Budget 2024 sent shockwaves through the Indian real estate sector, as investors reacted negatively to the removal of indexation benefits for calculating long-term capital gains tax on property sales. This key change in the budget proposal essentially means that for property sales, any capital gains will now be taxed based on the full sale price, without taking into account inflation over the holding period. This eliminates a significant advantage previously enjoyed by real estate investors, and it sparked a sell-off in the stock market.
The NSE Nifty Realty index, which tracks the performance of major real estate companies in India, plunged over 4% during intra-day trade on the day of the budget announcement. Individual companies also saw their share prices tumble, with DLF, a leading real estate developer, experiencing the steepest decline of 5%. This steep drop reflects the anxieties of investors who are now facing the prospect of higher tax liabilities and potentially lower returns on their real estate investments.
The move by the government to remove indexation benefits has been met with criticism from industry experts who argue that it will discourage investments in the real estate sector, potentially hindering growth. It remains to be seen how this change will play out in the long term, but for now, it has undoubtedly cast a shadow over India’s real estate market.
