Home loan interest deduction: Hike limit to ₹3 lakh in old regime or allow it in new tax regime, says KPMG

It said that in line with the objective of 'Housing for all', it is widely expected that the Union Government may consider some tax SOPs for the housing and funding cost for middle- and low-income earners.

In the context of a self-occupied property, the new tax regime disallows any deduction for interest on housing loans. And the old tax regime permits a deduction of up to only ₹2 lakh.

This distinction is crucial as buying a home and securing a loan for self-occupation are substantial financial commitments, often spanning long periods.

KPMG also noted that with recent hikes in interest rates and regulatory reforms, there is mounting pressure on the real estate sector.

Revive affordable housing

According to Anuj Puri, Chairman, Anarock Group, the once robust supply of affordable housing has dwindled in a short time.

"Its total supply share reduced from 40% in 2018 to 16% in 2024. The target clientele, consisting of blue-collar workers, lower-paid workforces and those just starting out in their careers, were severely cash-strapped and obviously, buying homes did not feature among their immediate priorities. Instead, the rental market picked up after the pandemic abated and businesses sent out their 'return to office' call," Puri said.

Anarock's data shows that in 2024 and as of now in January 2025, Bangalore is devoid of any supply in this segment. Hyderabad and Chennai are seeing only a minimal 2% supply share. The only cities with any sizeable activity in this segment are Kolkata and MMR. In both these cities, nearly 31% of the total upcoming supply is priced below ₹40 lakh.

"Nationally, rising prices have led to a gradual tapering down of luxury housing, and this may trigger an inflection point where the cycle can once again turn positive for the affordable segment. Any substantial announcement for the affordable housing segment in the upcoming Union Budget can strengthen the trend and give affordable housing a seriously needed leg-up," said Puri.