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Below the Union Budget FY25 Quote on Real Estate Sector by Pankaj Kumar, VP – Fundamental Research, Kotak Securities

“The Union Budget-FY25 has rationalized long-term capital gains tax on real estate transaction. It proposed to remove indexation benefits and reduce the long term capital gains tax rate from 20% to 12.5% with immediate effect (grandfathering for properties held before 2001). We find that the new capital gains tax structure for real estate favours investors, who have generated high IRRs, while investors with poor IRRs would be worse off in the new regime. On the other hand, it is expected to have limited impact on end users who purchase homes for personal consumption. The budget has also talked about encouraging states to lower the stamp duty and consider lower duties for women buyers. Lowering of stamp duties would reduce the overall acquisition cost in high stamp duty states/markets like Gurgaon, Chennai, Mumbai and Kolkata. Further, Rs10 lakh cr allocation for urban housing (including Central Government assistance of Rs2.2 lakh cr over the next 5 years) is expected provide thrust to government’s housing for all initiatives.”

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