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Post-Budget Real Estate Trends: Who Gains and Who Losses?

By GeoSquare News Desk · Published 2024-07-27

The Indian real estate sector has been a major focus of the Budget 2024, with the government announcing various tax restructuring measures. These reforms aim to simplify the tax structure, reduce compliance burdens, and expand the tax base, which will have a direct and indirect impact on real estate transactions and growth in the current financial year.

One of the key benefits for real estate buyers is the increased disposable income due to the simplified tax system and increased tax brackets for mid-range taxpayers. This could lead to more investment in real estate and potentially lower interest rates on home loans. The government has also prioritized affordable housing, allocating Rs 10 lakh crore for the Pradhan Mantri Awas Yojana (PMAY) Urban 2.0 to cater to the housing requirements of 1 crore urban poor and middle-class families in the next five years.

Additionally, the finance minister has urged state governments to reduce stamp duty for all and lower it for women buyers, which will be a big relief for home buyers who pay higher stamp duty. The government has also earmarked Rs 4,000 crore for the credit-linked subsidy scheme within PMAY-U to enable accessible loans for economically disadvantaged sections, low-income groups, and middle-income groups.

However, the removal of the indexation benefit for the sale of non-financial assets, like real estate, could result in a greater effective tax burden on long-term capital gains (LTCG) for property owners, particularly those with properties held for more than five years. The elimination of the indexation benefit, despite the reduced LTCG rate, might increase the tax burden on real estate transactions.

Experts suggest that the impact of this adjustment will vary depending on how long you have owned the asset. It is now essential to take into account the new taxation when considering real estate investment as a long-term asset.

The Budget 2024 provides a comprehensive approach to increase more supply for affordable housing and address the housing needs of the urban poor and middle-class families. While real estate may see higher growth due to increase in consumption, the tax burden may make it less lucrative for long-term investment.