After removing the indexation benefits for long-term capital gain in assets like real estate properties in the union budget in July, the government has brought back the option to opt indexation benefit for property holders. In the current system, one can avail any of the two schemes – where they either pay 12.5% taxes on LTCG on real estate assets or 20% with indexation on real estate transactions. The country’s real estate players and industry experts have cheered the move as it will lift confidence of homebuyers and lift the overall industry.
Niranjan Hiranandani, Chairman of the Hiranandani Group and industry body NAREDCO, applauded the Finance Minister for the amendments proposed in the finance bill, providing substantial tax relief for the real estate sector. “This relief applies to the transfer of long-term capital assets, such as land or buildings, acquired before July 23, 2024. By enabling taxpayers to choose the lower tax burden between the new and old schemes, the amendment is poised to drive investment and enhance sales across housing segments,” he says.
According to Dhruv Agarwala, Group CEO, Housing.com & Proptiger.com, the move is a significant step forward. Agarwala says, “By ending the confusion and speculations from the Budget announcement, this move prevents potential negative impacts on market sentiment and growth in India’s second-largest employment-generating sector. Additionally, while this benefit won’t apply to future transactions, it gives taxpayers more time to plan the sale of their assets to maximise benefits, further boosting investment across housing segments.”
Mumbai-based real estate player Ashar Group expects the confusion among homebuyers to be addressed now. Dharmendra Raichura, Vice President & Head of Finance at Ashar Group says, reinstating indexation is expected to have a significant impact, including increasing real estate investment by 20-25% according to Knight Frank, contributing to a 0.5-1% increase in GDP growth, and benefiting investors by adjusting the purchase price for inflation, reducing capital gains tax payable, and resulting in lower tax liabilities.
The move addresses concerns and provided stability. “This amendment will mitigate the impact of potential tax hikes on older properties, support sustained growth in the real estate sector, with a reported 31% year-on-year increase in sales according to Anarock Group, and boost investment and growth, with over 10,000 monthly property registrations expected to continue. A stable and consumer-friendly tax regime increases confidence, leading to more investment in the real estate sector,” he says.
Manju Yagnik, Vice Chairperson of Nahar Group and Senior Vice President of NAREDCO- Maharashtra, points towards the benefits of the latest move. “This change will undoubtedly make property transactions more lucrative for sellers by reducing their tax burden, thus enabling them to retain more of their sale proceeds. The adjustment in LTCG tax calculation is particularly beneficial in the current economic climate, where every financial advantage counts,” says Yagnik, adding, “we can expect a positive ripple effect on realty sales, as more sellers are encouraged to enter the market, leading to increased transactions and higher market activity. This policy change is likely to bolster investor confidence and stimulate growth in the real estate sector, paving the way for a more dynamic and robust housing market.
