Currently, homebuyers under the old regime can claim up to ₹2 lakh annually on home loan interest under Section 24(b) for self-occupied properties, while principal repayment qualifies for deductions up to ₹1.5 lakh under Section 80C.
Additional deductions may also apply for eligible first-time buyers under Sections 80EE and 80EEA.
Where the benefits still matter
The impact of these deductions is most visible in affordable and lower mid-income housing, where loan sizes often remain within the existing deduction ceiling.
Bikash Kumar Mishra, CFO, Easy Home Finance, a series C-funded, tech-native housing finance company in India, said borrowers with loans between ₹15 lakh and ₹35 lakh continue to derive meaningful value from the current structure.
“For a salaried borrower in the 30% tax bracket with a ₹25 lakh loan, combined interest and principal deductions can yield annual savings of ₹60,000 to ₹1 lakh,” he said.
However, he noted that the ₹2 lakh interest deduction cap under Section 24(b) has remained unchanged for over two decades despite a sharp increase in urban property prices and borrowing costs.
For a ₹50 lakh loan at 8.5% interest, first-year interest payments can exceed ₹4 lakh, leaving a substantial portion outside the deduction limit.
How buyers factor it in
While deductions are claimed during tax filing, developers say buyers often account for these savings while planning affordability and EMI commitments.
Neelu Jain, Director at SNN Raj Corp, a real estate developer based in Bengaluru, said tax benefits are viewed as part of broader financial planning rather than standalone incentives.
“For most households, the decision is built around EMI affordability, income stability, savings and long-term financial comfort. Tax deductions may be realised later, but buyers often consider them much earlier while evaluating loan tenure and repayment commitments,” she said.
According to Jain, this becomes particularly relevant in a market where affordability pressures are rising.
The CREDAI-Anarock Q1 2026 report showed housing sales across the top seven cities rose 9% year-on-year, even as average residential prices increased 7%.
Affordable housing sees the strongest impact
Experts say tax savings can materially influence purchasing power in the affordable housing segment.
Shiv Garg, Director, Forteasia Realty, a first-generation entrepreneurial real estate developer based in the Delhi NCR/Haryana region, said deductions under Sections 80C and 24(b) effectively reduce the cost of ownership for salaried borrowers in higher tax brackets.
“Such savings often increase buyers’ comfort with slightly larger ticket sizes within the affordable category,” he said.
The effect is particularly visible among first-time homebuyers who continue to opt for the old tax regime to maximise deductions.
Why their role is changing
The growing shift toward the new tax regime, which does not provide most home loan deductions for self-occupied properties, is gradually reducing the importance of tax-saving considerations in urban housing finance.
At the same time, lenders are evaluating borrowers on cashflow strength rather than tax-adjusted affordability.
Akash Pharande, Managing Director, Pharande Spaces, a real estate developer based in Pune, Maharashtra, said underwriting models today focus more on repayment resilience and monthly surplus income.
“Lenders are assessing borrowers on net take-home salary, existing liabilities and stress-tested repayment capacity rather than anticipated tax refunds,” he said.
Calls for a review
Experts say the current ITR season has also revived discussions around revisiting deduction thresholds to reflect present-day housing costs.
Hardik Shah, Director, Shyam Group-Dholera SIR, a real estate developer in India’s first planned smart city in Gujarat, said tax refunds still support repayment confidence for middle-income households.
“Annual savings through deductions often become an additional financial cushion for prepayments or future expenses,” he said.
While home loan tax benefits are no longer seen as the primary trigger for homeownership, they continue to serve as an affordability support mechanism, particularly for first-time and salaried buyers balancing rising EMIs with long-term financial planning.
