Budget 2026: Homebuyers Seek 5 Key Home Loan Reforms from Finance Minister Nirmala Sitharaman
Union Budget 2026 Expectations — As the Union Budget 2026 approaches, homebuyers across India are looking to the government for meaningful reforms in home loan taxation and housing finance policies. Over the past two to three years, residential property prices have risen sharply due to higher construction costs, property inflation, and elevated interest rates. However, tax benefits linked to home loans have remained unchanged for a long time, reducing affordability for many aspiring homeowners.
Although 2025 brought some relief for borrowers—with the Reserve Bank of India cutting interest rates for the first time in nearly five years and reducing the repo rate from 6.5% to 5.25%—experts believe interest rate cuts alone are not enough. Homebuyers and industry stakeholders now expect the government to announce targeted reforms in Budget 2026 that can revive housing demand and boost confidence in the real estate sector.
Here are the five major home loan reforms that homebuyers are hoping for in Budget 2026.
1. Higher Tax Deduction on Home Loan Interest
One of the most prominent demands from homebuyers is an increase in the tax deduction limit on home loan interest under Section 24(b) of the Income Tax Act. Currently, self-occupied homeowners can claim a maximum deduction of ₹2 lakh per year on interest payments.
Real estate experts argue that this limit no longer reflects today’s property prices or loan sizes. Raoul Kapoor, Co-CEO of Andromeda Sales and Distribution, believes the deduction cap should be increased to at least ₹5 lakh annually. With rising home prices and larger loan amounts, the existing limit offers limited relief, especially to buyers in urban areas.
An enhanced interest deduction could significantly reduce the effective cost of home loans and encourage more people to invest in residential property.
2. Separate and Higher Limit for Principal Repayment
At present, the deduction on home loan principal repayment is available under Section 80C, which has an overall cap of ₹1.5 lakh. This limit also includes other popular investments such as provident fund contributions, life insurance premiums, and ELSS funds.
Experts suggest either creating a separate deduction limit of ₹2.5–3 lakh exclusively for home loan principal repayment or increasing the overall Section 80C limit. Such a move would provide meaningful tax relief, particularly to middle-class and first-time homebuyers purchasing homes in cities where prices are significantly higher.
3. Revival of Section 80EEA Benefits for First-Time Buyers
Another key expectation from Budget 2026 is the revival of tax benefits under Section 80EEA. This provision earlier allowed first-time homebuyers to claim an additional deduction of up to ₹50,000 on home loan interest payments. However, this benefit was discontinued in March 2022.
According to Vikram Singh, Executive Director at Urban Money, reinstating Section 80EEA would provide much-needed support to buyers in the affordable housing segment. He also emphasized that this benefit should be extended to taxpayers opting for the new income tax regime, which currently does not offer any home loan-related deductions.
4. Interest Subvention or EMI Relief in Initial Loan Years
To make home ownership more affordable, especially for young and first-time buyers, experts are also calling for interest subvention or EMI relief during the initial years of the loan. Early loan years are typically the most financially stressful, as EMIs are high while household expenses are still stabilizing.
Raoul Kapoor pointed out that targeted government support—such as reduced interest rates or partial EMI subsidies for the first few years—could ease financial pressure and encourage hesitant buyers to enter the market.
5. Higher Limits and Policy Support for Affordable Housing
Affordable housing remains a key priority area, but experts believe further steps are required to improve accessibility. Vikram Singh suggested expanding the scope of priority sector lending for housing, increasing loan limits for affordable housing projects, and encouraging banks to reduce processing fees and other charges.
Additionally, restarting stalled housing projects could provide major relief to buyers who are currently paying both EMIs and rent. Faster project completion would ease financial stress and restore trust in the housing market.
Why These Reforms Matter
Over the past few years, the total cost of buying a home has increased significantly, while income growth has not kept pace. At the same time, limited tax relief has added to the uncertainty faced by young families and first-time buyers. While interest rate cuts have helped to some extent, comprehensive tax and policy reforms are essential to restore affordability.
Industry experts believe that if these five reforms are addressed in Budget 2026, it could revive housing demand, strengthen buyer confidence, and give a much-needed boost to the real estate sector.
As expectations rise, all eyes are now on Finance Minister Nirmala Sitharaman to see whether Budget 2026 delivers the reforms homebuyers have been waiting for.
