Things to Know About Home Loan after Union Budget 2026

The past few years have demonstrated economic resilience despite global uncertainty. However, rising property prices and high EMIs continue to challenge the homeownership aspirations of middle-class buyers. As Union Budget 2026 is yet to be presented, expectations are building around potential policy support for the housing sector.

Based on past trends, expert commentary, and ongoing government initiatives such as PMAY 2.0, home loan buyers are hopeful for tax relief, affordability measures, and credit support. Here is a realistic look at what home loan buyers may expect from Budget 2026, if the government continues its housing-focused approach.

Before assessing what Budget 2026 could bring, it is important to understand the current home loan environment. Interest rates, eligibility norms, and lending practices today form the baseline against which any potential changes will be measured.

1. Current Home Loan Interest Rates and Loan Amount Trends

As of early 2026, the RBI repo rate stands at 6.25%, which directly influences home loan pricing. Most banks and NBFCs currently offer floating interest rates in the range of 8.4% to 9.5%, largely linked to the Repo Linked Lending Rate (RLLR).

Loan eligibility norms remain cautious. Buyers can typically expect 80% to 90% loan-to-value (LTV) for properties priced below ₹75 lakh, while higher-value properties may attract lower LTV limits. These norms are unlikely to loosen significantly unless supported by policy incentives in Budget 2026.

2. Loan Sanctions and Borrower Eligibility

Home loan sanction processes have become more stringent over time. A CIBIL score of 760 or higher is increasingly important to secure favourable interest rates. Lenders carefully assess income stability through salary slips, ITRs, and employment continuity.

Loan amount, tenure, and pricing are closely tied to the Fixed Obligation to Income Ratio (FOIR), which is generally capped at 50%. First-time buyers may also face processing fees in the range of 0.25% to 0.5%, depending on the lender and risk profile.

As the budget announcement approaches, several policy measures are being discussed across industry and financial circles. These expected reforms could determine how supportive Budget 2026 is for home loan borrowers.

1. Expected Tax Relief on Home Loan Interest

One of the most anticipated measures in Union Budget 2026 is a potential enhancement of home loan interest deduction under Section 24(b). Currently capped at ₹2 lakh for self-occupied properties, there is speculation that this limit could be increased, particularly for affordable and mid-income housing segments.

If implemented, such a move could provide meaningful tax relief to salaried individuals facing higher EMIs due to elevated interest rates.

2. Likely Continuation and Expansion of PMAY Benefits

Given the government’s long-term focus on “Housing for All,” PMAY-Urban 2.0 is expected to remain a priority area. Industry experts anticipate higher budgetary allocation, which could translate into expanded eligibility, revised price caps, or extended timelines for first-time homebuyers.

If supported in Budget 2026, PMAY incentives could significantly improve affordability for urban and semi-urban buyers.

If the anticipated budget measures are introduced, they could meaningfully impact affordability and long-term savings. This section explores how these possible changes may translate into real benefits for buyers

1. Higher Interest Deduction Limits Under Section 24(b)

There is ongoing discussion around raising the interest deduction limit to ₹4 lakh or higher, especially for homes below a certain value threshold. For a typical ₹50 lakh home loan at around 9% interest, this could result in annual tax savings of ₹50,000 to ₹80,000, depending on the final structure.

Such a measure would directly ease the financial burden on salaried homeowners.

2. Broader Definition of Affordable Housing

Budget 2026 may also revisit the definition of affordable housing. Property value caps could be revised upward to reflect current market realities, especially in metro cities where prices have increased sharply over the past few years.

An expanded definition would allow more buyers to qualify for interest subsidies and tax benefits, improving overall housing access.

3. Possible EMI Relief for First-Time Buyers

To support new entrants into the housing market, the government may consider interest subvention schemes for first-time buyers. A temporary reduction in effective interest rates during the initial years of repayment could make EMIs more manageable.

Such relief, if announced, would likely be targeted and time-bound to control fiscal impact.

4. Stamp Duty Rationalisation and Process Simplification

Although stamp duty is a state subject, Budget 2026 could encourage states to offer targeted stamp duty concessions, particularly for women and first-time buyers. There is also hope for further digitisation and single-window approval systems, which would reduce delays and transaction costs.

Together, these steps could make the home-buying process smoother and more transparent.

Regardless of budget outcomes, borrowers need to make informed decisions based on prevailing loan structures and interest rate dynamics. Understanding these factors can help buyers prepare better for any post-budget scenario.

1. Choosing Between MCLR and RLLR Loans

Even without budget changes, borrowers should carefully evaluate loan structures. RLLR-linked loans, which are directly tied to the RBI repo rate, generally offer faster transmission of rate cuts compared to MCLR-based loans.

In the current environment, RLLR options may offer savings of 0.25% to 0.5%, depending on lender terms and reset frequency.

2. Interest Rate Outlook Post Budget 2026

While Budget 2026 itself may not directly alter interest rates, supportive fiscal measures could influence market sentiment. Borrowers with strong credit profiles may continue to access rates in the 8.25% to 9.25% range, while subsidy-linked schemes could further reduce effective borrowing costs.

Even marginal reductions in interest rates can lead to significant savings over long loan tenures.

While Union Budget 2026 is yet to be announced, expectations from home loan buyers remain cautiously optimistic. Possible enhancements in tax deductions, continued support for PMAY, and targeted affordability measures could make home ownership more achievable despite high property prices.

For prospective buyers, staying informed and planning finances in advance will be crucial. If supportive measures are announced, aligning loan choices with these benefits could make 2026 a favourable year to step into the housing market.