Budget 2026 Resolves Pre-Construction Interest Ambiguity: Tax Implications Clarified for Under-Construction Property Investors

Budget 2026 has introduced definitive regulatory clarity regarding the tax treatment of pre-construction interest on home loans for under-construction properties, a move that resolves long-standing ambiguity for investors and homebuyers. The key provision integrates pre-construction interest within the existing ₹2 lakh annual deduction cap under Section 24(b) of the Income Tax Act, thereby standardizing the fiscal framework. This development is particularly significant for the real estate sector, as it eliminates previous uncertainties that often complicated financial planning for purchasers of properties under development. The clarification ensures that taxpayers can now accurately calculate their eligible deductions during the construction phase, aligning with broader governmental efforts to enhance transparency in housing finance. Analysts suggest this measure could stimulate demand in the under-construction segment by providing predictable tax benefits, potentially bolstering market confidence. However, it also imposes a structured limit, requiring careful financial management by borrowers to optimize deductions within the prescribed cap. This regulatory refinement underscores a strategic approach to supporting the housing market while maintaining fiscal discipline, reflecting a balanced policy intervention aimed at fostering sustainable growth in real estate investments.