Why High-Net-Worth Individuals Are Selling Properties in Mumbai's Real Estate Market
Several high-net-worth individuals (HNIs), including Bollywood celebrities, have recently sold their properties in Mumbai. Experts suggest that the reasons could range from healthy returns on real estate to offsetting losses in the stock market.
Mumbai Real EstateHighnetworth IndividualsProperty SalesTax BenefitsCapital GainsReal Estate MumbaiJan 30, 2025
Tax experts and real estate consultants offer various insights into the possible motives behind these sales, which can differ widely from one investor to another.
However, the primary reasons seem to revolve around healthy returns on real estate investments and the opportunity to offset losses in the stock market.
Mumbai real estate has seen a significant surge in prices over the last few years, especially in premium and luxury housing segments.
HNIs typically maintain a diversified investment portfolio, including both shares and property.
The recent bearish sentiment in the Indian stock market, where many shares have lost more than 10% in value over the last six months, has prompted these investors to look for alternative strategies to manage their capital gains and losses.
Changes in LTCG Tax for Real Estate
In the Union Budget 2024-25, Finance Minister Nirmala Sitharaman initially proposed lowering the long-term capital gains (LTCG) tax on real estate to 12.5% from 20%, but without the indexation benefit.
This move faced criticism for potentially raising the tax incidence and discouraging investments in the real estate sector.
However, the government later amended the provision on August 7, 2024, allowing homeowners to choose between a lower tax rate of 12.5% without indexation or a higher rate of 20% with indexation for properties acquired before July 23, 2024.
Expert Opinions
Vivek Jalan, Partner at Tax Connect Advisory, a multidisciplinary tax consultancy firm, explained that the current market scenario is favorable for arbitrage.
HNIs have invested heavily in shares over the past one to two years, and real estate prices have risen significantly.
Frequently Asked Questions
Why are high-net-worth individuals selling their properties in Mumbai?
High-net-worth individuals are selling their properties in Mumbai due to healthy returns from real estate investments and the opportunity to offset losses in the stock market.
What changes were made to the long-term capital gains tax on real estate in the Union Budget 2024-25?
The Union Budget 2024-25 initially proposed lowering the long-term capital gains tax on real estate to 12.5% from 20%, without indexation benefits. However, this was later amended to allow homeowners to choose between a 12.5% rate without indexation or a 20% rate with indexation.
How can property sales help in offsetting stock market losses?
Property sales can help in offsetting stock market losses by allowing investors to book long-term capital gains from the sale of property and using these gains to offset long-term capital losses from the stock market.
What is the Housing Price Index (HPI) and how does it relate to Mumbai's real estate market?
The Housing Price Index (HPI) reflects the growth in real estate property prices. In Mumbai, it has shown moderate growth over the years, with significant increases in premium and luxury housing segments.
What are the primary reasons for HNIs selling their properties, according to real estate consultants?
Real estate consultants suggest that the primary reasons for HNIs selling their properties are property appreciation and the decline in stock market gains, which motivates them to book profits and offset capital gains against stock market losses.
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