Indexation was a tax-saving tool for property owners. It allowed them to adjust the purchase price of a property for inflation when calculating capital gains tax. This significantly reduced tax liability, especially for long-term holders.

Key Changes in Budget 2024:

• Indexation Removed: This benefit is no longer available for properties purchased on or after April 1, 2001.

• Lower Tax Rate: The long-term capital gains tax rate has been reduced from 20% to 12.5%.

How Does This Impact Real Estate Investors?

1. Higher Taxes: Without indexation, the taxable profit from property sales will be higher, leading to increased tax outlays.

2. Short-Term Focus: Investors may shift towards shorter holding periods to avoid higher taxes, potentially increasing market volatility.

3. Cash Transactions: To avoid taxes, some may resort to cash transactions, raising concerns about transparency and regulation.

4. Impact on High-Value Properties: High-value properties will be disproportionately affected, potentially leading to decreased demand.

Expert Opinions:

• Gunjan Goel (Goel Ganga Developments): Increased turnover expected as investors try to avoid higher taxes.

• LC Mittal (Motia Group): Short-term flipping might increase, and property valuations could see recalibration.

• Ashok Singh Jaunapuria (SS Group): High-value properties may face reduced demand and price adjustments.

Should You Still Invest in Real Estate?

While the removal of indexation is a significant change, real estate still has its merits. Factors like location, property type, and investment goals play a crucial role. It's essential to consult with financial advisors to assess how these changes impact your individual investment strategy.

- source: msn.com