NAREDCO Proposes Increased Home Loan Interest Deduction and Rental Housing Incentives

With the Union Budget of 2026 around the corner, the National Real Estate Development Council (NAREDCO) has recommended several measures to the Union Ministry of Finance to boost the real estate sector. These measures include raising the limit on interest deduction for home loans and promoting rental housing.

The association has also sought a change in the definition of affordable housing, suggesting that homes costing up to Rs 75-80 lakh should be considered affordable, as opposed to the current limit of Rs 45 lakh. Additionally, NAREDCO has demanded that the real estate sector be granted industry status, which would help in securing cheaper loans for all inputs, including land and raw materials for construction.

NAREDCO Chairman Niranjan Hiranandani emphasized the importance of housing, stating, “Like bread and cloth, housing should get equal importance. The country has more than enough resources to fulfill the Housing For All mission.” The organization believes that promoting rental housing by incentivizing real estate developers or partnering with them in a Public-Private Partnership (PPP) model will play a significant role in providing affordable housing options to citizens.

NAREDCO has suggested that the deduction on interest payments under Section 22 of the IT Act 2025 should be applicable from the year in which capital was borrowed, similar to the principal deduction under Section 80C. The limit of Rs 2 lakh should be raised to Rs 5 lakh or more for owner-occupied houses. Additionally, the five-year period for acquisition or completion from the year of borrowing should be dispensed with.

Parveen Jain, President of NAREDCO, highlighted the importance of rationalizing taxation on housing finance. “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,” he said.

The body has also recommended the reinstatement of the Income-tax Settlement Commission, which was 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. The commission was discontinued on February 1, 2021. NAREDCO noted that the current dispute resolution scheme excludes certain specific cases, including those 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.

Hiranandani added, “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.”

To further boost the income of people and enterprises, thereby lifting housing demand across the country, NAREDCO has recommended reducing the tax rate for all non-corporate entities to 25%, including surcharge and cess. Furthermore, the tax rates for individuals should be reduced to a maximum level of 30%, including surcharge and cess.

These recommendations aim to create a more favorable environment for the real estate sector, addressing the housing shortage and promoting affordable housing options for all citizens.