payment corpus of 40–50%. Most can arrange only about 20–25% of the property value upfront. In such cases, buyers may consider a higher loan component of 75–80%, provided the EMI remains manageable and does not exceed 40% of their monthly take-home income.

Buying a ₹1 crore home? Plan first

If you are planning to buy a ₹1 crore home and take a loan of ₹80 lakh at the prevailing interest rate of around 7.5% for a tenure of 20 years, the EMI would be approximately ₹64,500 per month, says Kapoor.

At an interest rate of 7.5%, the monthly EMI of about ₹64,500 translates into a minimum in-hand income of roughly ₹1.6 lakh. If rates rise to 8% and the EMI increases to around ₹66,800–67,000, the required monthly take-home moves closer to ₹1.7 lakh. This highlights how even small increases in interest rates materially raise the income buffer needed to comfortably service a large home loan.

New owners benefit from Section 24(b) interest deduction (up to ₹2 lakh/year for self-occupied) and Section 80C principal ( ₹1.5 lakh) on home loans, claimable in ITR if filing under the old tax regime.

Apart from ensuring EMI fits in <40% of income, factor family goals like education funding, and maintain a 6-12 months’ emergency fund. “Consult a tax expert if you are managing a down payment by selling MF or an equity portfolio,” says Krishna.

Home loans need an interest-rate cushion

With inflation risks still in play, future rate cuts remain uncertain, and the current pause could well mark the end of the easing cycle. “In this backdrop, anyone planning to buy a ₹1 crore home must evaluate affordability not only at prevailing loan rates, but also under higher interest rate scenarios,” says Shubham Gupta, CFA and co-founder of Growthvine Capital.

Consider a common scenario. You buy a ₹1 crore flat and fund 80% through a home loan, which means borrowing ₹80 lakh. At a 7.5% interest rate for a 20-year tenure, the monthly EMI works out to roughly ₹64,500. On paper, that may seem manageable.

“But home loans are long-term commitments, and interest rates don’t stay still forever. If your loan rate increases by 1% to 8.5% the EMI on the same ₹80 lakh loan rises to about ₹69,000. That is an additional ₹4,500 every month. If rates go up by 2% to 9.5%, the EMI climbs close to ₹74,500, meaning nearly ₹10,000 extra per month,” says Gupta.

Over a year, that higher EMI translates into an additional outflow of more than ₹1 lakh, even without any change in lifestyle expenses or family responsibilities.

“Your finances should stay comfortable even if interest rates go up by 1–2%. Buying a home should not force you to stop your main investments or damage your long-term financial goals,” says Prashant Mishra, founder and CEO, Agnam Advisors.

Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics