Pre-Budget 2025: Home Loan Borrowers’ Expectations - Insights from IMGC India’s Only Mortgage Guarantee Company

Pre-Budget Views: What Home Loan Borrowers Hope to See in Union Budget 2025

The housing sector is a vital contributor to India’s GDP, projected to account for 13% of the national economy. With the Union Budget 2025 approaching, homebuyers are hopeful that reforms and incentives will ease financial burdens and promote homeownership. Despite recent resilience in the housing market, challenges like high interest rates, affordability gaps, and liquidity issues continue to affect borrowers. Several key measures in the upcoming budget could offer significant relief.

Enhanced Tax Benefits for Home Loan Borrowers - Current tax incentives for home loan borrowers allow deductions of up to ?2 lakh per year on home loan interest under Section 24(b). This limit, unchanged since 2014, no longer adequately addresses rising property prices and larger loan amounts. Raising this limit to ?4 lakh would better reflect the current market conditions and improve affordability. Additionally, expanding the principal repayment deduction under Section 80C or creating a separate limit would help salaried borrowers leverage this benefit more effectively.

Reinstatement of Section 80EEA - With interest rates ranging from 8.5% to 9.5%, home loan EMIs have become a significant financial burden. Section 80EEA, which previously offered first-time homebuyers an additional deduction on home loan interest, could be reinstated to help reduce the financial stress of higher EMI outflows. This would encourage more buyers to enter the housing market despite the high-interest environment.

Home Loan Interest Benefit under New Tax Regime - The new tax regime, introduced in Budget 2020, offers lower tax rates with fewer deductions, but it excludes deductions for home loan interest under Section 24. Including this deduction in the new regime would make homeownership more affordable and align the tax structure with the rising costs of property.

Supply-Side Initiatives - The rising cost of construction and land acquisition has limited the availability of affordable housing, particularly in urban centers. The government could introduce measures like GST rationalization, transit-oriented development, and single-window clearance systems to reduce construction costs and encourage affordable housing development. Stamp Duty Reductions Stamp duty, ranging from 5% to 7%, adds significantly to the cost of purchasing a home. While stamp duty is a state subject, the central government could incentivize states to temporarily reduce rates or offer rebates for first-time homebuyers, making homeownership more accessible.

Home loan borrowers are hopeful that this year’s budget will introduce reforms that reduce financial stress and make homeownership a reality for millions of Indians. With the right focus, the budget can transform housing aspirations into tangible outcomes for many.