 "Real estate")
Dhaval Ajmera, director of Ajmera Realty & Infra India Ltd said these changes were
The removal of indexation benefit while calculating the long-term capital gains (LTCG) tax on sale of property may not have a significant impact on demand and prices in the real estate sector in the long term, according to a Business Standard analysis of responses by 10 developers and consultants.
But it would impact high-end properties which may see a drop in demand, they said.
On Tuesday, Finance Minister Nirmala Sitharaman — in her Budget 2024 speech — announced the removal of indexation on property sales and lowered the LTCG rate from 20 per cent to 12.5 per cent. The ministry later clarified that properties purchased before April 1, 2001, would continue to enjoy indexation.
Harmohan Sahni, chief executive officer (CEO) of Raymond Realty said he sees “no impact” on sales from “actual users”.
“The investors will also be eventually enthused as this creates a level-playing field among all asset classes,” he said, adding the property prices are also likely to stay “stable to strong.”
Dhaval Ajmera, director of Ajmera Realty & Infra India, said these changes were “positive” for the sector, aligning with other asset classes like equity, stocks and gold.
“This adjustment is expected to make real estate a more attractive long-term investment,” he said.
Swaroop Anish, executive director and CEO of residential segment and business development at Prestige Group said this would “encourage property upgrade in shorter intervals,” boosting the demand for new real estate.
Shabala Shinda, partner at Grant Thornton Bharat, said the reduction in LTCG rate to 12.5 per cent mitigates the increase in tax cost which would have arisen if indexation were not available.
“The cost inflation index has averaged around 6 per cent since 2001 and a reduction in the tax rates would provide benefits to the investor equivalent to nine years,” he said. He added that an investor holding a property for less than nine years would be better off.
Pradeep Aggarwal, founder and chairman at Signature Global (India), also welcomed the move and said that it is being done to “simplify the tax structure.”
After the announcement on Tuesday, most realty stocks tumbled. The Nifty Realty index closed 2.29 per cent in the red. On Wednesday, however, it closed 0.78 per cent in the green.
Abhishek Raj, founder and CEO of Jenika Ventures, said there may be a “transitory drop” in demand and prices of homes in India. However, “the real estate market has good medium-to-long-term prospects due to fundamental demand and supportive governmental actions.”
Some experts pointed out that in the short term, the highest impact could be seen in high-end properties as they may see a sharper reduction in prices.
“High-value properties will be most impacted and we may see a reduction in demand for them,” said Prashant Thakur, regional director and head – research, Anarock Group.
He added that primary home buyers may not be affected as much since their main motive for buying homes is to use them for residence and not investment returns.
Anuj Puri, chairman of the Anarock Group, said the move to remove indexation may have a negative impact as it directly impacts real estate investors.
First Published: Jul 24 2024 | 8:31 PM IST
