Indexation Benefit Removal to Impact Indian Real Estate Market
The removal of indexation benefit for real estate properties is expected to increase tax outgo for sellers, affecting the demand in the Indian real estate market.
Real EstatePropertyIndexation BenefitTaxIndian EconomyReal Estate NewsJul 23, 2024
According to experts, selling a 20-year-old property will be problematic compared to selling a property that is five years old. This is because the new regime does not take into account the inflation rate, making it difficult for sellers to adjust their gains.\n\nDevelopers, on the other hand, said the move would not have any major impact on the real estate market. They believe that the new regime is beneficial for anyone who has made a significantly higher profit over medium- to long-term inflation in property.
However, rating firms and advocates felt that the move would hurt the real estate market. They believe that the removal of indexation benefits may hurt sellers, particularly individual sellers or middle-class sellers who had invested in real estate with the intention of eventually benefitting from market value rising.
On the other hand, the finance minister's move to reduce the holding period for assets, including real estate, to two years from three years for calculation of long-term capital gains tax is beneficial for buyers. Investments in growth corridors for a holding period of more than 24 months will become relatively beneficial from a tax perspective.\n\nExperts also said that the FM reducing holding period for calculation of long-term capital gains for REIT and InvIT investors from 36 months to 12 months, making them on a par with listed shares, will also benefit the instruments.\In other news, the FM also announced that the government will build 30 million houses under the Pradhan Mantri Awas Yojana. She said they will encourage states charging higher stamp duty to moderate rates, and also consider reducing stamp duty for women buyers.
Hiranandani Group is a leading real estate developer in India, known for its luxury residential and commercial projects. Assetz Property Group is a prominent real estate developer in India, specializing in luxury residential and commercial projects. JSA Advocates and Solicitors is a leading law firm in India, providing legal services to clients across various sectors. Embassy REIT is a leading real estate investment trust in India, providing investors with an opportunity to invest in the Indian real estate market.
Frequently Asked Questions
What is the impact of removing indexation benefit on real estate sellers?
The removal of indexation benefit will increase tax outgo for sellers, depending on when the property was bought.
What is the new holding period for assets, including real estate, for calculation of long-term capital gains tax?
The new holding period is two years from three years.
How will the removal of indexation benefit affect the real estate market?
The removal of indexation benefit may hurt sellers, particularly individual sellers or middle-class sellers, leading to a reduction in demand in the real estate market.
What is the benefit of reducing holding period for REIT and InvIT investors?
The reduction in holding period will make REIT and InvIT instruments more attractive to investors, increasing investor participation.
What is the government's plan for affordable housing in India?
The government plans to build 30 million houses under the Pradhan Mantri Awas Yojana, and also encourage states charging higher stamp duty to moderate rates, and consider reducing stamp duty for women buyers.
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