Budget 2025: Will home loan relief become a reality? Experts weigh in

Owning a home remains a cherished dream for millions of Indians. However, with property prices escalating, this dream often feels out of reach without loans that impose a long-term financial burden on families. As the Union Budget 2025 approaches, many home loan borrowers are hopeful for policies that could make housing more affordable.

 

Budget 2025 expectations: Home loan burden

 

"The affordability of home loans depends heavily on fiscal policies and potential relief measures in Budget 2025," said Ketan Mukhija, Senior Partner at Burgeon Law.

 

Mukhija added that raising the tax deduction limit for home loan interest under Section 24(b) of the Income Tax Act, currently capped at Rs 2 lakh, to Rs 3 lakh could offer significant relief. "Such a change would be especially impactful for middle-class families grappling with rising property costs in urban centres. Additionally, extending direct subsidies under schemes like Pradhan Mantri Awas Yojana (PMAY) for first-time homebuyers could reduce financial strain," he explained.

 

He also noted that a reduction in repo rates by the Reserve Bank of India (RBI) could lower home loan interest rates, bringing down monthly EMIs. "However, this depends on inflation trends and broader economic stability. While global pressures persist, a major repo rate cut in 2025 appears uncertain," Mukhija said.

 

Tax benefits and GST rationalisation

 

Animesh Hardia, Senior Vice President of Quantitative Research at 1 Finance, highlighted key areas where Budget 2025 could help. "Increasing the Section 80C limit beyond Rs 1.5 lakh and raising the Section 24 exemption for home loan interest would directly benefit borrowers. However, given the government’s focus on the New Tax Regime, major changes under the Old Tax Regime seem unlikely," he said.

 

Hardia also pointed to GST-related measures. "Reducing the 18% GST on home loan insurance, lowering GST rates on construction materials like cement (currently at 28%) and steel (18%), or removing GST on residential property purchases altogether would make housing more affordable," he explained.

 

On monetary policy, Hardia said a 50-75 basis point reduction in the repo rate by the RBI could lower interest rates for borrowers. "This would allow families to either reduce their EMIs or shorten loan tenures, providing much-needed financial relief."

 

Industry voices call for broader measures

 

N K Gupta, Chairman of Manglam Group, echoed these sentiments, suggesting that an increase in tax benefits for home loan interest payments would bring considerable relief to middle-class buyers.

 

"The affordable housing segment could see a boost with measures like revising the criteria for affordable housing to reflect current property prices. This would allow more people to benefit from tax incentives and subsidies," Gupta said.

 

He added that the repo rate remains a crucial factor. "A reduction in the repo rate could lower borrowing costs significantly. For instance, a 0.25% cut in interest rates on a 20-year Rs 50 lakh loan could save borrowers around Rs 800-Rs 1,000 per month. However, with inflationary pressures due to the rupee’s depreciation, an immediate cut seems unlikely," Gupta explained.

 

Steps that government can take to relief borrowers

 

Adhil Shetty, CEO of BankBazaar.com, outlined measures the government could adopt to help middle-class home loan borrowers:

 

Increasing tax deductions: Increasing the deduction limit for home loan interest payments to Rs 3 lakh and introducing a separate deduction for principal repayments could lower taxable income.

 

Reviving the Credit Linked Subsidy Scheme (CLSS): Reintroducing the scheme for first-time buyers and raising the cap on affordable housing prices could provide significant subsidies on interest rates.

 

Expanding affordable housing definitions: Updating these criteria to reflect today’s market prices would make more borrowers eligible for tax benefits and government schemes.

 

Interest rate subventions: Offering government-backed interest rate reductions for loans within a specific range, such as Rs 25-Rs 50 lakh, would directly lower EMIs.

 

"While these measures could make a tangible difference, their implementation depends on balancing fiscal discipline with economic growth," Shetty said.

