Budget 2025: Will FM Hike Tax Exemption Limit On Home Loans To Rs 5 Lakh? Here's What Real Estate Expects

Budget 2025: Real estate sector expects reforms that could benefit both developers and homebuyers in the upcoming Union Budget for FY26 which will be presented by Finance Minister Nirmala Sitharaman on February 1. For developers, there is a desire of reduction in GST rates on construction materials like steel and cement among others. Additionally, incentives to green building is also expected to drive the sector. Further, for homebuyers, one of the most expected reform is the increase of tax deduction limit in home loan interest rates to Rs 5 lakh from current Rs 2 lakh.

Kirthi Chilukuri, Founder & MD of Stonecraft Group said, "from Budget 2025, we seek a balanced approach that benefits both developers and buyers. Recognizing real estate as an industry would unlock access to affordable funding, streamline approvals, and attract investments, driving economic growth."

Chilukuri believes easing the GST burden on developers and reviving the Credit Linked Subsidy Scheme (CLSS) for first-time homebuyers could stabilize property prices and boost the housing market. Revising the home loan interest deduction under Section 24(b) to ₹5 lakh and revisiting capital gains taxation would enhance liquidity across segments, benefiting all stakeholders. Prioritizing urban infrastructure investment and offering incentives for green building adoption can create sustainable, livable cities while aligning with national climate goals.

Currently, there is tax deduction on principal payment on home loans up to Rs 1.5 lakh under section 80C offered. Further, Rs 2 lakh tax exemption is allowed under section 24B on interest paid on home loans. Also, up to Rs 2 lakh exemption each is allowed to joint borrowers who are co-borrowers on housing loans.

Along the similar lines, Vivek Singhal, CEO, Smartworld Developers said, "As the Union Budget 2025-26 approaches, the real estate sector remains hopeful for forward-looking reforms that can amplify growth and reinforce its role in India's economic progression. Increasing the tax deduction limit for housing loan interest under Section 24(b) to ₹5 lakh would align with the rising aspirations of homebuyers while addressing evolving market conditions. Similarly, introducing a single-window clearance mechanism could streamline processes, expediting project approvals and enhancing operational efficiency."

On the sector, Singhal added, granting 'industry status' to real estate is another vital step that would unlock greater access to institutional capital, stimulating growth across the entire value chain, including over 200 interdependent industries. The rationalization of GST rates and an optimized input tax credit framework for construction materials are equally crucial to mitigate costs and maintain the competitiveness of premium projects.

Singhal also encouraged strategic incentives to boost investments in advanced infrastructure, laying the foundation for India's transformation into a global hub for luxury living and modern urban development. These progressive measures, supported by the positive momentum from last year's budget, would establish real estate as a cornerstone in achieving India's vision of becoming a developed economy by 2047.

Meanwhile, Rahul Singla, Director, Mapsko Group expects reduction in GST rates on construction materials to be a key booster for the sector.

Singla added, Budget 2025 to address key challenges in the real estate sector, a crucial driver of economic growth and employment. Granting industry status to real estate would streamline access to funding and attract investments, bolstering the sector's growth. He said, "Measures like reducing GST on construction materials such as steel and cement can help curb rising costs for developers and buyers. A single-window clearance system is essential to eliminate project delays and cost escalations. To enhance liquidity, relaxed financing norms and credit support for stalled projects are critical to restoring buyer confidence. Incentives for green building initiatives can encourage sustainable practices, while investments in infrastructure across tier-2 and tier-3 cities can promote regional growth and improve housing access. These steps can transform the sector and fulfil aspirations for homeownership."