Removal of Indexation Benefits Announced in the Union Budget 2024 Could Significantly Impact the Indian Real Estate: Brickwork Ratings Report

Business Wire India
According to analyst at Brickwork Ratings, removal of indexation benefits announced in the Union Budget 2024 could significantly impact the Indian real estate sector, potentially increasing tax burdens and causing market slowdowns. The long-term outcomes remain uncertain, and stakeholders must adapt strategies to monitor trends and mitigate the new regulations.

IMPACT OF REMOVAL OF INDEXATION ON REAL ESTATE SECTOR
 

• The Union Budget 2024, announced by Finance Minister Nirmala Sitharaman, proposes the removal of the indexation benefit for homeowners, which allows them to adjust property prices for inflation, impacting India's real estate sector.
• Indexation adjusts asset purchase prices based on inflation, reducing taxable gains. However, the removal of this benefit may increase the tax burden for sellers. The new LTCG tax rate is 12.5%, reduced from 20% but without indexation benefit.

 
Potential Impacts on the Real Estate Sector
 

• Removal of indexation benefits could increase tax burdens for sellers 
• Potential secondary market slowdowns may occur 
• Long-term outcomes remain uncertain 
• Government’s intention to simplify tax regime commendable 
• Potential increase in tax burdens for property owners 
• Discouragement of investment, making real estate less attractive 
• Secondary market slowdown due to seller hesitation 
• Potential short-term property price stagnation or decline 
• Stakeholders must monitor trends and adapt strategies to mitigate market adjustments 
• Incentivizes under-the-table cash transactions to offset higher tax burdens 
• Counters government efforts to formalize real estate sector 
• Increases property prices, transferring tax burden onto buyers 
• Long-term effects on market dynamics could be neutral or positive

 
Heritage Properties Impact
 

• Owners may face higher tax burden upon sale due to extended holding periods 
• Absence of indexation prevents inflation adjustment, potentially discouraging sales