India's Indexation Reform: A Step towards a More Equitable Housing Market
Top realty experts in Mumbai agree that eliminating indexation on real estate will lead to higher tax payments for a small number of people, but the overall impact may be positive in the long run.
IndexationReal EstateHousing MarketIndiaTax ReformReal Estate MumbaiAug 01, 2024
What is Indexation in Real Estate?\nIndexation in real estate means adjusting the purchase price of a property for inflation, as determined by the government's cost inflation index, to reduce the taxable gain on sale. Long-term capital gain is the difference between the sale price minus indexed cost of acquisition for a long-held asset.\n\nThe government has amended the rules to scrap the benefit of indexation for calculating long-term capital gains (LTCG) with immediate effect. While this change may affect wealthy individuals who buy real estate as an investment, most home-owners who buy properties for their personal use will remain unaffected.
Who Are the Losers?Wealthy individuals who buy real estate as an investment will be affected by this change. These individuals hold on to property for a long time, hoping for sharp price appreciation to make up for high costs. The new indexation rules will make such investments unattractive.The policy change aims to discourage speculative buying, thereby increasing the availability of housing stock and stabilising prices. This could benefit many prospective home-owners, as most properties purchased as pure investment remain locked up due to the risks associated with rent agreements.
In conclusion, the decision to eliminate indexation may have triggered initial outrage, but it would lead to a more stable and equitable housing market, benefiting a larger portion of the population in the long run.
Frequently Asked Questions
What is indexation in real estate?
Indexation in real estate means adjusting the purchase price of a property for inflation, as determined by the government's cost inflation index, to reduce the taxable gain on sale.
Who will be affected by the change in indexation rules?
Wealthy individuals who buy real estate as an investment will be affected by this change.
What is the purpose of the policy change?
The policy change aims to discourage speculative buying, thereby increasing the availability of housing stock and stabilising prices.
Will this change affect home-owners who buy properties for their personal use?
No, most home-owners who buy properties for their personal use will remain unaffected.
What is the expected outcome of the decision to eliminate indexation?
The decision to eliminate indexation may have triggered initial outrage, but it would lead to a more stable and equitable housing market, benefiting a larger portion of the population in the long run.
Related News Articles
India's Residential Real Estate Market Shows Healthy Demand as Inventory Overhang Drops to 22 Months
The Indian residential real estate market has made significant strides, with the inventory overhang dropping to 22 months in the June quarter, down from 34 months last year. Key markets like Mumbai Metropolitan Region (MMR) and Pune, which account for 54%
Gurgaon-Rewari Highway Set to Boost Local Real Estate Market
The new Gurgaon-Rewari Highway is expected to enhance the quality of life for commuters and transporters, leading to a surge in demand for real estate projects in the vicinity. Raheja Developers' Nayan, a prominent figure in the real estate sector, shares
Mumbai Property Market Sees Festive Surge
Mumbai city, under the jurisdiction of the Brihanmumbai Municipal Corporation (BMC), is expected to see a significant boost in property registrations this festive season. With an anticipated 12,929 property registrations in October 2024, the real estate m
Kansai Nerolac Paints Secures Prime Real Estate in Mumbai with Major Lease Deal
Kansai Nerolac Paints has entered the real estate market by leasing a prime property in Lower Parel, Mumbai, for INR 726 crore. This strategic move is a testament to the company's vision to capitalize on the booming real estate sector.
Maharashtra Elections 2024: Impact on Key Sectors from Banks to Hospitals
Liquor ban across Mumbai and other cities kicked in after 6 pm on November 18 and will last till 6 pm on the voting day. Paid leave for public sector employees and other measures are in place to ensure smooth elections.
Housing Crisis in India: 36% Drop in Affordable Homes in Top 9 Cities
India's major urban centers, which attract a significant number of migrants seeking employment opportunities, are facing a severe housing crisis. The supply of homes priced at Rs 1 crore and below has plummeted by 36% in the top nine cities, creating a si