Union Budget 2026: What Homebuyers Expect on Tax Relief

Amid sales dipping owing to affordability pressure, India’s Middle Class requires more tax relief and higher incentives to invest in property.

At a time when housing affordability in India is under a great deal of stress, homebuyers in India will watch with anticipation as Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026-27 on February 1. The occasion provides the government with an opportunity to boost buyer sentiment for the real estate sector, the second-largest employment-generating sector in the country after agriculture.

Boosting consumer sentiment is highly crucial amid home sales showing declining quarter after quarter, as rising property costs make property acquisition near-impossible for India’s Middle Class.

That brings the question: What do homebuyers expect from the Union Budget 2026-27?

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Changes in the Old Tax Regime

Under the existing rules, a homebuyer can claim a deduction of up to INR 1.5 lakh on principal and INR 2 lakh on interest paid on their home loan under Section 80C and Section 24(b), respectively.

The limit of INR 1.5 lakh per annum under Section 80C has not been changed since 2014, and does not align with the ground realities of today. There is a strong case for increasing the cap under this section to INR 3 lakh. The threshold for deduction under Section 24(b) is also not aligned with current property prices, and experts believe it should be increased to INR 5 lakh per year.

Re-introducing provisions meant specially for first-time homebuyers — like Section 80EEA — will provide a further boost to buyer sentiment.

Tax Breaks for First-time Homebuyers under the New Tax Regime

India launched a new tax regime in 2021 to simplify the tax structure and reduce procedural complexities. Running in parallel with the old tax regime, the new one ensures more disposable income in the hands of taxpayers. However, because many tax deductions in the old tax regime have been eliminated to maintain a simpler structure, the new tax regime offers limited relief to homebuyers in India. This absence of sops on home loans seems a lot more aggravated in current times, when sky-high prices have made homeownership a distant dream for a large section of the population. This is especially true for first-time homebuyers, who struggle to invest in property despite rising incomes.

Provisions in the new regime must be made to incentivise home buying with lower home loan interest rates at a time when the share of affordable housing in sales is declining, impacting overall sales numbers.