Real estate stocks fall after Budget removes indexation benefit on LTCG
Mumbai: Real estate stocks dropped following Finance Minister Nirmala Sitharaman's proposal to remove the indexation benefit for calculating long-term capital gains tax (LTCG) on real estate.
The Nifty Realty index fell 2.6% on July 23, with DLF shares plunging over 6% to a low of Rs 778.2 in response to the Budget 2024 announcement.
To rationalize the capital gains tax regime, the Finance Minister proposed lowering the LTCG tax rate to 12.5% for all assets, down from the previous 20% for property.
This change led to a decline in benchmark indices, with the Nifty 50 dropping 0.6% (136 points) and the Sensex falling 350 points.
Other real estate stocks also suffered, with Macrotech Developers down 3.6%, Godrej Properties down 5%, Prestige Estates down 5.3%, and Phoenix Mills down 2.1%.
The indexation benefit adjusts the asset's purchase price for inflation, reducing the capital gain and consequently the tax.
Without this benefit, the tax will be based on the original purchase price, potentially leading to higher tax liabilities.
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