Budget 2026 expectations: Home buyers seek relief on EMIs and upfront costs

As Budget 2026 nears, home buyers want higher loan deductions, lower upfront costs and targeted help for first-time purchasers

The Union Budget 2026 is just around the corner. As Finance Minister Nirmala Sitharaman prepares to present the Budget, home buyers are looking beyond headline tax relief and focusing on what could make owning a home easier in a high-cost market.

 

With property prices rising, EMIs staying elevated and upfront costs climbing, buyers, especially first-time purchasers and middle-income households, are increasingly seeking measures that directly improve affordability and access to credit.

 

What home buyers want most from Budget 2026

 

Tax relief still matters, but expectations are tempered after last year’s rebate.

 

“While a tax rebate would be most welcome, since one was already done last year, it is highly unlikely that there will be any major deduction on it this year. Having said that, homebuyers would benefit directly if the upcoming Budget increases tax deductions on home loan interest,” Santhosh Kumar, Vice Chairman, ANAROCK Group, told Business Standard.

 

 

He said the current deduction cap needs a rethink. “For instance, the current deduction limit (Rs 2 lakh) could be raised to a higher amount, thereby helping lower EMIs and thereby improve affordability for many. Further, the government should revise the affordable housing price definition limit; this would extend lower tax or GST benefits to a broader set of homes, not just very low-priced units. Escalating prices have pushed many buyers into a wait-and-watch mode.”

 

Rajan Yadav, Director, Roots Developers, said buyer concerns have become more immediate. “With property prices going up and EMIs staying high, buyers feel the pinch every month. Extra tax benefits on home loans would make a real difference to affordability. Lower interest rates or credit-linked support would also be welcomed. Regulatory clarity still matters, but right now, buyers are far more focused on measures that directly reduce the cost of owning a home,” he told Business Standard.

 

Support first-time buyers at the point of purchase

 

Aditya John, Founder and Director, Limehouse Real Estate, said Budget 2026 could help first-time buyers through targeted interventions rather than broad incentives.

 

For India, Budget 2026 could support first-time buyers through:

• A dedicated first-time buyer window with limited-period interest support or credit-linked assistance for eligible first-home buyers, especially end-use homes

• Lower friction at the point of purchase through stamp duty or registration relief for first homes, even if capped by ticket size, since upfront costs often delay decisions more than EMIs

• Faster, simpler home-loan execution with standardised documentation and quicker approvals for salaried and self-employed first-time buyers, where time-to-sanction remains a pain point

 

“First-time buyers need lower upfront costs, easier credit access and faster processing to convert intent into ownership,” John told Business Standard.

 

Home loan interest deduction limit under pressure

 

Amit Prakash Singh, Co-founder and CBO, Urban Money, said the case for revising the interest deduction cap has strengthened.

 

“Residential property prices across major urban centres have significantly outpaced income growth, while the interest deduction limit has remained unchanged for years. Raising the limit would restore its real value, improve affordability for genuine end users and offer targeted tax relief without fuelling speculative demand. Such a move would also align tax policy with current market realities,” Singh said in a conversation with Business Standard.

 

Yadav echoed the concern. “For middle-income buyers, the existing limit no longer reflects actual EMI burdens. Raising this cap would offer meaningful relief, make home ownership more affordable, and support genuine end-users rather than speculative investors.”

 

Interest rates and buyer sentiment

 

Interest rates continue to shape decision-making, though prices have played a larger role.

 

“Post the pandemic, we saw home loan interest rates go down from double digits to all-time-low single digits. However, the rates increased but still continue to be in single digits. In the last one year, we have seen some respite in the interest rates with RBI slashing the repo rates,” said Kumar.

 

He said higher rates add to buyer hesitation. “Home loan interest rates definitely have an impact on prospective homebuyers because besides escalating property rates, a higher interest rate adds to overall cost. Due to higher rates coupled with escalating property prices, many buyers, particularly in the affordable and mid segment, went into a wait-and-watch mode. However, more than the interest rates, it was skyrocketing prices that dampened homebuyer sentiment.”

 

What current policies miss for first-time buyers

 

Experts said first-time buyers need deeper, more focused support.

 

“This includes higher tax benefits for initial home purchases, credit-linked incentives tailored to middle-income households, and simplified access to long-tenure loans. Support mechanisms should also account for rising down payment requirements, which remain a major entry barrier. First-time homebuyers also need access to actual affordable homes, which are currently limited in government supply, while lotteries are difficult and often taken over by investors,” Singh said.

 

Kumar suggested sharper fiscal tools. “The government can possibly hike the INR 2 lakh tax rebate on housing loan interest rates under Section 24 of the Income Tax Act up to at least Rs 5 lakh for first home buyers. This could support demand, especially in the affordable and mid-segment categories. A GST waiver for under-construction homes for first home buyers can also push demand in the mid and lower segments. The present GST rate on under-construction properties is 5 per cent without ITC for premium homes above Rs 45 lakh and 1 per cent for affordable homes below Rs 45 lakh. Some waivers of GST will reduce overall property cost and push demand for under-construction homes.”

 

Why stability in stamp duty matters

 

Prashant Kajaria, Managing Director, SPA Group, said predictability in state levies plays a larger role than often recognised.

 

“Stability in stamp duty and registration charges plays a far more critical role in buyer confidence than is often acknowledged. For most homebuyers, especially end-users, these costs are not marginal add-ons. They represent a substantial upfront outlay that directly affects purchase timing and financial planning,” Kajaria said.

 

“Frequent revisions or uncertainty around government levies tend to create hesitation, with buyers either delaying decisions or rushing into transactions purely to avoid anticipated hikes. What buyers value most is predictability. When stamp duty structures remain stable over a sustained period, it allows buyers to plan purchases with clarity and confidence.”

 

Affordability over size and location

 

Affordability has begun to reshape buyer choices across cities.

 

“Affordability has taken the lead. Buyers are increasingly willing to compromise on location and unit size to ensure financial comfort and long-term sustainability. This has driven demand towards peripheral micro-markets, emerging corridors, and compact configurations, particularly among first-time and mid-income buyers,” Singh said.

 

He added, “With housing continuing to drive urban employment and middle-class consumption, affordability remains a core policy priority. Budget 2026 offers an opportunity to lower entry barriers, recalibrate affordability levers and strengthen frameworks for long-term borrowing.”

 

John pointed to market data. “We can already see this behaviour in Mumbai. Properties under 1,000 sq ft dominate activity, and the market is shifting towards practical ticket sizes, with demand concentrated in suburbs rather than only prime cores,” he said.

 

“At the same time, demand is becoming more segmented. While affordability is a priority for many first-time and upgrade buyers, premium housing has continued to show resilience in 2025, suggesting the market is splitting between value-conscious end users and affluent buyers.”

 

Kumar said preferences still vary by segment. “Several buyers with the financial wherewithal are not ready to compromise on location or size. This is why developers are launching more luxury and ultra-luxury projects in prime areas. In the affordable and mid segments, buyers tend to trade off between size and location, depending on what matters more to them.”