Union Budget 2026 could reset housing finance to boost affordability

As India pushes for sustainable urban growth, the Union Budget 2026 is being seen as a crucial opportunity to address persistent gaps in housing finance. With outstanding home loans crossing ₹27 lakh crore, according to RBI data, industry experts are calling for targeted reforms to improve affordability, transparency, and borrower protection amid rising property prices and financial strain on households.

Real estate and finance professionals say buyer-centric policy changes could ease the path to homeownership at a time when EMIs often consume over 40% of household income.

Calls for higher tax benefits and revival of subsidies

Atul Monga, CEO and Co-Founder of BASIC Home Loan, has proposed raising the home loan interest deduction limit under Section 24(b) from ₹2 lakh to ₹5 lakh. He also recommends a separate and higher cap for principal repayment under Section 80C so that home loan repayments do not compete with other tax-saving instruments.

“These reforms are necessary because affordability has steadily declined, while tax benefits have remained unchanged,” Monga said, noting that property prices in many markets have risen nearly 30% in recent years.

According to industry estimates, enhanced deductions could reduce annual outflows by ₹40,000–₹75,000 for borrowers. Monga has also urged the government to revive the Credit Linked Subsidy Scheme (CLSS) under Pradhan Mantri Awas Yojana (PMAY) for mid-income groups, which could lower effective interest rates by 1–2% and generate savings of ₹3–₹5 lakh over the loan tenure.

Simplifying loan portability to cut borrowing costs

Sandeep Mangla, Managing Director of Forteasia Realty, highlighted the need for no-cost and simplified home loan portability. He said current balance transfer procedures are complex and expensive, discouraging borrowers from refinancing despite high interest rates.

With housing loans now exceeding ₹27 lakh crore, Mangla said seamless digital balance transfers with faster processing and regulated fees would encourage competition among lenders and allow borrowers to switch to better terms without financial friction.

“A simplified portability framework would help borrowers save on interest and regain flexibility in managing their loans,” he said.

Linking loan disbursements to construction progress

Project delays continue to burden homebuyers, many of whom pay EMIs while waiting for possession. Anurag Goel, Director at Goel Ganga Developments, has recommended linking loan disbursements strictly to verified construction milestones using RERA-mandated escrow mechanisms.

Government and National Housing Bank data show a large share of housing loans is disbursed for under-construction properties, yet delays remain common. “Many buyers begin paying EMIs long before possession, leading to the double burden of rent and loan repayments,” Goel said.

He suggested Budget 2026 introduce policies ensuring funds are released only in line with verified construction activity, which could reduce interim financial stress and improve accountability.

Push for standardized loan disclosures

With home loan volumes having expanded by nearly ₹10 lakh crore over the past two years, concerns over opaque loan terms and hidden charges have also intensified. Pramod Kumar Gupta, Director at Kadamshree Developers India LLP, has called for mandatory, standardized loan disclosures.

Clear and uniform communication of loan terms, he said, would reduce borrower risk, strengthen confidence, and support long-term stability in the housing finance system.

If implemented, these measures could significantly reshape housing finance by aligning lending practices with buyer interests. Industry stakeholders believe Budget 2026 has the potential not only to reform housing loans but also to advance more equitable and sustainable urban living.