Increase limit for interest deduction on home loans, promote rental housing: NAREDCO's Budget recommendations
With the Union Budget of 2026 around the corner, the National Real Estate Development Council (NAREDCO) has recommended to the Union Ministry of Finance a slew of measures, including raising the limit on interest deduction on home loans and reinstating the Income Tax Settlement Commission.
The association also sought a change in the definition of affordable housing and suggested that homes costing up to Rs 75-80 lakh should be treated as affordable as opposed to the price limit of Rs 45 lakh. It also demanded the long-pending industry status for the real estate sector as this would help in getting cheaper loans for all inputs, including land and other raw materials for construction.
NAREDCO also wants the government to promote rental housing by incentivising real developers or partnering with them in a PPP model as this would play a big role in providing affordable housing options to citizens. "Like bread and cloth, housing should get equal importance. The country has more than enough resources to fulfill the Housing For All mission," said NAREDCO Chairman Niranjan Hiranandani.
The real estate body has suggested that the deduction on account of interest payment available under Section 22 of the IT Act 2025 should be made applicable from the year in which capital was borrowed as for principal u/s 80C and should be to the extent of full interest paid, at least in respect of one house. It added that the limit of Rs 2 lakh should be raised to Rs 5 lakh or more for owner-occupied houses. Also, the five-year period for acquisition/completion from the year of borrowing should be dispensed with.
“Rationalising taxation, especially on housing finance, will directly stimulate end-user demand, provide much-needed impetus to a sector grappling with a significant housing shortage, and offer relief to homebuyers impacted by project delays arising from cash flow constraints, while restoring overall buyer confidence,” said Parveen Jain, President, NAREDCO.
The body has also suggested the reinstatement of the Income-tax Settlement Commission. The commission established in 1976 to provide taxpayers a one-time opportunity to enter into a compromise and settlement arrangement with the Income-tax Authority to grant them relief from penalties and prosecution, was discontinued with effect from February 1, 2021.
The housing body noted that the current dispute resolution scheme excludes certain specific cases including cases where lower appellate authorities disposed of the appeal prior to the specified date (22 July 2024), but the time period for filing further appeals before higher appellate authorities remains open.
"Restoring and strengthening dispute resolution mechanisms like the Income-tax Settlement Commission is critical for fostering a transparent, investor-friendly environment in the real estate sector. Coupled with rationalised taxation policies, these reforms will catalyse sustainable growth, boost housing affordability, and accelerate India’s journey towards becoming a truly developed economy by 2047," said Hiranandani.
Among other suggestions to boost the income of the people and enterprises, thereby lifting housing demand across the country, NAREDCO recommended that the rate of tax, including surcharge and cess, for all non-corporate entities should be brought down to 25%. Further, the tax rates for individuals should be reduced, to a maximum level of 30%, including surcharge and cess.