 

Optimism for housing policies

 

According to Sudeep Bhatt, Director of Strategy at Whiteland Corporation, the upcoming Union Budget 2025 brings optimism for prospective homeowners. "The emphasis on allocations for the PMAY will substantially boost the housing segment by addressing the growing demand for housing in Tier 1 cities. Reducing the GST on under-construction properties to 3% could attract first-time homebuyers," Bhatt said.

 

Bhatt also pointed out ongoing challenges. "Interest rate fluctuations and rising property costs remain a concern. Long-term housing purchases require stable lending rates and easier regulations. The budget’s measures can lay a positive foundation for helping homebuyers achieve homeownership," he added.

 

Repo rate cuts: A distant possibility?

 

Shetty explained that a cut in the RBI’s repo rate directly impacts home loan EMIs. "Banks pass on the benefits of lower borrowing costs to customers. For example, a 0.25% reduction in interest rates on a Rs 50 lakh loan could save borrowers Rs 1,000 monthly," he said.

 

However, Shetty cautioned that the likelihood of such a cut hinges on inflation, GDP growth, and global economic trends. "While a rate reduction could stimulate economic activity, the RBI will prioritise stability before making any changes. The February 2025 monetary policy meeting will likely offer more clarity," he said.

 

Gupta also pitched in, saying that while a repo rate cut later in 2025 could provide the needed boost for buyers and developers, current inflationary pressures may delay such relief. "Until then, borrowers should focus on managing their EMIs and staying prepared for market shifts," he said.

 

Take a look at the current home loan interest rates offered by various banks, as shared by PaisaBazaar:

 

Public Sector Banks

1. State Bank of India:  

Up to Rs 30 lakh: 8.50–9.85%  

Rs 30–75 lakh: 8.50–9.85%  

Above Rs 75 lakh: 8.50–9.85%  

 

2. Bank of Baroda:  

Up to Rs 30 lakh: 8.40–10.65%  

Rs 30–75 lakh: 8.40–10.65%  

Above Rs 75 lakh: 8.40–10.90%  

 

3. Union Bank of India:  

Up to Rs 30 lakh: 8.30–10.75%  

Rs 30–75 lakh: 8.30–10.90%  

Above Rs 75 lakh: 8.30–10.90%  

 

4. Punjab National Bank:  

Up to Rs 30 lakh: 8.45–10.25%  

Rs 30–75 lakh: 8.40–10.15%  

Above Rs 75 lakh: 8.40–10.15%  

 

5. Bank of India:  

Up to Rs 30 lakh: 8.35–10.85%  

Rs 30–75 lakh: 8.35–10.85%  

Above Rs 75 lakh: 8.35–11.10%  

 

6. Canara Bank:  

Up to Rs 30 lakh: 8.50–11.25%  

Rs 30–75 lakh: 8.45–11.25%  

Above Rs 75 lakh: 8.40–11.15%  

 

7. UCO Bank:  

All amounts: 8.30% onwards  

 

8. Bank of Maharashtra:  

Up to Rs 30 lakh: 8.35–11.15%  

Rs 30–75 lakh: 8.35–11.15%  

Above Rs 75 lakh: 8.35–11.15%  

 

9. Punjab and Sind Bank:  

All amounts: 8.50–10.00%  

 

10. Indian Overseas Bank:  

 All amounts: 8.40–11.00%  

 

11. Indian Bank:  

 All amounts: 8.40–10.30%  

 

Private Sector Banks

1. HSBC Bank:  

All amounts: 8.50% onwards  

 

2. South Indian Bank:  

All amounts: 8.50% onwards  

 

3. City Union Bank:  

Up to Rs 30 lakh: 8.25–9.50%  

Rs 30–75 lakh: 8.50–10.00%  

Above Rs 75 lakh: 8.75–10.50%  

 

Housing Finance Companies (HFCs)

1. LIC Housing Finance:  

All amounts: 8.50% onwards  

 

2. Bajaj Housing Finance:  

All amounts: 8.50% onwards  

 

3. PNB Housing Finance:  

Up to Rs 30 lakh: 8.50–14.50%  

Rs 30–75 lakh: 8.50–14.50%  

Above Rs 75 lakh: 8.50–11.45%