Indian realty sector faces ₹6,480 crore loss post-Budget announcement
The Indian real estate sector suffered a significant loss of ₹6,480 crore in market value, following the Union Budget announcement by Finance Minister Nirmala Sitharaman. The decision to remove indexation benefits on property sales has led to a decrease in investor sentiment, especially within high-end segments. Stock market data shows that listed stocks partially recovered their losses on Friday, but ended the week with a net loss compared to pre-budget day.
Tax changes could deter real estate investors
Rating firm IndRa's analysis suggests that properties with expected returns below 10% to 11% per annum, could see investors facing higher capital gains tax outflows. This could lead to decreased investments in this segment. "The reduction in investor demand could make it difficult to take price hikes in the near term by developers, as investors may be wary of large exposures due to higher tax outflows," IndRa stated.
Regime shifts impact on real estate investors
The removal of indexation benefits and the lowering of long-term capital gains tax, are not expected to impact end-users who sell their existing house and reinvest in a new one. However, it will affect investors who sell their house (investment) and reinvest in other asset classes. Prashant Thakur, Regional Director & Head - Research, of Anarock Group said, "The removal of benefits may reduce speculative demand and increase supply, leading to some price corrections."
Market corrections expected in short term
In the short term, the removal of benefits could result in a notable price decline, as sellers compete for fewer buyers, according to Thakur. He added that over time, the market will regain stability and prices will reflect genuine end-user demand rather than speculative investors' demand. Developers may shift their focus from luxury to affordable and mid-segment housing due to these changes.
