5 Housing Loan Reforms Homebuyers Want from Union Budget 2026

• Homebuyers seek higher tax deductions on home loan interest and principal

• Demand grows for revival of Section 80EEA for first-time buyers

• Policy support expected to ease EMIs and improve housing affordability

As the government gears up for Union Budget 2026, homebuyers across India are pinning their hopes on meaningful housing loan reforms to counter rising property prices and stretched household budgets.

While 2025 brought some relief with the Reserve Bank of India cutting the repo rate from 6.5% to 5.25%, the first rate-cut cycle in nearly five years, experts say lower interest rates alone are not enough. Structural changes in taxation and lending policies are now being seen as critical to restoring affordability and confidence in the housing market.

Call for Higher Tax Deductions

One of the strongest demands from homebuyers is a revision of long-standing tax limits that many believe no longer reflect current realities.

Raoul Kapoor, Co-CEO of Andromeda Sales and Distribution, said the Section 24(b) interest deduction cap of Rs 2 lakh has become outdated given today’s property prices and loan sizes. He suggested increasing the limit to at least Rs 5 lakh annually.

There is also a push to enhance relief on principal repayment. Industry experts are calling for either a separate Rs 2.5–3 lakh cap for principal repayment or an overall increase in Section 80C’s Rs 1.5 lakh limit, particularly to support genuine end-users in urban markets.

Currently, these housing loan benefits are available only under the old tax regime, with the new regime offering no such incentives—another key concern for buyers.

Revival of Section 80EEA

Another major expectation from Budget 2026 is the return of Section 80EEA, which earlier allowed first-time homebuyers an additional Rs 50,000 deduction on home loan interest. The benefit was discontinued after March 2022.

Vikram Singh, Executive Director at Urban Money, said reinstating Section 80EEA—especially if extended to the new tax regime—could significantly boost demand in the affordable housing segment and encourage first-time buyers to enter the market.

Policy Support to Ease EMI Burden

Beyond tax relief, buyers are also seeking policy-driven support to reduce the financial strain of home loans, particularly in the initial years.

Kapoor noted that measures such as interest subvention schemes or EMI relief during the early loan tenure could make home ownership more accessible, especially for younger buyers and first-time borrowers.

Other Lending Reforms on the Wishlist

Experts believe broader reforms are needed to make housing finance cheaper and more transparent. Suggestions include expanding priority sector lending, increasing loan limits for affordable housing, lowering processing fees, and encouraging lenders to offer longer tenures with predictable EMIs.

Singh also highlighted the need to resolve stalled housing projects, which often force buyers to juggle both rent and EMIs, worsening financial stress and leading to disputes.

Why These Changes Matter

The push for reforms comes amid a challenging housing environment marked by rising construction costs, elevated property prices, and income growth failing to keep pace.

“Incomes have not matched the rising cost of home ownership, and limited tax relief only adds to uncertainty for young families,” Kapoor said. Singh added that stalled projects often trap buyers in prolonged legal and financial distress.

Industry voices agree that borrower-friendly measures in Budget 2026 could go a long way in restoring affordability, improving access to credit, and ensuring that owning a home remains an aspiration rather than a financial burden.