Union Budget 2026: Can tax relief on home loans revive homebuyer sentiment?

As India approaches the Union Budget 2026, the real estate sector is keenly awaiting policy signals that can reinforce buyer confidence and sustain housing-led economic momentum. Over the past few quarters, buyer behaviour has evolved, particularly in large urban markets such as the Mumbai Metropolitan Region (MMR). While demand in the mass and mid-income segments has remained measured, premium and luxury housing has continued to show resilience, driven by buyers who prioritise quality, design, location and long-term asset value.

High-net-worth individuals are increasingly viewing real estate not just as a stable investment avenue but also as a lifestyle choice. Against this backdrop, Budget 2026 is seen as an opportunity to introduce targeted fiscal and structural reforms that can unlock wider participation across housing segments and reinforce real estate’s role as a key economic multiplier.

One of the most pressing demands from the sector is a revision of home loan tax benefits to reflect today’s pricing and financing realities. Currently, the deduction on home loan interest for owner-occupied properties under Section 24(b) is capped at Rs 2 lakh per annum—a limit that has remained unchanged despite a sharp rise in urban property values and loan sizes.

Ayushi Ashar, Director, Ashar Group, said enhancing this limit is critical to reviving sentiment. “An increase in the Section 24(b) cap to ₹5 lakh would provide meaningful relief to homebuyers managing higher EMIs, improve effective affordability and act as a strong confidence booster for those deferring purchase decisions, especially in markets like MMR,” she said.

Echoing similar views, Atul Monga, Co-Founder and CEO of BASIC Home Loan, said tax reforms could directly improve affordability. “Increasing the deduction on home loan interest to ₹4 lakh, revising principal repayment limits under Sections 80C and 80EEA, and rationalising GST on construction materials such as cement and steel would help revive housing demand and support supply, particularly in affordable housing,” he said.

Affordable housing

Affordable housing remains another key area where policy recalibration is being sought. In metro regions, the current price cap of ₹45 lakh does not adequately reflect land costs or construction economics. Ashar pointed out that redefining affordable housing—either by raising the price threshold to ₹75–85 lakh in metros or shifting to an area-based definition—would allow more projects to qualify for incentives. A revival of Section 80-IBA to support developers could also significantly improve supply viability.

For first-time homebuyers, industry participants are calling for the restoration or expansion of credit-linked subsidy schemes, which can help convert aspirational demand into actual purchases. Proposals such as allowing joint income tax assessment for households are also being discussed, as they could improve loan eligibility and purchasing power for dual-income families.

GST rationalisation

GST rationalisation is another critical expectation, particularly for under-construction projects. Allowing input tax credit for developers could lower project costs, improve pricing transparency and support timely delivery, thereby boosting buyer confidence in new launches.

Monga noted that the broader macroeconomic context strengthens the case for housing-focused reforms. “Domestic demand remains resilient, inflation is under control and public capex continues to support growth. In this environment, home financing deserves policy attention. Predictable EMIs, clear tax benefits and easier access to credit matter far more to homebuyers than short-term rate movements,” he said.

Ultimately, the sector believes that well-calibrated tax and regulatory measures in Budget 2026 can revive genuine housing demand, strengthen credit growth and reinforce real estate’s role as a cornerstone of India’s domestic economic growth.