Govts move to remove property indexation will make real estate speculative
Real Estate speculating will pick up in India after this ill thought oversmart decision of Government. Here is why:-
[1] Indian government charges a stamp duty of around 9% on high ticket properties.
[2] Unfortunately, once you pay this duty, crores of money gets locked for decades in Real Estate.
[3] How does the government make that 9% again? Well by making you sell/buy (i.e flip). Every time you flip, someone pays another 9% of the entire value
[4] So far: with indexation benefits people had the incentive to stay invested in the Real Estate for long-term
[5] Why? because if the inflation (price increase) rose fast. The indexation (or inflation offsetting) benefits would be given to the final property value.
This was a hedge against rising inflation.
[6] Now, this incentive has been withdrawn.
[7] The Real Estate game in town would be: buy a property. Sell it as soon as the long-term capital gains kicks in after 2 years.
[8] This encourages:
a. Trading of properties on new properties
b. Black money transactions on old properties
c. Builders making more money
[9] How exactly? will builders make more money: the way project launches are designed. Easy payment plans, massive marketing, creation of hype -- will lead to a lot of "traders" moving into the Real Estate market.
[10] Real Estate brokers, government, builders will be the ultimate beneficiary.
[11] People who choose to buy a home, which they might sell in case of an emergency after 20 years, will be hit the most. more
[1] Indian government charges a stamp duty of around 9% on high ticket properties.
[2] Unfortunately, once you pay this duty, crores of money gets locked for decades in Real Estate.
[3] How does the government make that 9% again? Well by making you sell/buy (i.e flip). Every time you flip, someone pays another 9% of the entire value
[4] So far: with indexation benefits people had the incentive to stay invested in the Real Estate for long-term
[5] Why? because if the inflation (price increase) rose fast. The indexation (or inflation offsetting) benefits would be given to the final property value.
This was a hedge against rising inflation.
[6] Now, this incentive has been withdrawn.
[7] The Real Estate game in town would be: buy a property. Sell it as soon as the long-term capital gains kicks in after 2 years.
[8] This encourages:
a. Trading of properties on new properties
b. Black money transactions on old properties
c. Builders making more money
[9] How exactly? will builders make more money: the way project launches are designed. Easy payment plans, massive marketing, creation of hype -- will lead to a lot of "traders" moving into the Real Estate market.
[10] Real Estate brokers, government, builders will be the ultimate beneficiary.
[11] People who choose to buy a home, which they might sell in case of an emergency after 20 years, will be hit the most. more
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The basic concept behind Long Term Capital Gains is that it is meant to tax, gains and not Capital. Here, by doing away with indexation, not allowing interest, registration and stamp duty as cost of purchase, this is adding insult to injury. This provision is a draconian step in ruining some tax provisions which were time tested. Even the existing cost inflation index was based on WPI and not Retail prices. So, as it is is was to the governments advantage. Now, what relevance does the year 2001 have in 2024 by freezing the index at that point in time? This is nothing short of extortion by the government. If your hard-earned money is burnt in taxes with taxes taken on the principal, then you will never say this. Most middle-class people buy property by taking loans. The interest paid is a sizeable amount. Now, cost excludes registration, stamp duty, interest and the impact of inflation so you will end up paying tax on capital. As per the government's own computation, this scheme benefits only such properties where the YoY price increase is 16%. Which part of India has that high rate of YoY growth in residential property? This is a curse, sir. Most people are not property dealers, At best we may sell one house or maybe two in a lifetime more
Jul 29
Indexation benefit is natural with kind of inflation (grossly under reported) we have. It is unfair to withdraw it. more
Jul 27
What’s the big deal paying stamp duty. If you make profit, then pay tax as only then the govt is able to discharge its assigned duties and responsibility. The problem is the big difference between circle rates and actual market which will now get corrected to a great extent. Hence nothing wrong with this. It has become a practice to criticise whatever the ruling govt does in the larger interest of the nation. more
Jul 27
This is very much UNFAIR on BJP part. I think the Kotrie suggesting this is ready to DIG the Grave of BJP in future Elections. And face the consequences. more
Jul 26
It’s very unfortunate for the BJP Government to withdraw the indexation benefits for the middle class people. I request the Government of India to kindly withdraw the above decision at the earliest please more
Jul 26
