Non-resident Indians (NRIs) with home loans in India may face higher equated monthly instalments (EMIs) after the Reserve Bank of India (RBI) raised the repo rate by 25 basis points to 5.50% on Wednesday.
The increase could push up borrowing costs for NRIs with floating-rate home loans if banks pass on the entire 25-basis-point hike to their lending rates.
The rate increase also raises an important question for NRIs planning to buy property in India: should they use more of their overseas savings for the down payment to reduce the loan burden, or retain those funds to maintain liquidity?
Should NRIs increase their home loan down payment?
Experts said NRIs should not make home loan decisions based solely on the prevailing interest rate. Instead, they should assess their overall financial position, including liquidity, income stability, investments and existing financial obligations in both India and their country of residence.
Hitesh Jain, Founder and CEO of Finomatic, said: “NRIs must balance the rising EMI burden against the opportunity cost of deploying their savings towards a larger down payment. While higher interest rates increase borrowing costs, market corrections may also create attractive long-term investment opportunities. Using excessive savings to reduce a home loan could mean sacrificing potentially higher investment returns.”
Finomatic is a fintech platform and AMFI-registered mutual fund distributor.
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