Home prices have increased significantly over the past two to three years. However, tax benefits on home loans have not. Home buyers are demanding more tax breaks and changes to home loan regulations. This will increase interest in home purchases.
The year 2025 brought relief to home loan borrowers. After nearly five years, the RBI initiated a series of interest rate reductions, bringing the repo rate down from 6.5% to 5.25%. Many believe the government will introduce housing loan reforms in the Union Budget 2026 to benefit homebuyers. This will increase home buying interest and boost confidence in the real estate sector. Home prices have risen significantly in the past two to three years.
Higher deduction on housing loan interest payment
Home buyers want more tax breaks and changes in home loan rules. They also want changes in the old deduction rules under the Income Tax Act. Raoul Kapoor, Co-CEO of Andromeda Sales and Distribution, said, “The interest deduction limit under Section 24(b) needs to be increased from Rs 2 lakh to Rs 5 lakh annually. This is because it does not match the prices and sizes of properties today.”
Separate limit for deduction on principal repayment
He also suggested increasing the limit for principal repayment to Rs 2.5-3 lakh separately or the total limit under Section 80C to Rs 1.5 lakh. This will greatly benefit home buyers in cities. Tax benefits on housing loans are currently available only under the old income tax regime. There are no benefits on home loans under the new income tax regime. Vikram Singh, Executive Director of Urban Money, said, “Many deductions were decided long ago, when property prices and line sizes were much lower. These need to be changed to provide inflation-adjusted relief.”
Reintroduce tax benefits under section 80EEA
Under Section 80EEA, first-time homebuyers used to be eligible for a deduction of Rs 50,000 on home loan interest payments. This deduction was discontinued in March 2022. Singh said, “It is important to reinstate the benefits of Section 80EEA. This provides additional tax deductions to first-time homebuyers in the lower-priced segment. These benefits should also be available in the new income tax regime.”
Interest subsidy or EMI relief in the initial years
Kapoor said, “Home buyers want policy support to make home loans more affordable. First-time home buyers, in particular, expect this from the government. They want interest subsidy or EMI relief in the initial years of the loan.”
Limit for affordable housing should be increased
Singh said, “Housing finance needs to be made cheaper and more affordable.” He added that priority sector classification could be expanded, loan limits for affordable housing could be increased, and banks could be incentivized to reduce fees to reduce costs. Resuming work on stalled projects would also ease the financial burden on buyers. Currently, they are paying rent in addition to EMIs.
Over the past few years, rising construction costs, property inflation, and high interest rates have impacted people’s interest in home purchases. Kapoor said that while the overall cost of home purchases has risen significantly, people’s incomes haven’t increased in the same proportion. Low tax relief creates uncertainty for young families.
The post Budget 2026: Home buyers want these 5 home loan reforms from Finance Minister Nirmala Sitharaman first appeared on informalnewz.
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