New Delhi, Nov. 20 -- For many homebuyers, a housing loan is more than a means to acquire a property. It is viewed as a form of leverage-one can use borrowed money to own an appreciating asset while enjoying generous tax breaks that reduce the cost of borrowing. This logic drives countless buyers toward under-construction homes. But the home loan deduction tax fine print for an under-construction property may play spoilsport.

In the case of an under-construction property, the deduction on interest can be claimed only after the construction is complete. Moreover, there are caps on the maximum interest that can be claimed depending on whether the property is bought for renting out or self-consumption. These rules significantly restrict the...