NAREDCO seeks tax reforms, higher home loan interest deduction to revive housing demand

New Delhi: The National Real Estate Development Council (NAREDCO) urged the Finance Ministry to undertake tax reforms aimed at reviving housing demand, proposing a sharp increase in the interest deduction limit on home loans and the reinstatement of the Income Tax Settlement Commission, at a time when the real estate sector is seeking policy support to sustain growth.

In a set of recommendations submitted to the Ministry, NAREDCO called for raising the interest deduction cap for owner-occupied houses from Rs 2 lakh to at least Rs 5 lakh and making the benefit applicable from the year of borrowing, rather than after project completion. It also suggested doing away with the five-year completion condition, arguing that project delays, often beyond homebuyers’ control, undermine the provision’s intent.

The NAREDCO also announced the Urban & Real Estate Development Conclave 2026, to be held in New Delhi in February, which will bring together policymakers, developers and investors to deliberate on reforms, housing affordability. Under the existing framework, full interest deduction is allowed only for rented properties, while owner-occupied homes are subject to a ceiling. NAREDCO said aligning the treatment would provide relief to end-users and help restore buyer confidence amid rising input costs and tighter financing conditions.

“The real estate sector is a key pillar of economic growth and employment. Rationalising housing taxation will directly stimulate end-user demand and offer relief to homebuyers affected by delays,” said Parveen Jain, President of NAREDCO.

The apex body also pressed for the revival of the Income Tax Settlement Commission, which was discontinued in 2021. The Commission, NAREDCO said, had provided an effective mechanism for resolving long-pending tax disputes through settlement, thereby reducing litigation and improving compliance. Its absence, the organisation noted, has left gaps in dispute resolution, especially in cases where appeals timelines remain open but alternative remedies are unavailable.

NAREDCO recommended reducing the effective tax rate for non-corporate entities to 25% and capping individual income tax rates at 30%, inclusive of surcharge and cess, to enhance disposable incomes and spur housing demand. It also sought to ease conditions for rental housing projects by removing the requirement of a specific Central government notification to claim tax benefits, aligning with the “Housing for All” objective.