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The real estate sector will see positive changes in the budget for 2024

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This budget’s extensive measures demonstrate the government’s dedication to the real estate industry’s overall growth, which makes it a major driver of the country’s economic expansion. 

The Finance Minister, Nirmala Sitharaman, unveiled the 2024 Union Budget, which includes some ground-breaking initiatives expected to have a big effect on the real estate market. These programs provide the industry with much-needed support and cover affordable housing, infrastructure development, and urban planning.

Affordable Housing Initiatives

One crore low- and middle-class families will have the housing requirements met by the PM Awas Yojana-urban 2.0. This large-scale project will increase building activity and benefit developers and construction firms operating in the affordable housing market. Furthermore, over the next five years, the budget has set aside a sizeable Rs 2.2 lakh crore for urban housing. This increased funding will attract more capital into the urban real estate market by expediting housing projects, improving city life, and improving urban infrastructure.

Emphasis on Industrial Laborers

The budget suggests PPP (Public Private Partnership) rental housing with dorm-like accommodations to meet the housing needs of industrial workers. In addition to generating new opportunities for real estate developers specializing in rental and affordable housing, this initiative is anticipated to support industrial growth and stability in labor-intensive sectors.

Encouragement of Industrial and Urban Growth 

One notable step in encouraging real estate growth in these areas is to create an industrial hub that includes Gaya along the Amritsar-Kolkata Industrial Corridor. This will improve connectivity and economic activity while increasing demand for residential and commercial real estate. In addition, the development of mixed-use properties surrounding transit hubs will be encouraged by transit-oriented development plans for 14 major cities with populations greater than 30 lahks, to enhance urban [planning and spur real estate activity. 

Infrastructure Investment 

The budget’s plan to construct “plug and play” industrial parks in or near 100 cities will attract industrial investments, increasing the market for industrial real estate. This program encourages residential development and growing services in these areas.

Travel and Cultural Advancement

The world-class pilgrimage and tourism destinations that the Vihnipad and Mahabodhi Temple Corridors will soon offer will stimulate the tourism and hospitality industries and increase demand for commercial real estate, including lodging, dining establishments, and retail stores. An increase in the region’s cultural and educational significance will result from the revitalization of Nalanda University and its development as a tourist destination, drawing investments in learning infrastructure and associated real estate projects.

Rural Development and Connectivity 

Enhancing connectivity in rural areas will encourage rural development and make these areas more accessible for investments. Phase IV of the PM Gram Sadak Yojana will be launched in 25 rural habitations. As the infrastructure improves, these areas will likely see a rise in real estate activity. 

Long-Term Loans Without Interest 

Real estate markets will benefit from the budget’s allocation of Rs 1.5  lakh crore in long-term, interest-free loans to states for infrastructure creation. These loans will improve connectivity and amenities. As a result, areas will attract more investment from businesses and homeowners. 

Overall Impact of Budget on the Real Estate Market  

The 2024 budget’s focus on housing, infrastructure development, and urban planning is anticipated to accelerate the real estate sector’s expansion. The budget seeks to establish a more equitable and inclusive growth environment by attending to the needs of multiple segments, such as industrial workers, affordable housing, and urban infrastructure projects. The budget seeks to establish a more equitable and inclusive growth environment by attending to the needs of multiple segments, such as industrial workers, affordable housing, and urban infrastructure projects. In the upcoming years, real estate developers, investors, and stakeholders can anticipate more opportunities and a supportive policy environment.

The government’s commitment to the real estate sector’s overall growth is evident in the numerous initiatives included in this budget, making it a key engine of the nation’s economic growth. 

The elimination of indexation benefits in real estate will discourage secondary market sellers

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The real estate industry warned that eliminating indexation benefits for long-term capital gains would stunt its expansion, negatively affecting property owners and potentially increasing taxes. While experts thought low returns could still be a problem, authorities disagreed, citing high real estate returns. Leaders in the industry felt that the lower long-term capital gains tax rates would help new investors. 

The government’s proposal to eliminate indexation benefits for long-term capital gains in real estate has raised concerns among the real estate industry about how it stunts the industry’s expansion.

Property owners who have held their assets for more than ten years will likely be greatly impacted by removing the indexation benefit for long-term capital gains in real estate. Heritage homeowners might pay more in taxes when they sell because they cannot adjust the cost basis of their properties for inflation. After all, indexation is not in place. “The change may result in higher taxes for individuals who wish to sell assets held for more than ten years,” says Niranjan Hiranandani, Chairman of NAREDCO

A flat 12.5% tax on capital appreciation on the sale of a property, with no indexation benefits, has been proposed in the budget for 2024-2025.

The income tax department, however, disagrees with Hiranandani’s viewpoints. The Income Tax Department refuted the claim that people will pay higher taxes on profits from house sales on social media on Wednesday. The department based this on the idea that nominal real estate returns are typically between 12 and 16 percent annually, significantly higher than the inflation rate, 4 to 5 percent.

Real estate leaders concur that the new regime might be more effective when there is greater capital appreciation due to growth factors, a bullish economy, and a simplified tax structure.

However, real estate experts have clarified that the Income Tax department’s clarification that real estate returns are typically higher than the inflation rate is also not true in absolute terms.

Eliminating the indexation benefit for real estate sales will discourage sellers in the secondary market because of higher taxable capital gains, even if there is a lower LTCG (Long Term Capital Gains Tax) tax rate. However, it will not have an impact on first-time homebuyers. According to Ritesh Mehta, Senior Director/Head, North, East & West, Residential Service, India JLL, “the consistent growth of Reddy Reckoner rates across cities ensures no increase in unaccounted money in real estate transactions.”

New investors who hold properties longer than two years will still benefit from the lower long-term capital gains tax, which could make short-term investments more attractive.

The income tax department also stated that simpler tax computation, filing, and record-keeping compliance are advantages of streamlining any tax structure. The new proposal also eliminates the various rates for many asset classes.