With the Finance Minister set to present Budget 2026 on February 1, homebuyers are keenly watching for measures that could impact affordability and financing. Personal finance experts say the focus should be on borrowing costs, tax incentives, and access to credit to help buyers plan their first or next home.
Homebuyers are seeking an increase in the existing ₹2 lakh cap on home loan interest deduction under Section 24 to at least ₹4–6 lakh, as this could help first-time buyers by improving access to scheme-linked benefits, increasing loan eligibility, offering tax incentives, and narrowing the affordability gap. Additionally, raising the affordable housing price cap to ₹75–85 lakh is expected to provide similar benefits for first-time buyers, say personal finance experts.
Aligning tax limits with inflation
“As we navigate the 2026 fiscal landscape, it has become increasingly clear that the ₹2 lakh ceiling under Section 24(b) is a fiscal antique from 2014 that no longer reflects the economic reality of modern India,” says Reran Robin, Principal Associate, B. Shanker Advocates.
The existing cap of ₹2 lakh on home loan interest deduction under Section 24 has begun to feel dated and more of a formality than a meaningful benefit. With sharp increases in property prices, home buyers are already stretching their budgets.
Also Read: Budget 2026 wishlist: Homebuyers urge government to cap affordable housing prices, impose penalties for project delays
“Raising this limit to around ₹4-6 lakh would offer realistic and much-needed relief by lowering the effective cost of borrowing and improving monthly cash flows. In turn, this could boost housing demand, support allied industries, and contribute positively to overall macro-economic growth,” says Ritika Nayyar, Partner, Singhania & Co.
“Second, home buyers are looking for policy support to make home loans more affordable and predictable, particularly for first-time buyers, through measures such as targeted interest subvention or EMI relief during the initial years of the loan,” says Raoul Kapoor, co-CEO, Andromeda.
The real estate sector has increasingly gravitated towards luxury housing, resulting in a widening gap for the middle class and first-time homebuyers. To correct this structural imbalance, Forum for People’s Collective Efforts (FPCE), a homebuyers’ body, has proposed the introduction of a subsidised interest scheme on home loans for allottees purchasing units in affordable or mid-segment housing projects, provided that the allottee services EMIs on time and there is no default on the part of the promoter.
Also Read: Budget 2026 expectations: Experts push for a housing credit passport to speed up home loan processing for homebuyers
Raising the affordable housing price cap
The share of sales in the ₹50 lakh housing units (affordable housing) segment has steadily declined from 54% in 2018 to 21% in 2025. Even as overall housing sales have remained stable, affordable housing sales have dropped 17% YoY in 2025. Homebuyers in this segment are most affected by affordability constraints driven by rising residential prices, lower disposable income, and limited access to formal credit.
Raising the affordable housing price cap to ₹75-85 lakh would be practical, aligned with current market realities, particularly in metro cities where land and construction costs have risen sharply.
“For homebuyers, especially first-time buyers, this improves access to scheme-linked benefits (where applicable), higher loan eligibility and tax benefits, helping reduce the affordability gap. From a lender’s perspective, it expands the reach of first-time homebuyers entering the formal credit system, improving credit penetration without adding any material risk,” says Atul Monga, CEO and co-founder, BASIC Home Loans.
Granting infrastructure or industry status
Granting industry or infrastructure status to the real estate sector can structurally reduce financing costs by improving access to long-term, lower-cost capital. “For homebuyers in the affordable segment, this translates into stable prices, faster project completion and lower credit risk. Reduced borrowing costs for developers ultimately get reflected in viable home loan rates and greater confidence among first-time buyers,” says Monga.
Tax exemptions to boost rental supply
While existing government support for Affordable Rental Housing Complexes (ARHCs) primarily targets urban migrants, there is a critical need to expand this focus. The upcoming budget presents an opportunity to incentivise rental housing for low-income populations who remain financially out of reach of homeownership.
Currently, a significant number of residential units priced under ₹50 lakh remain vacant; investors often leave these properties unoccupied because the prevailing low rental yields do not justify the cost of property management.
“The budget could introduce a 100% exemption for rental income up to ₹3 lakh for houses costing up to ₹50 lakh. This would incentivise investors to rent out properties and augment the supply of rental accommodation in the segment, which is the most impacted by the housing shortage,” says Gulam Zia, Senior Executive Director, Knight Frank India.
Easing of capital gains constraints
Under Section 54 of the Income Tax Act, long-term capital gains from the sale of a house can be reinvested in a new property to obtain an exemption. For under-construction properties, the new home must currently be completed within three years, but larger residential projects with extended timelines, even after RERA, often exceed this limit, preventing homebuyers from claiming exemptions.
“To mitigate this, we recommend that the completion timeline of under-construction properties be extended to five years instead of the existing three,” says Zia.
Additionally, the law requires a new property to be purchased within one year before or two years after selling the old house.
“The criteria should be relaxed to two years in the case of purchasing a new property before the sale of the existing one as well. It is much harder to find buyers for older properties due to limitations in bank financing and the oncoming supply, among other factors. This time extension will give sellers more time to look for better prices and not sell at discounts just to avail of the capital gains,” says Zia.
Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics