Realty Sector’s Push for Tax Relief: NAREDCO’s Picks Ahead of Budget 2026

The real estate industry in India is lining up its priorities before the Union Budget 2026, and one of the loudest voices is that of the National Real Estate Development Council (NAREDCO). 

With housing demand softening in key markets and buyers grappling with rising costs and finance charges, NAREDCO has urged the government to rethink how home loans and housing-related taxes are treated in the tax code. Their recommendations aim to boost affordability, stimulate demand and offer relief to both developers and homebuyers.

Home Loan Interest Deduction: Why Raise the Cap?

Under the current tax rules, individual taxpayers can claim a deduction of up to ₹2 lakh per year on interest paid on home loans for a self-occupied property under Section 24(b) of the Income-Tax Act. This limit has not been revised in over a decade, even as property prices and loan sizes have ballooned. 

NAREDCO wants this cap increased to at least ₹5 lakh. The logic is straightforward: in many urban centres, the annual interest component alone on a typical home loan often exceeds ₹4–6 lakh. 

Boosting the deduction limit could considerably lower the net cost of owning a home for middle-income buyers and reduce pressure on household cash flows. It might also help bridge the gap between ownership costs and rental expenses in high-priced cities.

Developers argue that raising the deduction limit would not only help individual buyers but also stimulate demand across the housing market as a whole, thereby supporting broader economic activity in the sector.

Read More - Income Tax Act: Tax Provisions, Sections, Deductions & Complete Guide

Reinstating the Income-Tax Settlement Commission

Another key ask of NAREDCO is the revival of the Income-Tax Settlement Commission, a body that allowed taxpayers facing disputes with the tax authorities to reach a one-time compromise, avoiding prolonged litigation.

Its reinstatement could ease the compliance burden on real estate firms, many of which face tax disputes that can stretch for years and divert management attention. Supporters say restoring this dispute-resolution avenue would enhance transparency and investor confidence.

Broader Tax Reforms on the Wish List

Beyond home loan deductions and dispute mechanisms, NAREDCO has flagged other fiscal tweaks it believes could help rejuvenate housing demand. These include:

• Lower tax rates for non-corporate entities and individuals to boost purchasing power.
• Reduction in surcharge and cess to enhance disposable incomes of potential buyers.
• More expansive recognition of affordable housing models, so promotions and incentives align with rising construction costs.

These suggestions align with wider industry calls for rationalising taxation on housing and construction, which analysts believe could help correct distortions caused by inflation, higher material costs and GST complexities.

What It Means for Buyers and the Market

The real estate industry accounts for a substantial chunk of economic activity and employment in India. Forecasts suggest housing demand in the affordable and mid-income segments remains sensitive to credit costs and tax incentives. 

By raising the home loan interest deduction limit and simplifying tax dispute processes, policymakers could make homeownership more accessible and support a sector that has felt headwinds in recent years.

Also Read - Delhi Road Tax – Rates, Payment & Rules Explained

For homebuyers, especially first-time purchasers and those in the middle-income bracket, enhanced tax-deduction limits translate directly into lower effective costs and improved affordability. In an era where loan EMIs form a large part of household budgets, even modest relief at the tax stage can influence purchase decisions.

Conclusion

As the Union Budget 2026-27 approaches, NAREDCO’s recommendations underscore the real estate industry’s dual focus: lowering barriers to homeownership while ensuring developers have a supportive regulatory and tax environment. 

By advocating for higher home loan deductions and reinstating user-friendly dispute mechanisms, the industry is signalling that targeted fiscal reforms could revive housing demand and contribute to broader economic growth. 

The government’s response will indicate how far tax policy will be leveraged to address structural challenges in India’s housing sector.