5 housing loan changes homebuyers are expecting from Budget 2026

Home buyers want policy support to make home loans more affordable, especially for first-time buyers.

The year 2025 has provided relief to home-loan borrowers, as the Reserve Bank of India (RBI) initiates a rate-cut cycle after nearly five years, reducing the repo rate from 6.5 percent to 5.25 percent.

As the government prepares for Union Budget 2026, home buyers hope for reforms in housing loans to improve affordability and boost confidence in the sector, which is struggling with rising prices.

Need for higher tax exemptions

Home buyers are want enhancements in tax incentives and structural lending tweaks.

Budget 2026 Live Updates: Nirmala Sitharaman’s Budget speech today

One of the key demand is to revise "outdated deductions" under the Income Tax Act. Raoul Kapoor, Co-CEO of Andromeda Sales and Distribution, said raising the interest deduction limit under Section 24(b) from Rs 2 lakh to at least Rs 5 lakh annually, noting it "does not reflect today’s property prices or loan sizes" .

He also called for a separate Rs 2.5–3 lakh cap for principal repayment or an overall hike in Section 80C’s Rs 1.5 lakh limit to aid genuine end-users in urban markets. Housing loan benefits are currently limited to the old tax regime; the new tax regime doesn't offer these perks.

Vikram Singh, executive director, Urban Money, said, “Many deductions were designed when property prices and loan sizes were materially lower, underscoring the need for inflation-adjusted relief.”

'Being back Section 80EEA'

Section 80EEA offered first-time homebuyers a deduction of up to Rs 50,000 on the interest paid on home loans. This was discontinued after March 2022.

“Reinstating benefits under section 80EEA, which provides additional tax deductions for first-time home buyers in the affordable housing segment, is a key expectation and extending them to the new tax regime,” said Singh. This move could encourage more people to invest in affordable housing.

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Policy support

"Home buyers want policy support to make home loans more affordable, especially for first-time buyers. They’re looking for measures like interest subvention or EMI relief in the loan’s early years," Kapoor said.

Other reforms and measures

"Reforms are needed to make housing finance cheaper and more accessible," Singh said. He suggested measures such as expanding priority-sector classification, higher loan limits for affordable housing, incentives for lenders to offer lower EMIs, and reducing fees to lower costs. Support to clear stalled projects would also help buyers avoid dual financial burdens (EMI + rent).

These changes will bring tangible relief and empowerment. Higher deductions would boost disposable income, ease early-year pressures and enabling larger loans without tax penalties. "This gives buyers confidence to plan long-term, whether it’s children’s education, savings, or overall financial security," Kapoor said.

Singh called or wider access to affordable credit and resolving stalled projects to reduce disputes. He also favours tailored products with longer tenures and capped fees to make home loans more transparent and predictable.

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The imperative for change

These reforms address a housing landscape strained by multiple headwinds. Over recent years, escalating construction costs, property inflation, and elevated interest rates have eroded affordability, even as incomes lag. “Incomes haven’t kept up with rising home ownership costs, and insufficient tax relief adds to uncertainty for young families,” Kapoor said.

“Stressed projects trap buyers in legal woes, amplifying financial distress,” said Singh.

These borrower-friendly moves will "improve affordability and access", making home ownership aspirational rather than a burden, say experts.