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Now, as we look ahead to 2025, experts are optimistic about the future of the sector, with some expecting key developments that could impact borrowers.
A resilient year for home loans in 2024
Abhishek Tharwani, Director at Tharwani Realty, attributes the home loan demand to urbanisation and the rise of nuclear families.
“Urban migration and greater mobility meant people were more inclined to invest in homes, especially in established residential areas,” he says.
Pushpamitra Das, Founder & Director of Justo, points out that government initiatives, particularly the Pradhan Mantri Awas Yojana (PMAY), played a crucial role in boosting the affordable housing sector.
Moreover, the Reserve Bank of India’s (RBI) cautious approach in 2024, with the repo rate largely unchanged throughout the year, helped maintain stability in home loan interest rates.
According to Goonmeet Singh Chauhan, Founding Partner at Design Forum International, this stability allowed borrowers to better plan their finances.
“Stable repo rates meant borrowers could anticipate fixed EMIs, reducing uncertainty,” Chauhan explains.
A look at current home loan rates in India:
| Banks | Starting Interest Rate (p.a.) |
| Kotak Mahindra Bank | 8.75% p.a. onwards |
| Union Bank of India | 8.35% p.a. onwards |
| Bank of Baroda | 8.40% p.a. onwards |
| Central Bank of India | 8.50% p.a. onwards |
| Bank of India | 8.40% p.a. onwards |
| State Bank of India | 8.50% p.a. onwards |
| HDFC Home Loans | 8.75% p.a. onwards |
| LIC Housing Finance | 8.50% p.a. onwards |
| Axis Bank | 8.75% p.a. onwards |
| Canara Bank | 8.40% p.a. onwards |
| Punjab and Sind Bank | 8.50% p.a. onwards |
(Source: Bankbazaar)
The impact of interest rates and economic conditions
While 2024 was marked by a relatively stable interest rate environment, the higher repo rates earlier in the year did put pressure on home loan borrowers.
From May 2022 to October 2024, RBI’s cumulative policy repo rate hikes amounted to 250 basis points (bps), which led to an increase in the weighted average lending rates (WALRs) on new and outstanding loans.
Data from RBI showed that the WALR for fresh loans rose by 203 bps, while for outstanding loans, it increased by 118 bps.
This rise in lending rates directly impacted home loan EMIs,
making it more expensive for borrowers, particularly those on tight budgets.
Despite these challenges, Tharwani suggests that higher-income groups were less affected by rate hikes.
“The mid-to-premium housing segment remained largely unaffected due to higher purchasing power. However, first-time buyers, particularly in the affordable housing market, felt the pressure of rising rates,” he notes.
The shift in financing preferences
According to a recent Knight Frank report, ‘Banking on Bricks,’ home loans have remained the most preferred financing option across all income groups, with 79% of respondents opting for this route.
However, there is a significant variation in how different income groups approach funding. For households earning between ₹10-50 lakh, 83% preferred home loans.
In contrast, affluent buyers with household incomes above ₹50 million showed a higher inclination to utilise their savings or liquidate investments for home purchases — 19% compared to just 11% in the lower-income group.
This data suggests that while home loans are the most common financing option, wealthier individuals tend to diversify their funding approach, using their liquid assets for more flexibility.
What to expect in 2025: A rate cut on the horizon
As we look to 2025, experts believe that a rate cut could be key to reviving growth in the home loan sector.
In December 2024, when the Reserve Bank kept the repo rate unchanged for the 11th consecutive time, most real estate experts welcomed the move, viewing it as a sign of stability.
However, many also believe that a rate cut is necessary to further boost demand.
Tharwani predicts that demand for homes will continue to rise, especially in urban areas with strong infrastructure development.
“Affordable housing will remain a major driver, and government schemes will continue to support this growth,” he adds.
Similarly, Das expects that a rate cut of 50-100 basis points (bps) could be on the horizon in 2025, which would bring immediate relief to homebuyers by lowering EMI burdens.
Additionally, with interest rates expected to stabilise, Das highlights the growing trend of sustainable housing, which is likely to gain traction in the coming year.
“In 2025, we expect a rise in the demand for energy-efficient and eco-friendly homes. Developers and lenders will need to offer tailored financing options to cater to this growing demand,” he says.
