Budget 2025: What home-loan borrowers hope from the finance minister

India’s housing market has shown remarkable resilience and growth in recent years, driven by urbanization, infrastructure development, and rising aspirations for homeownership. 

However, persistent challenges such as high interest rates, affordability gaps, and liquidity constraints continue to affect borrowers. A few things can ensure targeted relief on the above and provide impetus to home ownership.

Enhanced tax benefits for home-loan borrowers

Tax incentives are the primary budgetary tool that promotes home ownership. Currently, borrowers can claim deductions of up to ₹2 lakh per year under Section 24(b) for interest paid on home loans. However, this limit has remained unchanged since 2014 despite rising property prices and loan sizes. 

The property prices, even in tier III and tier IV cities, have increased substantially due to rising input costs and land acquisition prices. 

A home loan of ₹50 lakh has an interest component of about ₹4.2 lakh annually for the first three years. The limit of ₹2 lakh as a deduction doesn’t have a significant impact on improving affordability. Keeping this in mind, there is a need to increase this limit from ₹2 lakh to ₹4 lakh. 

An additional deduction available on home loans is the deduction of principal repayment under Section 80C. However, salaried borrowers can’t leverage this sufficiently because of statutory PF contributions being part of 80C. Thereby, there is merit in either enhancing this limit or creating a separate limit where it is not clubbed with other investments.

Reinstatement of Section 80EEA

With the repo rate currently at 6.5%, borrowers face interest rates in the range of 8.5% to 9.5%, making EMIs a significant financial burden. High rates not only reduce affordability but also discourage potential buyers from entering the housing market. Section 80EEA offered first-time homebuyers an additional deduction on the interest paid on home loans. Given the current monetary stance, this can be temporarily reintroduced to reduce the burden of higher EMI outflow on borrowers.

Home-loan interest benefits under the new regime 

The Budget 2020 introduced a new regime under Section 115BAC, giving individuals and HUF taxpayers an option to pay income tax at lower rates with fewer exemptions and deductions to claim. However, the deduction for interest on housing loans under section 24 is not available. The inclusion of the same will help improve affordability for homebuyers.

Supply-side initiatives

Owing to the rising cost of construction and land acquisition, there is a lack of affordable housing in the major urban centres. To offset the rising costs of construction, several government measures can be introduced in the budget, such as transit-oriented development, goods and services tax (GST) rationalization, single-window clearance, and access to better finance.

Stamp duty reductions

Stamp duty constitutes a significant portion of homebuying costs, often deterring potential buyers. Currently, stamp duty rates vary across states, ranging from 5% to 7%. While stamp duty is a state subject, the central government can incentivize states to reduce rates temporarily or offer rebates for first-time buyers.

Home-loan borrowers are looking to this budget with optimism, hoping for relief that makes homeownership more achievable and sustainable in India’s evolving economic landscape. This year’s budget must focus on turning aspirations into realities, ensuring that owning a home is not just a dream but a tangible possibility for millions of Indians.

Also read: How to choose the right tenure for your rental agreement

Views are personal. 

Amit Diwan is the chief distribution officer-IMGC (India Mortgage Guarantee Corp. Pvt. Ltd.