Real Estate Indexation Rules Tweaked: How Does It Change The Situation For Property Owners?

However, the benefit will be applicable only for properties purchased before July 23, 2024. Even then, the move has been a mood booster for the crucial real estate sector and is expected to increase demand. 

Importantly, the rollover benefits will continue. So in case of reinvestment, the LTCG would not be taxed.

The earlier announced removal of indexation benefits had dented sentiments and taken away much of the sheen from the much-sought-after real estate sector as an asset class. 

Experts however said that home sellers must opt for the tax structure carefully only after weighing all pros and cons. 

“Ideally, if a property's value has significantly outpaced inflation, the 12.5 per cent rate might be more beneficial.  However, indexation could be advantageous in cases where property appreciation is closer to the inflation rate,” Shishir Baijal, chairman and managing director, Knight Frank India said.

Home sales in India have been booming in the last few years with rapid urbanisation. The introduction of the Real Estate Act, 2016 (RERA) with the aim to bring in transparency and accountability while protecting the interests of buyers has further induced growth in the sector.

“We have yielded to the voices, we have heard the people,” Sitharaman said while speaking on the Finance Bill. Underlining that the NDA government has prioritised the interests of the middle class, the finance minister said that the measure on LTCG was brought in with the aim of simplifying the overall tax structure and not to boost the government’s kitty.

"The amendment gives a choice to taxpayer to now they can calculate and see what works better for them. The current amendment ensures that there will be no additional tax burden on people," Sitharaman added.

The Economic Survey noted that following two challenging years of pandemic-induced lockdowns and economic instability, the real estate sector has experienced a robust recovery.

With increasing urbanisation, the housing industry is poised for a significant transformation. As per the United Nations, by 2050, half of India's population is projected to dwell in urban regions, compared to 31 per cent in 2011. “This underscores the need to adapt strategies and policies to meet the rising demand for housing and offer viable, cost-effective, sustainable solutions,” the survey noted.