Indian Realty Sector Faces Significant Loss Post-Budget Announcement
The Indian real estate sector suffered a significant loss of ₹6,480 crore in market value following the Union Budget announcement.
Real EstateIndian RealtyMarket ValueUnion BudgetFinance MinisterReal Estate NewsJul 28, 2024
Rating firm IndRa's analysis suggests that properties with expected returns below 10% to 11% per annum could see investors facing higher capital gains tax outflows. This could lead to decreased investments in this segment. The reduction in investor demand could make it difficult for developers to take price hikes in the near term, as investors may be wary of large exposures due to higher tax outflows.
The removal of indexation benefits and the lowering of long-term capital gains tax are not expected to impact end-users who sell their existing house and reinvest in a new one. However, it will affect investors who sell their house (investment) and reinvest in other asset classes. Prashant Thakur, Regional Director & Head - Research, of Anarock Group said, 'The removal of benefits may reduce speculative demand and increase supply, leading to some price corrections.'
In the short term, the removal of benefits could result in a notable price decline, as sellers compete for fewer buyers, according to Thakur. He added that over time, the market will regain stability and prices will reflect genuine end-user demand rather than speculative investors' demand. Developers may shift their focus from luxury to affordable and mid-segment housing due to these changes.
Frequently Asked Questions
How much loss did the Indian real estate sector face post-Budget announcement?
The Indian real estate sector suffered a significant loss of ₹6,480 crore in market value.
What led to the decrease in investor sentiment in the real estate sector?
The decision to remove indexation benefits on property sales led to a decrease in investor sentiment, especially within high-end segments.
How will the removal of indexation benefits affect real estate investors?
The removal of benefits may reduce speculative demand and increase supply, leading to some price corrections.
What is the expected impact of the removal of benefits on the real estate market in the short term?
In the short term, the removal of benefits could result in a notable price decline, as sellers compete for fewer buyers.
How will developers adjust to the changes in the real estate sector?
Developers may shift their focus from luxury to affordable and mid-segment housing due to these changes.
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