Budget 2025 Expectations: Will Home Loan Relief Finally Arrive?

The dream of owning a home continues to inspire millions across India, but rising property prices and the financial strain of home loans keep this aspiration out of reach for many. As the Union Budget 2025 approaches, hopeful homebuyers and borrowers are eagerly awaiting measures that could alleviate their financial burdens. Experts weigh in on potential policy changes that could reshape the housing sector.

Budget 2025 Expectations for Home Loan Borrowers

The affordability of home loans is heavily influenced by fiscal policies and relief measures introduced in the Union Budget. According to Ketan Mukhija, Senior Partner at Burgeon Law, raising the tax deduction limit under Section 24(b) of the Income Tax Act from ₹2 lakh to ₹3 lakh could provide significant relief to middle-class families grappling with high urban property prices.

Additionally, expanding direct subsidies under schemes like Pradhan Mantri Awas Yojana (PMAY) could reduce financial strain for first-time homebuyers. Mukhija highlights the role of repo rate reductions by the Reserve Bank of India (RBI) in lowering monthly EMIs. However, global economic pressures and inflation trends make substantial repo rate cuts in 2025 uncertain.

Tax Benefits and GST Rationalization: Key Focus Areas

Animesh Hardia, Senior Vice President of Quantitative Research at 1 Finance, underscores the importance of increasing the Section 80C limit beyond ₹1.5 lakh and raising exemptions under Section 24 for home loan interest. Despite these possibilities, the government’s emphasis on the New Tax Regime might limit significant changes under the Old Tax Regime.

Hardia also points to GST-related measures as crucial for reducing housing costs. Potential actions include:

Lowering the 18% GST on home loan insurance.
Reducing GST on construction materials like cement (currently at 28%) and steel (18%).
Eliminating GST on residential property purchases.

These changes could significantly enhance housing affordability, particularly for middle-income families.

Industry Insights: A Push for Affordable Housing

Industry leaders echo similar sentiments about tax reforms and their potential impact on the affordable housing segment. N. K. Gupta, Chairman of Manglam Group, suggests revising the criteria for affordable housing to align with current market prices. This adjustment would allow more individuals to benefit from tax incentives and subsidies.

Gupta emphasizes that repo rate reductions could lower borrowing costs, making home loans more manageable. For instance, a 0.25% cut in interest rates on a 20-year ₹50 lakh loan could save borrowers approximately ₹800–₹1,000 per month. However, inflation and rupee depreciation may delay such measures.

Government Measures to Relieve Borrowers

Adhil Shetty, CEO of BankBazaar.com, outlines actionable steps the government could take to ease the financial burden on home loan borrowers:

Increasing Tax Deductions: Raising the limit for home loan interest payments to ₹3 lakh and introducing a separate deduction for principal repayments could reduce taxable income.
Reviving the Credit Linked Subsidy Scheme (CLSS): Reintroducing this scheme with higher caps on affordable housing prices could offer substantial subsidies.
Expanding Affordable Housing Definitions: Updating these definitions to reflect current market prices would enable more borrowers to access benefits.
Interest Rate Subventions: Government-backed interest rate reductions for loans within specific ranges (e.g., ₹25–₹50 lakh) could directly lower EMIs.

However, Shetty notes that implementing these measures requires balancing fiscal discipline with economic growth.

Optimism for Housing Policies in Budget 2025

Sudeep Bhatt, Director of Strategy at Whiteland Corporation, expresses optimism about Budget 2025’s potential to address housing challenges. Enhanced allocations for the PMAY scheme could stimulate demand for housing in Tier 1 cities, while reducing GST on under-construction properties to 3% may attract first-time buyers.

Bhatt also emphasizes the need for stable lending rates and simplified regulations to support long-term housing investments. The upcoming budget could lay the groundwork for these improvements, enabling more individuals to achieve their homeownership dreams.

Repo Rate Cuts: A Waiting Game

Repo rate cuts are closely tied to home loan EMIs, with banks passing on the benefits of lower borrowing costs to borrowers. According to Shetty, a 0.25% reduction in interest rates on a ₹50 lakh loan could save borrowers ₹1,000 monthly.

However, such reductions depend on factors like inflation, GDP growth, and global economic stability. With inflationary pressures persisting, the RBI is likely to prioritize economic stability before considering rate cuts. The February 2025 monetary policy meeting may provide further clarity on this front.

Current Home Loan Interest Rates by Lenders

Here’s an overview of current home loan interest rates offered by various banks and housing finance companies:

Public Sector Banks

State Bank of India: Up to ₹30 lakh: 8.50–9.85% | ₹30–75 lakh: 8.50–9.85%
Bank of Baroda: Up to ₹30 lakh: 8.40–10.65% | Above ₹75 lakh: 8.40–10.90%
Union Bank of India: Up to ₹30 lakh: 8.30–10.75% | Above ₹75 lakh: 8.30–10.90%

Private Sector Banks

HSBC Bank: 8.50% onwards.
South Indian Bank: 8.50% onwards.
City Union Bank: Up to ₹30 lakh: 8.25–9.50% | Above ₹75 lakh: 8.75–10.50%.

Housing Finance Companies (HFCs)

LIC Housing Finance: 8.50% onwards.
PNB Housing Finance: Up to ₹30 lakh: 8.50–14.50%.

Conclusion: Hopeful Yet Cautious

The Union Budget 2025 has the potential to address critical issues in the housing sector, from tax reforms to affordable housing initiatives. While borrowers remain optimistic about possible relief measures, the government faces the challenge of balancing economic stability with growth.

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